[bluevolt]

Read an article on Quora regarding Mutual funds and the writer is not in favour of mutual funds at all. (Writer is an IAS Government official)

https://www.quora.com/20s-age-What-i...an-1?srid=zxu0


What are your comments over the article and writer's views on mutual funds bashing?

[hserus]

After all this pontificating about how senior he is and how many senior people he has spoken to, what is his sole suggestion? Invest in PPF? Don't go to unnecessary hardships such as travelling unreserved to save money etc?

Total know it all, that chap. What to do?

As for investment advice - what works for you is not necessarily what works for someone else, so such advice needs to be given and received / followed taking into account your own circumstances vs the circumstances of the person receiving the advice.

Mutual funds are - as that disclaimer reminds you - subject to market risks, and of course read the offer document before investing. Blindly putting money into something you don't fully understand, and quickly withdrawing it the first time you see a dip in your investments, is a recipe for eventual bankruptcy.

Save as much as you can, spread out your investments, carefully pick what you invest in (if a house - make sure it is something you're prepared to go and live in yourself, not somewhere miles out on the highway just because a builder there has a great dussehra or diwali discount offer). Stuff like that.

And of course make sure that you don't suffer personally in order to save as much as you can, like those Rakhee / Nirupa Roy roles in hindi movies where they wear old clothes and drink big bottles of cough syrup for every imaginable disease, just so their laadla beta can become a BA Pass Engineer. At least, don't do that unless you absolutely have to and there's no other alternative to doing so, and even then, get better medicine not the same bottle of cough syrup for everything from cancer to constipation

Never mind the movie analogy, there are so many cases of people going "onsite" or even out of their home city on software jobs and living worse than they used to in their engg college hostels just because they blew cash unwisely and end up having to frantically hunt for extra cash by the time the month end arrives.

Anyway the moral of that story is "spend sensibly, save sensibly and over the long term".

[Dry Ice]

Originally Posted by bluevolt

Read an article on Quora regarding Mutual funds and the writer is not in favour of mutual funds at all. (Writer is an IAS Government official)

https://www.quora.com/20s-age-What-i...an-1?srid=zxu0


What are your comments over the article and writer's views on mutual funds bashing?

I am not an expert and just speaking from my personal experience.

I agree with the writer about PPF - open it as early as possible even if you can contribute the minimum for initial few years. You will surprised how much of a head-start you can get on someone who starts 5 years after you with double the contribution. The magic of compounding.

As for mutual funds, agree with hserus, depends on your priorities and risk appetite.

If you wish to live in the now without thinking about the future, go ahead and live life king size. If, however, you worry about that rainy day, it's good to put something aside. Now how much should this amount be and where should you tuck it depends entirely on the individual. There is no one solution fits all. Read up about the options available and take an informed decision. If it all seems too overwhelming, hire a professional financial advisor to do it for you and be honest with him.

[DieselFan]

Over a 15 year period (same period of lock-in as in case of ppf), Mutual fund will give much better returns compared to ppf. On a long term horizon there is absolutely no risk in putting your money in good, well rated, established mutual funds. In future with reduction in interest rates returns, ppf would become more unattractive hence my suggestion is to Invest for all the long term goals > 5 years in equity mutual funds and < 5 year goals investment can go into debt mutual funds.

[hserus]

PPF has certain other benefits -

1. Exempt - Exempt - Exempt so there's absolutely no taxation on it

2. It can't be attached by a court in proceedings if you for example go bankrupt

3. It is a fifteen year long term rather inflexible instrument - so absolutely simple in terms of saving, and with a reasonable rate of return that's further increased by zero taxes on it

4. Remember to invest as much as you wish to in ppf right at the start of the year (on April 2) for maximum interest to be gained for that year.

Originally Posted by DieselFan

Over a 15 year period (same period of lock-in as in case of ppf), Mutual fund will give much better returns compared to ppf. On a long term horizon there is absolutely no risk in putting your money in good, well rated, established mutual funds. In future with reduction in interest rates returns, ppf would become more unattractive hence my suggestion is to Invest for all the long term goals > 5 years in equity mutual funds and < 5 year goals investment can go into debt mutual funds.

[sgiitk]

@hserus; I do not expect any court to try and attach any of our savings. Equity related ELSS are also EEE, so no gain there. You have the flexibility to move the money around, but then you have to be disciplined. I only look at Equity or Equity based balanced funds.

[gsurya]

Originally Posted by hserus

4. Remember to invest as much as you wish to in ppf right at the start of the year (on April 2) for maximum interest to be gained for that year.

PPF investment is required to be from earnings from that fiscal year only. So an IT officer can ask you to prove that you did earn your investment on April 1st, if you do it on 2nd April. This has happened to a few people.

[hserus]

That is an interesting way to harass people - not happened to me yet but thanks for pointing that rule out!

[ontheroad]

Which is better? Investing in PPF or NPS? I think the tax exemption are same for both.

[searacer932]

Originally Posted by gsurya

PPF investment is required to be from earnings from that fiscal year only. So an IT officer can ask you to prove that you did earn your investment on April 1st, if you do it on 2nd April. This has happened to a few people.

Are you sure about this? I have not come across this rule earlier! Do you have any references or materials pointing to this rule please?

[msdivy]

Originally Posted by DieselFan

Over a 15 year period (same period of lock-in as in case of ppf), Mutual fund will give much better returns compared to ppf. On a long term horizon there is absolutely no risk in putting your money in good, well rated, established mutual funds. In future with reduction in interest rates returns, ppf would become more unattractive hence my suggestion is to Invest for all the long term goals > 5 years in equity mutual funds and < 5 year goals investment can go into debt mutual funds.

Important words here are 'good, well rated, established mutual funds'. It is possible that after 15 years, the invested amount may remain same or even be negative. This purely depends on the returns of the mutual fund.
Unlike PPF, MF investor needs to do some homework, monitor performance periodically and must switch depending on market performance.

[gsurya]

Yes, I am sure of this technical rule, though its not applied by ITO in the normal course. If you are already being scrutinized, they might throw this in too. In fact this rule applies to ALL tax saving instruments, it has to be from money earned in current fiscal year.

[hserus]

Originally Posted by ontheroad

Which is better? Investing in PPF or NPS? I think the tax exemption are same for both.

NPS is a glorified ULIP of sorts. But you need to compare it to what it is supposed to substitute - which is the EPF (deducted from your payroll rather than voluntary on your part like a separate PPF account with a bank or post office).

Out of the two NPS and EPF I would prefer the EPF.

IIT-M prof and investment blogger Pattabhiraman Murari has some perspective on this. https://freefincal.com/national-pens...-tax-benefits/

[gupta_chd]

Originally Posted by gsurya

Yes, I am sure of this technical rule, though its not applied by ITO in the normal course. If you are already being scrutinized, they might throw this in too. In fact this rule applies to ALL tax saving instruments, it has to be from money earned in current fiscal year.

I have heard about this from some people but nobody could provide any concrete reference nor could I find any mention on internet. I guess there is no such rule, only rumors. I may be wrong too.

[sgiitk]

Originally Posted by gsurya

PPF investment is required to be from earnings from that fiscal year only. So an IT officer can ask you to prove that you did earn your investment on April 1st, if you do it on 2nd April. This has happened to a few people.

I think this bit got taken off the statute books quite some time back. I guess a proper interpretation today may be that you should be able to prove that you had enough earnings during the year to justify the 80C expenditure. Yes, I know in the past many people with a habit of moving money into ppf on April 2 or 3 were caught out.