Public Provident Fund vs Equity vs Mutual Funds vs Mix of all: What experts think is better option

A financial advisor would never suggest you put your entire money into one category. Instead, the investors are always asked to diversify their funds on the basis of risk-taking ability. For a fresher, around 25 years of age who has just started his or her career, investment and financial planning experts say 50 per cent in ELSS (Equity Linked Saving Scheme), 25 per cent in small savings like Sukanya Samriddhi scheme, Public Provident Fund or PPF etc. and 25 per cent in debt-mutual funds cam be invested to get a return which is more than the inflation irrespective of the market movement. Investment experts say if a person does fund allocation on the above-mentioned line, one can expect at least 10 per cent to 12 per cent return on his or her investment after 20 years.

Speaking on the investment strategy and fund allocation strategy Manikaran Singhal, a SEBI registered investment and financial planning expert said, "Small saving schemes are popular among investors because of their fixed return and tax saving nature. But, their interest rate gets changes on a quarterly basis by the Indian government. So, the interest an investor is getting at the time of investment might not remain the same post-investment. It may increase or decrease in coming time but its risk-free and hence fund allocation for such schemes are advisable investing." He said that debt mutual funds are advised for those who believe in such schemes that give fixed return and tax-free benefit to the investor. Debt-Mutual funds give better return when the market is on the downside. 

Singhal who is Chief Financial Advisor at goodmoneying.com said that one should invest in equity-linked saving schemes too. "In fact, if you take my suggestion, a fresh investor should allocate 50 per cent of his or her fund into ELSS, 25 per cent in small saving schemes and rest 25 per cent into debt-mutual funds for long-term means 20 years or above. It will help the investor to get a post-tax return, which is higher than inflation taking place during the investment period," he added.

Asked about the return that an investor can expect on this suggested fund allocation and time period, Manikaran Singhal said, "If someone invests on above-mentioned line, one can expect at least 10 per cent return on his or her investment."

However, differing with Manikaran Singhal's views Kartik Jhaveri, Director at Transcent Consultants told Zee Business Online, "A fresh investor should invest at least 60 per cent of his or her surplus fund into ELSS and rest amount equally into small savings and debt mutual funds. This will give the investor a better return if the investment is for long-term means 20 years or more. The ELSS would give a return to the tune of 12 to 14 per cent while the debt-mutual funds would also give return to the tune of aound 11-12 per cent while a small saving scheme would give around 8.0 to 8.5 per cent return." Jhaveri said that if a person invests on his line of approach, one can easily expect around 12 per cent return on his or her investment.

The financial planners can have their own views and they may differ with one another. But, the investment choice depends on how much risk an investor is willing to take. On the basis of their financial goals, they can choose the fund allocation related suggestions and keep monitoring their returns regularly whether the return is in sync with their financial goals or not?