Public Provident Fund (PPF), a retirement planning-focused instrument, was introduced by the National Savings Organization in 1968. It offers assured returns irrespective of market developments. PPF is currently offering 7.1 percent interest, and it is revised every quarter by the government.
Financial experts suggest investing in PPF as the maturity amount and the overall interest earned during the period of investment are tax-free.
Additionally, PPF gives decent returns with the power of compounding as it is a long-term investment.
While the advantages of PPF are in place, have you ever wondered that how much time it would exactly take for the money to double while investing in this avenue?
The answer to this is that as returns are fixed and curtailed, PPF would take a longer time to double your investment.
According to Archit Gupta, Founder and CEO, Clear, investors can gauge the number of years the investment would take to double by using the rule of 72.
“This rule requires one to divide 72 by the expected rate of return. If PPF continues to offer 7.1 percent interest over the coming years, the investment in PPF (according to this rule) will double in 10.1 years (72/7.1 ≈ 10.14),” Gupta tells.
One can only invest Rs 1.5 lakh in PPF in a year. However, it gives one of the highest returns among the safe fixed-income products. The fixed rate of return brings in an element of predictability in the gains that one can expect when saving money in PPF.
The maturity period of the PPF account is 15 years. However, the same can be extended within one year of maturity for a further of five years and so on.
Also, the PPF account can remain active even after maturity, without making any fresh contributions. It continues earning tax-free interest after maturity.
Alternatively, for doubling money faster, Gupta suggests individuals consider investing in equity-linked investments such as stocks and equity-oriented mutual funds. However, it’s also important to note that these investments carry higher risks and require careful consideration, evaluation of requirements, and risk tolerance levels.
So, making an informed choice should be an individual's decision after considering all factors.
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