NPS, PPF and Mutual Fund- What to take and why?

When considering investment opportunities, the first challenge that almost every investor faces is deciding between financial instruments. From stocks, money market securities to bonds or a right combination of two or more of these. Each option presents its own set of challenges and benefits.

In most of the cases, people end up investing according to the advice of someone in the family or their colleague or friend at the office. However, everyone has a different goal i.e. Your family member may be looking more towards the safety and thus a lot of money ends up in safer instruments like FD, RD or PPF and your office colleague may be looking at better returns and thus he invests mostly in Mutual funds.

We at NiveshGyaan help people create their financial plans and definitely suggest people to have a component invested in safer instruments like FD, RD. However, if a large percent of a portfolio is invested in these instruments than there is a chance that your money is not growing and in some years would actually be decreasing as it’s not able to beat the inflation.

Therefore, every individual needs to have a plan according to his needs which can be determined by his goals, his risk appetite and his age. Based on these three parameters, he can define his plan, but he would end up having different components of all the PPF, NPS and mutual Funds.

Why are we so insistent on all these three investments and What’s the difference?

Firstly, All the three investment options serve a different function and we believe that they are best for the purposes they are meant to do.

Mutual Funds help investors generate better inflation-adjusted returns. They help mitigate risks to a large extent by distributing your investment across a diverse range of assets.

Every form of investment involves risk, but skillful diversification can help reduce the risk, while increasing the chances of higher returns over time. Therefore, we at NiveshGyaan suggest everyone to have a diversified portfolio with a varying percent of NPS, PPF and Mutual funds into it depending upon its goal and the risk appetite.

P.S.: It will be great if you can share this article for more people to become aware of these financial instruments. Also, do subscribe to our blog at https://www.niveshgyaan.in/home so that you don’t miss any article from our side.

References:

How ELSS can help you save tax: https://m.economictimes.com/wealth/invest/how-elss-can-help-you-save-tax-and-fund-your-retirement/articleshow/63429713.cms