NPS vs PPF vs EPF vs Mutual Fund vs ELSS - YouTube

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Hello, my name is Mukul

And you are welcome to the Asset Yogi

So friends in this video we are going to compare some popular investments

Like NPS, means National Pension Scheme,

Fixed Deposit, Public Provident Fund means PPF

EPF means Employ Provident Fund

And mutual funds

In mutual funds, we will also see ELSS

ELSS means Equity Linked Savings Schemes

What are their benefits?

In this video, we will not go into many details

What are the features of these investments

I have already made an individual video regarding every investment

So you can watch those videos

You will find the links in the description box

In this video, we are going to compare these investments in four parameters

The first is a risk, the second is liquidity

Liquidity means that how easily can we withdraw money from investment

The third is tax benefits and the fourth is their returns

We will compare the investment in these parameters

See every investment has its advantages and disadvantages

That we are going to learn in this video

But every investment can be used for a particular goal

So we will understand from this video, which investment to be used for which goal

So stay tuned with the video

Music

Firstly we will talk about fixed deposits

This is quite an easy and simple investment tool

Everybody knows about it.

Your risk here is quite minimal

You can go to any bank or post office and can make a fixed deposit

If we talk about liquidity here, then you can deposit money anytime here

And can withdraw it anytime

So liquidity is high here

So if we talk about taxation on fixed deposits

So Under Section-80(C), you get an FD

Which you have to make for five years

Your log in period is of 5 years there

You get a tax rebate on that under Section 80 C

Whatever type of FD you have, whether it is of a tax rebate or normal FD

The interest you get on that is taxable

So because this interest is taxable and your FD is promising you 7 or 8 % returns

Or let's say you come in 20 to 30 % tax bracket

Then your interest will decrease by 20 to 30 %

So you can assume that the post-tax returns you get on FD are not more than 5 to 6%

So approximately it matches the inflation

As much as inflation is rising and you get that much interest

Then you have not earned that much money

So we will say here that you have low returns

The returns can only match the inflation

The next is our provident fund

So provident fund is generally of two types

The first is Public Provident Fund

where anyone can open their account in the designated bank

The second is your Employ Provident Fund which is called EPF

If you are a salaried employee anywhere

Then whatever your company is

So your company provides some portion from their side

And you have to provide some portion from your side

You get an approximately equal return on PPF and EPF

If we talk about risk here

I am carrying both PPF and EPF along because both are similar types of investment

Here your risk is minimal

Because you have got the backing of the government

If we talk about liquidity,

Liquidity here is very low

Because you have to invest for a very long period,

You can not suddenly withdraw the Employment Provident Fund

Until you leave your job

If we talk about Public Provident Fund

So you have to invest the money for 15 years

The minimum time horizon here is 15 years

So if you deposit money there, then you cannot withdraw the money suddenly

Partial withdrawal is allowed only in the case of emergencies

If we talk about the taxation

Then here also U/S 80C, the investment that you make in PPF and EPF

You get a tax rebate on the total amount up to 1.5 lacs U/S 80C

In that, you get an option of PPF and EPF also

So these investments are also covered in the Section 80C

And the second benefit of PPF and EPF is that they come under EEE

Whenever you withdraw the money,

Whether you make a partial withdrawal or you withdraw the total amount at last

By any means, the interest is not taxable

If you are getting let's say 8% returns

Then you are getting exact 8% interest here

The return is not taxable

So here we will say that your returns are a bit more than inflation

We can assume that inflation is 5 to 6%

So they are just beating inflation

The returns are just 1 or 2% more than inflation

The benefit is not that much

If you want to beat inflation

And want to earn more returns

Then two options are good for you

The first is NPS, which means National Pension Scheme

The second is your mutual funds

We will cover ELSS under mutual funds

First of all, we will take about NPS

In NPS, I am talking about the Tier-1 account which is mainly a pension account

We will surely talk about the Tier-2 account a little

First, we will talk about the Tier-1 account which is mainly a pension account

If we talk about risk here, then the risk is a bit high here

If we see in comparison to FD, PPF, and EPF

Because you will get a chance to invest in the equity component here

How much you can invest in equity?

