Disclaimer: I am not a certified financial planner and it’s recommended to take professional help to manage your investments.

I joined the workforce in 2017 and have spent a considerable amount of time understanding where to save or invest money. I often tend to forget the details of some of these financial instruments/options and spend a lot of time re-trying to understand them in greater depth. In this blog post, I plan to aggregate some of these in the hope that I don’t spend a lot of time in the future researching the fundamentals of these instruments again. It may be of some help to others in the same boat.

Provident Fund

The Provident Fund is government mandated scheme, where both you and your employer contribute 12% of your basic salary (plus dearness allowances, if any) into the EPF account.

The aim of the EPF scheme is to promote retirement savings for employees across India. It falls under the E-E-E taxation category, i.e you get tax exemption at the time of investment, the earnings are tax-free, as are the withdrawal.

A few points to note here are:

  • The employer contribution of 12% is divided into 8.33% towards EPS and 3.67% towards EPF.
  • The EPS contribution is capped at Rs. 1250 per month, by considering the calculation on Rs.15,000 as the maximum.
  • EPF offers 8.55% interest rate p.a. for FY 2018-19, which is significantly more than the interest rate for Fixed Deposits.
  • No tax is deducted if the employee withdraws PF after five years.

Now, since PF is a safe instrument with good interest rate and tax benefits, it is a good option for risk-averse investors. The above benefits come naturally to all employees, however, there is an option for the investor to voluntarily increase their contribution to the PF. This additional contribution is known as the Voluntary Provident Fund [1].

VPF makes PF more interesting, as now the employee can increase their contribution to PF, and reap all of the benefits of EPF like a safe investment, high returns, and tax benefits. The only thing to keep in mind is that all withdrawals from the Voluntary Provident Fund are tax-free only after 5 years of continuous contributions. In case, the employee wishes to make a withdrawal within the first five years of enrollment in the scheme, the interest earned over the deposits will be subject to tax. The following article from Economic Times does a really good job of explaining taxation impact in case we withdraw from PF before five years.

In a nutshell, VPF makes sense (as a better alternative to FD) if we are certain to be in continuous service in India for at least 5 years to avail the tax-free interest, otherwise, if we withdraw before 5 years, it eventually becomes like an investment in Fixed Deposit, which will be taxed at our income slab.

We can monitor PF/VPF contribution online on the UAN website and corresponding passbook website.

Public Provident Fund

PPF is another government savings scheme, that falls under the E-E-E tax exemption category, with the safety of being backed by the government.

The interest rates are slightly more than those offered for Fixed Deposits and was 8% for Q4 FY 19.

The essential features of PPF are explained well in ClearTax (copied verbatim):

  • Tenure: The PPF has a minimum tenure of 15 years, which can be extended in blocks of 5 years as per your wish.
  • Investment Limits: PPF allows a minimum investment of Rs 500 and a maximum of Rs 1.5 lakh for each financial year. Investments can be made in a lump sum or in a maximum of 12 installments.
  • Annual investments above Rs 1.5 lakh will not earn interest and will not be eligible for tax saving.
  • Deposit Frequency – Deposits into a PPF account has to be made at least once every year for 15 years.

On Economic Times, the following is recommended for investment time – If you plan to invest in PPF in installments then you should do it before the fifth of every month in which you invest. Because according to PPF Rules, the interest on PPF deposits is calculated on the minimum balance between the fifth and at the end of the month.

There have been a few notices regarding PPF accounts for NRI, however, at the writing of this post, there is no impact on an existing PPF account for NRI’s as detailed in this LiveMint article.

Overall, PPF is pretty straight forward and following the simple lump-sump investment every year would yield the best returns.

Fixed Deposits

The most common and default investment instrument in India is a Fixed Deposit:

A fixed deposit (FD) is a financial instrument provided by banks which provides investors a higher rate of interest than a regular savings account.

