Investing at an early age will ensure that you would be in a better position to reap a good return. You must carry out your investment in a disciplined manner.
One investment avenue that assures guaranteed return is the Public Provident Fund (PPF) Scheme. PPF Scheme was introduced by the National Savings Organisation in 1968 was aimed at making small savings a lucrative investment option. If you choose your tenure wisely, PPF in the long term will yield very good returns.
If you invest even Rs 1,000 a month in Public Provident Fund, it will give you lakhs of rupees in return in the long term. Here is an assumptive calculation on how you can get over Rs 26 lakh by investing a small amount of Rs 1000 per month in PPF.
Public Provident Fund currently offers an interest rate of 7.1%. A minimum of Rs 500 and a maximum of Rs 1.5 lakh per annum can be deposited every year in a PPF account at present. Make deposits through a maximum of 12 transactions.
A PPF account matures in 15 years, after which you can either withdraw all your money or extend the PPF account for a block of 5 years each.
Check out the following calculation: Rs 1,000 invested in PPF turns into Rs 26 lakh.
First of all, it is advisable that you start investing in PPF at a very young age. Suppose you start investing at the age of 20, you can run it till you attain 60 years.
1. Investment for the first 15 years
If you continue to deposit Rs 1,000 every month for 15 years, then you will deposit Rs 1.80 lakh. On the said amount, you will get Rs 3.25 lakh after 15 years. Your interest in this at the rate of 7.1% will be Rs 1.45 lakh.
2. PPF Extended for 5 years
Now you extend your PPF for 5 years, and if you continue to invest 1000 rupees every month, then after 5 years, the amount of Rs 3.25 lakh will increase to Rs 5.32 lakh.
3. PPF extended second time for 5 years again
After 5 years, if you continue the PPF investment again for 5 years and continue to invest Rs 1000, then after the next 5 years, the money in your PPF account will increase to Rs 8.24 lakh.
4. PPF extended for third time for 5 years
If you extend this PPF account for the third time, for 5 years and continue to invest Rs1000, then the total investment period will be 30 years while the amount in PPF account will increase to Rs 12.36 lakh.
5. PPF extended for fourth time for 5 years
If you extend the PPF account for yet another 5 years after 30 years and keep investing Rs 1,000 every month, in the 35th year, the money in your PPF account will increase to Rs 18.15 lakh.
6. PPF extended for fifth time for 5 years
After 35 years, you extend the PPF account for 5 more years, and keep investing Rs 1,000 a month, in the 40th year, the money in your PPF account will increase to Rs 26.32 lakh.
Thus, an investment of Rs 1,000 that you started at the age of 20 will be Rs 26.32 lakh by the time you retire.