Many investors start reviewing their portfolios at the end of the year and making calculated choices to reach their financial objectives. Selecting between Exchange Traded Funds (ETFs), Public Provident Funds (PPF), and Bank Fixed Deposits (FDs) for year-end investments is a frequent conundrum. While PPF offers a safe, tax-free return of 7.1% and bank FDs, give stability with returns of 6-7%, exchange-traded funds (ETFs) offer a chance for greater growth potential with average yearly returns of 12–15% that are correlated with market performance. Experts such as Siddharth Maurya and Gaurav Singh Parmar emphasise the significance of balancing risk and return to maximise wealth generation, tax efficiency, and flexibility to economic changes. They suggest a diversified strategy combining PPFs, Bank FDs, and ETFs.
During the last month of the calendar year, strategic investors start moving away from pointing their wealth in Bank Fixed Deposits and Public Provident Fund investments and instead decide to invest in exchange-traded Funds (ETFs), which can promise better returns in the long run, said Siddharth Maurya, Founder and Managing Director of Vibhavangal Anukulakara Private Limited.
Siddharth Maurya added that, considering the recent Nifty and Sensex ETFs' average annual returns of 12-15%, investing in them may also be a good option as they offer growth relative to the market, taxation benefits, and low expense ratios.
“For prudent passive investors, targeting a global allocation of all three segments, say PPF 40%, Bank FDs 30% and ETFs 30%, would offer optimum return harnessing the risk. The present economic situation warrants a systematic investment approach where the various features of each investment are utilized in the right manner to achieve the goals of better wealth creation, tax efficiency and adaptability to changing circumstances,” said Gaurav Singh Parmar, Associate Director, Fincorpit Consulting
Currently, Bank FD returns are 6-7%, while PPF returns are 7.1% tax-free. ETFs represent a new sort of investment for those who want to achieve capital appreciation and grow their portfolios as well.
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Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
