Public Provident Fund, FD, Equity or Mutual Fund? Know how and where to invest

How and where to invest: When it comes to investing, everyone wants to play safe and invest in conservative instruments like PPF and Fixed Deposits. Though one may prefer these investment options over riskier instruments like equity, what they ignore is the impact of inflation. While FDs currently give interest income at the rate between 5 to 8 per cent, the current interest rate of PPF is 8 per cent and that of PF is 8.65 per cent.  According to Hemant Rustagi, CEO, Wiseinvest Advisors, the rate of inflation remains around 7 per cent in the long-term. Thus, your savings through these instruments fail to yield the desired result given the high rate of inflation. 

Rustagi said that long-term investments in PF and other likewise options doesn't help the investors beat inflation.

"Many people go for conservating investment instruments as it gives assured returns and helps one prepare a retirement corpus in the long run. Let's assume EPFO gives an average return of 8 per cent and the long-term inflation remains around 7 per cent. Considering you are investing in PF for a period of 20 years, if you put the same amount into a balanced mutual fund or an equity mutual fund, the return could be almost double," said Rustagi.

Rustagi further said that though equity is risky, the bigger risk is inflation. Thus one should invest in such instruments that help you beat inflation while giving a better return.

"People are concerned about their hard-earned money and prefer conservative options like FD and PPF. No doubt equity is risky but inflation is a bigger risk and that too invisible. You may invest in PPF and get a return of around 8 per cent but at the same time, you have the option to invest in equity. If you invest in SIPs every month just like you do in PPF, you may get returns much higher than 8% in the long-term." he said.

Rustagi added that no one knows how much money they will need at the time of retirement. Thus the effort should be to beat the inflation and earn more than it. He further said that these options give you flexibility and option to switch to other funds if one option is not performing well.