1. Public Provident Fund (PPF) typically reflects "traditional tax-free saving mindset" of older parents - not their kids (hopefully) - as they got "attracted" towards it and opened accounts in names of their minor kids (one child per parent) too.
2. This "15-year Government Recurring Deposit account" (at best), continues to be "utilized" for tax-saving, first by parents and then by kids when they become major, even by 5-year extensions for similar purpose.
3. During this long period, they unwittingly fall prey to another mindset that tax-saving government instruments are always best investment options, unaware of the fact that the government keeps tweaking its interest rates lower, to keep it "default risk-free" in the citizen's hands, ignoring all other risks, viz. interest, inflation and reinvestment, to which his hard-earned money gets exposed throughout these crucial investing years of his life.
4. Luckily (again hopefully), today's youth are "financially smarter" and are aware of, besides not averse to, taking well-calculated "investment risk" elsewhere during such a long period, for defeating these other risks, with proven knowledge that such investments become totally risk-free in 10 years.
5. Regarding employment-related "mandatory" Employees Provident Fund (EPF), it is hoped that EPFO, its regulator, would utilize its investors' hard-earned money with a more "independent investment mind" - to defeat all risks - by making timely preparation for their future, which is what "provident" truly means.
6. Young, financially savvy investors would, therefore, be well served by considering PPF/EPF only as debt instruments in their debt-equity retirement allocation, period.
7. After considering thumb rules like
(i) optimal tax-saving u/s 80C and 80D,
(ii) 20% annual investing, and
(iii) 100 minus age equity allocation,
(iv) EPF contribution limited to 15,000 monthly Basic pay+DA by employer,
an investor could utilize his annual income within this framework:-
a) 5 lakh income :
EPF-20,000;
PPF(if no EPF)-20,000;
NPS-50,000;
Term plan premium-10,000;
Health plan premium-10,000;
ELSS funds-10,000.
b) 10 lakh income:
EPF-20,000;
PPF(excl.EPF)-30,000;
NPS-50,000;
Term plan premium-15,000;
Health plan premium-15,000;
ELSS funds-70,000.
c) 15 lakh income:
EPF-20,000;
PPF(excl.EPF)-50,000;
NPS-50,000;
Term plan premium-20,000;
Health plan premium-30,000;
ELSS funds-30,000;
Equity funds-100,000.
d) 20 lakh income:
EPF-20,000;
PPF(excl.EPF)-80,000;
NPS-50,000;
Term plan premium-20,000;
Health plan premium-30,000;
Equity funds-200,000.
8. Loans (home, etc.), if taken, would figure as debt allocation within this framework.
2. This "15-year Government Recurring Deposit account" (at best), continues to be "utilized" for tax-saving, first by parents and then by kids when they become major, even by 5-year extensions for similar purpose.
3. During this long period, they unwittingly fall prey to another mindset that tax-saving government instruments are always best investment options, unaware of the fact that the government keeps tweaking its interest rates lower, to keep it "default risk-free" in the citizen's hands, ignoring all other risks, viz. interest, inflation and reinvestment, to which his hard-earned money gets exposed throughout these crucial investing years of his life.
4. Luckily (again hopefully), today's youth are "financially smarter" and are aware of, besides not averse to, taking well-calculated "investment risk" elsewhere during such a long period, for defeating these other risks, with proven knowledge that such investments become totally risk-free in 10 years.
5. Regarding employment-related "mandatory" Employees Provident Fund (EPF), it is hoped that EPFO, its regulator, would utilize its investors' hard-earned money with a more "independent investment mind" - to defeat all risks - by making timely preparation for their future, which is what "provident" truly means.
6. Young, financially savvy investors would, therefore, be well served by considering PPF/EPF only as debt instruments in their debt-equity retirement allocation, period.
7. After considering thumb rules like
(i) optimal tax-saving u/s 80C and 80D,
(ii) 20% annual investing, and
(iii) 100 minus age equity allocation,
(iv) EPF contribution limited to 15,000 monthly Basic pay+DA by employer,
an investor could utilize his annual income within this framework:-
a) 5 lakh income :
EPF-20,000;
PPF(if no EPF)-20,000;
NPS-50,000;
Term plan premium-10,000;
Health plan premium-10,000;
ELSS funds-10,000.
b) 10 lakh income:
EPF-20,000;
PPF(excl.EPF)-30,000;
NPS-50,000;
Term plan premium-15,000;
Health plan premium-15,000;
ELSS funds-70,000.
c) 15 lakh income:
EPF-20,000;
PPF(excl.EPF)-50,000;
NPS-50,000;
Term plan premium-20,000;
Health plan premium-30,000;
ELSS funds-30,000;
Equity funds-100,000.
d) 20 lakh income:
EPF-20,000;
PPF(excl.EPF)-80,000;
NPS-50,000;
Term plan premium-20,000;
Health plan premium-30,000;
Equity funds-200,000.
8. Loans (home, etc.), if taken, would figure as debt allocation within this framework.