You can invest a maximum of up to 75%

Let's talk about liquidity

Liquidity here is less than all the investments that we are talking about here

Because you cannot withdraw the money till the retirement

Here in the case of an emergency

Just like PPF and EPF have 2 or 3 emergency conditions

In which you can withdraw the money

Like if you are 30 years old now and you will get the money at the age of 60 years only

And if you want to withdraw the money in between then you cannot withdraw the money

You can do it only in some case of an emergency

Let's talk about taxation, Under Section 80C, the tax rebate of 1.5 lacs that you get

NPS is also one of the options in that

So whatever you invest here in a year,

If you invest 1 lac Rs in NPS

Then you will get a tax rebate on that 1 lac Rs

You get an additional rebate of 50000 Rs on NPS

Other than this if you have an employer contribution

Assume if you work in a corporate sector

And your company invest something from their side

You get tax benefits on that also

So if we compare all the investments

Then NPS has the most tax benefits

But there is a catch here

Whatever amount you invest,

and let's say finally the lump some amount

Whatever your corpus amount will be at the time of retirement

Out of that, you have to invest 40% in an annuity in the form of a pension

And you can take a maximum of 60 % as a lump sum amount

The tax is not levied on the 60%

But the 40 % that you will get in the form of pension every month

In that, the income generated according to the income tax slabs is taxable

But I understand that shortly, the government will make it more attractive

In the past also, NPS was made very attractive

Earlier, you could only invest up to 50 % in equity

Now it is 75 %

Now we will talk about returns

You can expect from 8 to 13% returns on NPS

So why am I saying this?

If you invest in debt, which means corporate bonds, or government securities

Which are your safe investments

Then you can expect an average of 8% returns there

If you increase your equity component,

then your expected returns are also increased

Because equity portion gives you around 15% returns

Let's say you have invested 75% in equity and 25% in debt

Then your average returns will be approx 13 or 13.5%

Because you are invested here for a long time, then you can beat inflation easily

If we assume inflation as 5 to 6 %

And you are earning returns of more than 10%

Then you can beat inflation quite easily

There is another account in NPS, which is called Tier-2 account

You will not get tax benefits in a tier-2 account

It operates like a mutual fund

You can invest up to 75% in equity

If we compare tier-2 accounts with mutual funds.

The fund management cost of the tier-2 account is less as compared to mutual funds

Let's talk about mutual funds in a little more detail

How the mutual funds and ELSS can be compared to other investments

First of all, we will talk about risk

Overall, the risk is more as compared to other investments

Because equity portion is more here

It depends on you if you want to go to 100% equity

Then you can go to mutual funds

If you are going into more equity

Your risk is diversified

If you are investing for a long time in mutual funds

Then it is invested in different shares

All the shares will not go down at once

And if talk about the long term then share market always goes up

So if you are taking the horizon of 10 to 15 years

Then it's not like there is a very high risk

Your risk is limited, and it is diversified

We can say that the average returns in mutual funds

Just like the overall average in the share market

You can expect 15 % returns if you invest 100% in equity

If we talk about liquidity, then liquidity is high here

Here you can invest the money anytime and can withdraw the money anytime

Nowadays we can invest and withdraw money online

If we talk about taxation on mutual funds

There are Equity Linked Savings Schemes

In which you have a lock in period of 3 years

You get a tax rebate on that U/S 80C

U/S 80C, all the products that we have talked about till now

You have options in all of them

Similarly, you have an option in ELSS also

Overall the limit of 1.5 lacs in Section 80C

It has an option of ELSS also

But along with that, you must know one thing

Last year, long term capital gains tax has been levied

Earlier, the tax was not levied on the returns

But now all the returns you will get on mutual funds

If your investment exceeds one year, then 10% of long term capital gains are levied

As we have talked about that if we are expecting the returns of 15%

Then you can assume if the 10% of the long term capital gains tax are levied

Then you can say that only 13.5% of returns are left

So you can understand that you will get 13 to 14% of returns in the long term

But these are also very good returns

You can beat inflation very easily

So we have seen the comparison of all the investments in all the 4 parameters

Now we will see that when to use which investment

So here I have made a comparison chart

based on the 4 parameters of risk, liquidity, tax benefits, and returns

We are going to compare all the investments

The question that arises here is that

Which investment to be made and when

This depends on mainly two parameters

The first is the time horizon

In how much time will you require the money that you are saving or collecting

The second is our goals

What is the reason behind saving that money

For what do we need that money in future?

