Ask Us: On investments
Raja Thilagar
A We are sorry to hear about your situation. Public Provident Fund (PPF) account comes with a lock-in period of 15 years, i.e. account can be closed only after the completion of 15 years under normal circumstances. It's not advisable to open a PPF account at the fag end of your career. In the Post Office PPF account, a subscriber can withdraw only after the completion of five financial years excluding the account opening. In your case, you have opened in November 2020 (FY20-21), withdrawal can be made only during FY2026-27, i.e. after completion of March 31, 2026. Further, only 50% of the balance credit at the end of the fourth preceding year could be withdrawn.
Premature closure is allowed only after the completion of the fifth calendar year from the end of the year in which the account was opened. The closure is subject to conditions such as life-threatening disease of account holder, spouse or dependent children; higher education of account holder or dependent children. It is also allowed when there is a change in the resident status of an account holder (i.e., he/she became NRI). However, 1% interest shall be deducted for the same.
Though you have a medical emergency, it is likely impossible to close your PPF account prematurely or withdraw your corpus. However, a post office official said, 'If you have valid medical certificates and that the medical condition (of self or any of the family member) is life-threatening, you can place a request to the Divisional Head of your branch through your branch head and try explaining your crisis. However, it's not a guarantee that your account could be closed prematurely.'
Q I passed out from college recently and am working in a Central government PSU. My father is into a small business and I have no liabilities. How should I start investing for long-term? Also advise me on health insurance for my family.
Ansh Gupta
A You are considerably young and have enough time for growth prospects, be it in direct equity investing or through mutual funds. First, you can start investing in mutual funds (MFs). Choose any Index fund (passive) that tracks Nifty 50 or Sensex 30, which are comparatively (not completely) safer. However, choose only direct schemes but not regular schemes that are offered by distributors or brokers. When compared with regular schemes, the expense ratio for direct schemes is lower.
Either you can start a Systematic Investment Plan (SIP) or you can invest in a lumpsum plan. SIP is a monthly commitment whereas a lumpsum is a one-time investment plan. You can start investing a minimum of ₹500 per month (some MF schemes offer lower amount plans also) in any passive fund or as a one-time lumpsum, if you get any incentive or bonus. Since you have no liability, you can start a SIP of ₹6,000 per month. Keep track of the performance of SIP investment for two to three years. Once you have understood how market movements impact your mutual fund performance, you can consider investing in other active mutual funds and also start investing in equity markets, that is stocks.
For a decent health insurance coverage for you and your family, take a family floater policy with a sum insured (SI) of up to ₹10 lakh at an affordable premium. Important criteria to consider in the policy are list of network hospitals for cashless treatment, higher claim settlement ratio of insurance companies, cap on room rents, sub-limits on treatments, waiting periods for pre-existing diseases, pre- and post-hospitalisation coverage period, no-claim bonus benefits, inclusion of annual health check-up facility, co-payment clauses, coverage for daycare procedures and life-long renewability.
(The writer is an NISM & CRISIL-certified wealth manager)
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