I’d Be the First Person In the Queue For This

by Vinaya HS on June 10, 2011

in Finance

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I thought my eyes were deceiving me when I read this on Wednesday morning. Increase the cap on your annual Public Provident Fund (PPF) investments from Rs 70,000 to Rs 100,000?

I’d be the first person in the queue with a deposit form.

I’d still be the first person in the queue even if the interest rate wasn’t changed. Because, as I’ve said before, EEE @ 8% compounded is pure magic. And if this recommendation gets implemented, the magic only gets better.

If you have time on your side, start and contribute fully into a Public Provident Fund account. I can never get tired of saying this.

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{ 14 comments… read them below or add one }

Vinay June 10, 2011 at 8:01 PM

I stand by you. I have been doing this for the past 15 years or it was my appa’s gift to me to start a PPF account when I got my 1st job. Now I applied for a renewal of my PPF account.

Before you could be at the counter, I would have stood the previous night itself :)

Rakesh June 10, 2011 at 8:19 PM


Thanks for the post but I still feel investing via SIP’s equity diversified mutual funds for a very long term can beat PPF any day. I have been investing in MF for the last 5 years and have earned over 12% returns, also managed to lock some profits to MIPs.


Badri June 11, 2011 at 7:26 AM

I second that. I hold PPF ac with SBI . I transfer amount directly from my savings account to PPF ac online. Makes life simpler isn’t it? Hope they soon bring out this recommendation.

Sandriano June 12, 2011 at 6:22 PM

Hi Vinaya,

Wouldn’t saving the same money in Employee Provident Fund be a better option? The current interest rate is 9.5%. The interest rate for EPF have been higher than PPF for the last 7 years.


raag June 13, 2011 at 8:34 PM

1. I agree with Sandeep’s comment above. VPF (voluntary contribution to EPF beyond the mandatory 12% contribution) looks more attractive than PPF.
2. Vinaya: Considering the prevailing inflation rate, PPF returns won’t even beat inflation. So, why do you think it is such a great investment?

Atul June 19, 2011 at 6:47 PM

Agreeing to Rakesh view. PPF investment cannot beat inflation. One should decide on the investment amount for PPF based on his age and capacity. For example, younger generations should have more exposure to equity than PPF, PPF contribution should increase as person nears retirement age. PPF is definitely a good investment though.



Vinaya HS June 25, 2011 at 7:27 AM


There’s always so much to learn about personal finance from our parents isn’t there? And unless you have your account at the same bank/branch that I do, we’d both be first in the queue. :-) He he he…


I didn’t know that! Got to inquire at my branch. Thanks for the tip.

Vinaya HS June 25, 2011 at 7:37 AM


Here’s my investing strategy at a high-level:

1. Automatic payroll deductions (12% my contribution + 12% employer match) into the Employees Provident Fund. I don’t contribute to the Voluntary Provident Fund (see comment below).

2. Fully contribute into my Public Provident Fund.

3. Invest the rest into chosen equity-diversified mutual funds.

So, as you can see, it’s not an either/or decision. My portfolio does have a couple of top-performing mutual funds, just that I contribute first towards debt instruments and only then towards equity.

But I’m quite sure that I’d first exhaust the PPF-limit were it to be increased.

Vinaya HS June 25, 2011 at 7:47 AM

@Sandriano, @raag, @Atul:

Per my comment above, EPF is indeed the very first investment that happens each month. The reason I don’t contribute to VPF is because my EPF deductions themselves are substantially high and any additional contribution to VPF would violate some of the investing principles that I’ve set for my portfolio.

My other grouse is the lack of transparency. You’ve no clue what’s happening with all that money you put in. Hopefully, the recent digitization effort at the EPFO should solve this.

And as I’ve written before, I wouldn’t benchmark my investment returns with the national inflation indices.

Rakesh June 26, 2011 at 1:39 PM


Thanks for the detailed explanation.


raghu July 22, 2011 at 11:34 PM

hi Vinaya,
I found this blog very interesting while searching for some thing on web. I am also interested in reading your blogs.could you please let me know what is this mutual fund and shares? how it works & help us ?how should I start investing.


Vinaya H S July 28, 2011 at 1:20 PM


I’d recommend Investopedia for your learning.

In particular, the basics @ http://www.investopedia.com/university/buildingblocks.asp

1 June 24, 2012 at 8:27 AM
raghu June 25, 2012 at 11:37 AM


Thank you

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