The Public Provident Fund (PPF) is all about making money grow steadily and with a guarantee for the public at large. While a lumpsum investment is always preferred right at the beginning of the investment journey, that is not always possible in a world where income comes in fits and starts. Therefore, while some manage to get their income on a monthly basis, others have a different schedule. They may be getting large amounts coming every few months.
Even if that is the case, there is no reason to not invest in PPF. While in a lumpsum investment you would have earned a greater amount of money, in quarterly investments you will get good returns, but not as much.
So, let us assume that a person opens his PPF account and starts investing on a quarterly basis. He invests the full amount allowed during a quarter, which is Rs 37,500. Remember, PPF investment limit is Rs 1.5 lakh per fiscal. The man regularly keeps investing this sum every year for the 15-year period.
The PPF interest rate on this amount that he is earning is 7.1%. Do note that the government sets the PPF interest rate and it is subject to change. In earlier years it was much more, but the government has been reducing it regularly. In contrast, under the Employees’ Provident Fund (EPF), the interest rate is a much higher 8.25%. However, that is applicable only to employees working in private businesses.
Be that as it may, after the calculations are made on maturity of the scheme, this person will get as much as Rs. 39,67,074. Through the PPF interest rate, the return is Rs. 17,17,074. The man himself contributed Rs 22,50,000. These are huge amounts of money made possible by the compounding of interest.
Now, imagine, if the same person had invested a sum of Rs 12500 on a monthly basis. What would he have earned? A much lower amount. The PPF calculations show that this person would have received Rs 39,44,599 on maturity. Of this, total PPF interest earned is Rs 16,94,599. The PPF account holder himself contributed Rs 2,250,000.
Note: The sums mentioned here are estimations and the actual amount will be available in the PPF passbook.
PPF is one of the best and safest investment avenues for the public. And here, find out out how PPF will turn Rs 37500 investment done on a quarterly basis into Rs 39,67,074. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
