Investment advice for 21 year old

Karan
Jun 12, 2019

Hi, a little intro on myself: 21 year old, started working a year back. Saving is become a norm for me now given I live with my parents and try to stay away unnecessary spends. But now I’m trying to get into investments. I have invested in a couple of FDs from reputable banks that offer good ROI. Now I’m thinking of investing in PPF, have spoken to a couple of folks about this, but what’s the catch? What’s the drawback of this? Why doesn’t everyone just invest 1.5L into this? Or do they already do this?

Reasons for me to invest for a long term:

  1. Will keep me away from temptations of making not so ideal purchase decisions
    Grow wealth and be able to provide when I’m at that age
  2. Is there something that I should consider given my age?
1 Answer
Jun 14, 2019

This is an excellent question.  A very brief intro to PPF has been given by one of the contributors. 

PPF: Fixed interest savings scheme offered by the Government of India. Interest rate is fixed every quarter. As of June 2019 the interest rate is 8%. Since this is a government backed scheme, returns are relatively risk free. Contributions to PPF can be deducted from taxable income.  Interest earned is tax free during accumulation. Withdrawals are also tax free. 

Source: Tax saving under 80C - NPS vs ELSS vs PPF

PPF is one of the few instruments that enjoys Exempt-Exempt-Exempt status in terms of taxation. 

A major feature of PPF is that it has a life of 15 years for full withdrawal.  Partial withdrawals are possible after 7 full years have been completed in the account.  Many people consider this as too restrictive and avoid investing in PPF.

I personally believe that PPF is one of the best products for the debt part of my portfolio. I invest in PPF even though my 80(c) limit is completed by other products. 

You are already investing in Fixed Deposits. PPF is a natural choice for you. As you earn more investing experience, you can also consider equity mutual funds. 

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