First, we will talk about FD

The risk is very low here, liquidity is high

You can deposit the money whenever you want and withdraw the money whenever you like

Tax benefits are negligible and returns are also very low

In FD, you should invest money only in the short term

From 3 months to 2 years, if you want to save money

Let's say there is some requirement

What type of goals they will be

They are short term goals

Like if you want to have money for the car, want to buy a house

Want to go on a vacation, there's a wedding in your home

You want to buy a gadget, you want to buy a laptop, or purchase a camera

So in short term, if there is any requirement for money

Let's say you want to purchase something in 1 or 2 year

It is best for you that you start saving in FD

You will get some interest there

If you invest money for the short term in other investments

First thing is that the time horizon is very long in PPF and EPF; and NPS

Then you will not be able to withdraw the money

On the other hand, mutual funds are subjected to market risk

It may be possible that in the next 1 or 2 years, the market goes down

If you require money suddenly,

then you may not be able to withdraw the money suddenly

Because you may face loss in the market

Mutual funds etc provides you benefits in long term

But if your requirements are for the short term

Then FD is right for you.

Now let's talk about PPF and EPF

Public Provident Fund and Employee Provident Fund are somewhat similar

Here your risk is quite low because you get the backing of the government

Liquidity is very low because you cannot withdraw the money prematurely

You can withdraw the money in the case of emergencies

That too you cannot withdraw the entire money

Make sure to watch my video on PPF

You will understand then, that in which cases you can withdraw the money

Tax benefits are more here as compared to FD

Returns are quite low here

So the investment of PPF and EPF are suitable for which type of goals

We have already talked about the time horizon

It is quite long, you have to invest for a minimum of 15 years

Goals will be the long term here according to that

So what long term goals will be here

Like you have to fund your children's education in the next 15 to 20 years

For that, the PPF and EPF is good

For your children's wedding, PPF and EPF is good for that also

Then it is also a good option for retirement too

Because you have to invest for a minimum of 15 years here

Along with that, if there comes a medical emergency

Then you will get the facility of partial withdrawal

Now let's talk about NPS, National Pension Scheme

Risk is moderate here

because some of the money is invested in equity while some are invested in debt

Liquidity is very low here

Because you will get the money at the time of retirement only

you cannot withdraw the money in between

Tax benefits are quite good here as we have already talked about it

And you get quite good returns here if you invest more in equity

So what is the main purpose of NPS ?

So see time horizon is a retirement

So the goal is the long term here

And what is the long term goal

There is mainly your retirement planning, this is quite a specific product

We are talking about the Tier-1 account of NPS

So this mainly solves the purpose of retirement

So if you want to invest in NPS, then you can surely do your retirement planning

Let's talk about mutual funds

The risk here is moderate just like it is in NPS

It depends on how much you are investing in equity

Liquidity is high

You can invest as much as you want and withdraw as much as you want

There is no problem with that

Tax benefits are less here as we have seen

And returns are high

So what goals can you achieve with the mutual funds

You should make a time horizon of more than 2 years

You should make it a minimum of 2 years

If you want definite in money in less than that

Then it is better that you invest your money in FD

Because your capital will not depreciate and it will not reduce

So what type of goals can you achieve with mutual funds

We will talk about mid to long term goals

Like you want to save for a downpayment of car or house

You are planning a house in the next 5 years

You can save for its downpayment by investing in mutual funds

You can fund your children's education

If your horizon is long I.e. 10 years, 15 years, 20 years

You can fulfill that too with mutual funds

Because you will get good returns in the long term

You can plan your children's wedding

You can do your retirement planning also with mutual funds

So in this video, we compared all the popular investments in four parameters

I assume that you have got the idea that which investment to be used for which goal

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