The Public Provident Fund (PPF) is the simplest form of investment anyone can come across. To its simplicity can be added the high PPF interest rate, which is now at 7.1%, although historically, it used to be in double digits! However, not anymore as the government has cut it back to just about what bank fixed deposits offer. And that also means that PPF interest rate is flexible and can be changed at the direction of the government. As such the current PPF interest rate may not continue into perpetuity – it is important for PPF investors to know that to properly work out their retirement corpus. They don’t want to be caught by a nasty surprise mid way.
In the current scenario, it is still possible to make a huge pile of money from the interest earned from a PPF account. The amount we are targetting is Rs. 18,18,209. That is over eighteen lakh rupees. And how does an investor actually earn that much money as interest?
The starting point is to open a PPF account as early in life as possible. Let us assume that an investor opens his PPF account and invests the maximum possible every year, which is 150000. This contribution he continues for the next 15 years without a break and without withdrawing any money at all.
Courtesy the magic of compounding of interest, on maturity, PPF will give this investor a total of Rs 4068209. Out of this massive amount almost half is in interest earned, which is Rs 1818209.
The investor has to do nothing except to turn up every year in his bank and contribute his Rs 1.5 lakh. Surely, this is the easiest and safest way to earn money.
Notably, every investor should have PPF in his portfolio as this will de-risk the entire thing and ensure the availability of funds that are growing every year. Do remember that the lockin period for PPF is 15 years. Also, the PPF account can be extended in batches of 5 years continuously.
Note: The sums indicated here are estimations and the actual amounts will be mentioned in the PPF passbook.
With the PPF interest rate set at 7.1%, an investor can easily earn Rs 18,18,209 in income in the form of interest alone. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
