Does investment in SIP is a good move for starters?

I have recently started working and can invest Rs.5, 000 per month. Should I open a public provident fund (PPF) account or invest in systematic investment plans (SIPs) of mutual funds? - Deepti Saxena, Delhi

It is encouraging to note your eagerness to save and invest money. However, there is a fundamental difference between a mutual fund SIP and a PPF. The investment in a mutual fund is market linked, which means that its performance is not guaranteed. On the other hand, the money deposited in the PPF earns a fixed and guaranteed return each year. The choice of picking one of these will depend on your age, your ability to take risk and the time frame of your investment. If you are open to putting your money in a PPF, which has a 15-year lock-in, you should definitely consider investing through SIP of a diversified equity mutual fund. You will not get guaranteed returns but by investing in a well-diversified equity fund, you will be able to gain far more than what the PPF pays over a 15-year period. If you are seeking the tax benefit that savings in a PPF offer, you can opt for the equity linked savings scheme (ELSS), which is a type of mutual fund wherein investments qualify for tax deductions under Section 80C, as is the case with savings in the PPF. The advantage with ELSS is that unlike the PPF, they have a much shorter lock-in of just three years.  

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