The PPF is one of the best indicators of household savings trends. It is also the most robust long-term savings instrument in the economy with a 15-year tenure; its ease of liquidity, unlike term insurance plans, makes it a favorite with the middle class.

However it isn’t only mutual funds and non-banking financial companies that are facing redemption pressure. The government-run Public Provident Fund (PPF)—the single-largest fixed-income scheme in the country—has also suddenly registered a spurt in withdrawals. PPF deposits have shrunk by over Rs 6,700 crore in September alone. Contrast this with the deposit inflow of Rs 5,072.39 crore for the first five months of this fiscal.

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photo by orangeacid

Investment experts keep advising us to “invest for the long term,” mainly so that we may benefit from the power of compounding.

Take an individual who decides to invest Rs. 50,000 for 20 years. Assume that he earns a constant return of 8% per year. In the first five years, the Rs. 50,000 invested grows to Rs. 73,466. (see table) This means, he gains Rs. 23,466 in absolute terms in the first five years. [Read more]

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photo by pshutterbug

Imagine if you had Rs 100,000 and had the full freedom to decide where to park (invest) it — where would you put it? Rewind — last quarter of 2007, no doubt it would’ve been the stock market calling your money. But hey, considering the bearish sentiments in the stock market today you’ve got to carefully evaluate your investment decisions.

Here’s how you could look at investing the amount:

CASH IS KING

With the inflation rate at 12.40% (approx as on Aug 28, 2008) you’re gonna have higher outflows in your monthly home budget. Make sure you have about 3-6 months of your living expenses set aside in either:

(1) A savings account that’s linked to a fixed deposit. This ensures you enjoy a slightly high rate of interest (as compared to a normal savings account) along with the liquidity of a Savings Account. And hey, you don’t even pay any penalty to access your funds which otherwise is the case when you access your funds in a normal Fixed Deposit account. [Read more]

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Saving Money is the key to financial freedom. Unfortunately, talk about savings and most people’s eyes start to glaze over. Inside many people simply feel that life is for living now, not for sometime never in the future and anyway they already contribute to a retirement fund.

This is a big mistake and many people make it; believing that savings are only about retirement. Retirement planning is important but it is not the only or the most important reason for saving. [Read more]

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