Investing in public provident fund continues to be the safest avenue around and it gives the soundest return in the fixed income world -- 8 per cent per annum, capital protected.
But is 8 per cent the best your investment can get? Certainly not, if you invest in equities safely. Yes, you can play safe in equities too.
The trick is in knowing which stocks should you pick that will culminate into returns that top 8 per cent per annum.
If one were to identify stocks (and construct a portfolio) that can give a similar compounded annual growth rate of 8 per cent for five years or more, then surely you can keep PPF on the backseat.
However, after the stock markets have zoomed to unchartered territories -- and now retracting, it becomes increasingly hazardous to spot stocks that will go up with minimal downside risk.
But don't lose heart -- you can still do it: select stocks on the following parameters -- the company should have a strong business model, sustainable earnings growth, strong existing businesses or growing businesses, should be in growing sectors, ideally must be the most competitive company in the sector that can handle competition, and of course, must currently have decent valuations.
Once you zero into companies on these parameters, you can begin investing in them -- and start counting the cash after some time.
To begin with, five years from now, sectors directly linked to the economic growth are seen as big beneficiaries, especially since India is expected to be among the top three fastest growing and biggest economies in Asia.
So who benefits from economic growth? The best of companies in banking, engineering, telecom, heavy equipment and not to forget, software.
Based on this theory, take your pick. And laugh all the way to the bank -- not for investing in PPF.