Is the Employees’ Provident Fund really worth it? With so much attention these days being focused on the stock markets, how beneficial is the EPF even though it does have an interest rate of 8.25%? The question arises from what is happening in the markets. The gains being targetted there are simply mind-numbing and there is a virtual flood of money hitting them every time an initial public offering (IPO) is rolled out. Check out what happened to the Resourceful Auto IPO just a couple of days ago.
IPO mania in stock markets
Resourceful Auto IPO had been rolled out by the company with the intention of garnering just Rs 12 crore. However, the company ended up collecting 420 times that! The total amount it garnered was a humongous Rs 4800 crore. The company has extremely weak fundamentals and touts just two Yamaha showrooms in its kitty and the services of 8 employees. The big news was that retail investors were leading the charge to subscribe to the IPO.
Why is this happening? Investors are eyeing big gains in a very short amount of time and they are not stopping to think whether the markets are overheated and things may change suddenly for the worse.
Old faithful EPF still has the spark?
Notably, stock market investors are typically eyeing double digit returns. However, the risk is tremendous.
EPF is currently offering an interest rate of 8.25% and that is higher than most bank fixed deposits, but it is not in double-digits.
So, is EPF worth it?
It will depend on your outlook and needs. First of all, EPF is not a voluntary investment scheme. It is something that an employee is roped into. However, it is still one of the best retirement funds around. Most importantly, it forces the employee to save month-on-month and year-after-year for a better future. And most importantly, it is the safest of investments as there is no risk involved. The employee will get paid the full amount on retirement. And if he happens to lose his job, he can withdraw money to tide him over the period of joblessness.
EPF interest rate of 8.25% may not compare with the double-digit growth promise of the stock markets. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
