What is Public Provident Fund?

Answer 1

PPF is similar to PF with the only difference being, anyone can open a PPF account by visiting the nearest State Bank of India branch. PPF is also managed by the government of India. Once we open a PPF account we can deposit cash in our PPF account anytime. There is one restriction here. We must deposit at least Rs. 500/- every year to keep our PPF account active. The maximum amount we can remit in our PPF account every year is Rs. 70,000/- Our PPF account remains active for 15 years and if we want we can extend it by a further 5 years. We cannot encash the entire amount in our account before the tenure of 15 years. Of course we can do partial withdrawals from our account but we cannot take out the entire corpus.

Safety = Very high because backed by the government

Returns on Investment = Average - Our Inflation is 11% and the returns on PPF is only 8%

Investment Strong points:

a. Extremely Safe

b. A decent amount deposited every year can help us make up a good corpus over the long run.

Downside:

a. Only average returns.

b. Very long lock in period. We cannot take out our cash before 15 years

c. We need to deposit at least Rs. 500/- every year to keep the account active.