SIMON + KAYAR

We saw in the last lesson how ELSS can bring energetic returns. But we must keep in mind that Diversification is still the key. Also there are many out there who are apprehensive of investing in a Mutual Fund, especially the ones tied to Stock Market. What else? We cannot just pump in more money into LIC policies as we know how detrimental it can be. If you are ready to forgo liquidity you get another excellent investment vehicle - The Public Provident Fund, a Govt backed scheme. Please note that PPF is different from PF. To open a PPF account all you need is to go to a Nationalised bank and shell out Rs 500/- PPF is a 15 year time bound investment. It can be best used for long-range planning. Instead of describing PPF let me list out the key points alone.

• The total tenure is 15 full financial years. Suppose you start today (June 15, 2005) your PPF account will mature on March 31, 2021.
• You must invest min of Rs500 per year to keep the account active
• The maximum limit is Rs 70000 per year
• It hax Tax Exemption as per the section 80C (The 1 Lakh limit)
• You can avail loan on your money(part of it) from the 3rd year onwards
• You can withdraw money (part of it) from the 7th year onwards
• The rate of return is 8% compounded (as of now. Please note that the rate is not fixed. It can go up or come down and Govt decides that)
• The returns are also tax free (Unlike NSS/fixed deposits where the interest are taxed)
• Every year you can pay the money in 1 to 12 installments, whichever suits you
• It is an excellent choice for conservative investors to plan their retirement as it is a Government backed scheme
  
• An example : Investing 17000 every year will give you 5 lakhs at the end of 15 years.