It is a well-known instrument in India and useful for risk-averse investors and to maintain liquidity & emergency fund in the bank. The interest on the principal amount is taxed as per the income slab of the person, thus not having any taxation benefits.

Mutual Funds

A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities.

Unlike PF, VPF, PPF, and FD which have fixed interest rates and backed by the government, MF investments are subject to market risks. Moreover, there are a variety of Mutual Funds and it is good to understand them before investing.

Direct MF vs Regular MF [2]

Regular and Direct plans are just the two options to buy the same mutual fund scheme, run by the same fund managers who invest in the same stocks and bonds. The only difference between the two is that in the case of a regular plan your AMC or mutual fund house does pay a commission to your broker as distribution expenses or transaction fee out of your investment, whereas in case of a direct plan, no such commission is paid. Instead, in the case of direct plans, the commission is added to your investment balance, thereby reducing the expense ratio of your mutual fund scheme and increasing your return over the long term.

Thus, if we know which MF to make investments in, buying Direct MF is preferable over Regular MF.

Equity MF vs Debt MF vs Hybrid MF [3] [4]

The differences in these MF are based on Nature of Fund/Sub-funds, Risk, Return and Tax treatment.

  • Equity MF:
    • Invest shareholder’s money principally in stocks (equity and equity-linked instruments)
    • High Risk - High Return
    • The capital gains shall be STCG if held for less than 1 year and taxed at 15%. If held for more than 1 year it will be LTCG. Effective Union Budget 2018, LTCG on equity funds will be taxed at 10% above Rs.1 lakh in a year without the benefit of indexation.
  • Debt MF:
    • Invests shareholder’s money in fixed income securities such as bonds and treasury bills.
    • Low Risk - Low Returns
    • Debt funds, which are held for more than 36 months, are taxed at 20 percent with indexation. In case of short-term debt funds, the capital gain is added to the total income of the investor and then taxed according to the income tax slab he//she falls under.
  • Hybrid MF: [5]
    • Some of the Hybrid funds include:
      • Equity-oriented Hybrid Funds
      • Debt-oriented Hybrid Funds
      • Balanced Funds
    • Medium Risk - Medium Returns
    • Taxation is dependent on the orientation of the Fund. If the equity exposure is greater than 65% it is taxed the same as Equity Funds.

Equity MF

Equity MF [6] again consists of various types:

  • Based on Market Capitalization – Large-Cap, Mid-Cap, Small-Cap, Multi-Cap
  • Based on Sector and Themes

I have been using Zerodha Coin and find their user experience extremely pleasing and convenient. The MF investments via Coin are in Direct MF and their other charges are minimum to none. Their SIP scheme is flexible and extremely easy to edit, pause and resume.


Stock Market: It is a place where shares of public listed companies are traded.

We can buy/sell stocks based on our analysis of the company’s performance. Zerodha Varsity has great modules on understanding the fundamentals of trading and finance.

I’ve used Zerodha broker and find their Kite user experience clean and easy to use.

Another good concept around stock investments is smallcasea smallcase is a basket of stocks that reflects an idea. It is a portfolio of stocks or ETFs, weighted intelligently to track a theme, strategy or objective.

It is similar to MF with direct exposure to equities and more control over the investment strategy.

I began writing the post with the intention to go over all instruments in great depth, however, the subject is huge and I could only manage aggregating information and writing an overview.

Hopefully, in the future, I can add more depth and share learnings from my investments. There are various other investment instruments that would require further research – Employee Pension Scheme (EPS), National Pension Scheme (NPS), Employee Stock Ownership Plan (ESOP), Exchange-Traded Fund (ETF), Gold Investments, Real Estate, Insurance, etc.


  1. 1: VPF Rules & Guidelines - BankBazaar 

  2. 2: Direct vs Regular MF- PaisaBazaar 

  3. 3: Debt vs Equity vs Hybrid MF - IIFL 

  4. 4: Debt vs Equity - Economic Times 

  5. 5: Hybrid Funds - ClearTax 

  6. 6: Equity Funds - ClearTax