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Mutual Funds Vs Post Office Schemes

There is no upper limit for post office schemes. It allows individuals to invest whatever amount of money that meets their financial goals. These plans provide up to 8.7% guaranteed interest yields. The early withdrawal carries a 2% penalty but assures liquidity. Interest collected on post office schemes is taxed according to the investor’s income tax bracket. Monthly deposits made to these schemes earn dividends at the corresponding rate of interest. This provides a consistent source of monthly income.

The diverse assortment of mutual fund schemes matches each investor’s specific investing objectives. Mutual fund investments made via the Systematic Investment Plan ensure that individuals may invest at a minimum of Rs. 500. Investors can withdraw from their mutual fund scheme by paying a 1% exit fee before the specified period.

Read on to learn the difference between post office schemes vs mutual fund. 

What are mutual fund schemes?

Mutual funds are financial tools primarily investing your money in the equity or stock market. They provide better yields than many other investing choices, such as PPF and Post Office savings. However, the substantial gains are highly risky and susceptible to market volatility. A market crash or other adverse conditions may result in the loss of cash. However, mutual fund managers strive to reduce risk by investing their money in various stock market sectors. 

Mutual funds provide more liquidity than other solutions since you may sell your assets and cash your rewards right away. 

6 benefits of investing in mutual fund schemes

  1. Diversification – Mutual funds invest in various securities from diverse businesses and sectors. This diversity reduces the total risk for investors.
  2. Professional management – Mutual fund managers and analysts have the knowledge and skills to manage funds and make sound investment decisions actively. This can result in higher returns than individual stock selection.
  3. Liquidity – Mutual fund units can be readily purchased and traded on any business day, providing investors with immediate liquidity. This makes it simple to switch in and out of fund investments.
  4. Flexibility – There are a diverse choice of fund types. It includes equities, debt, hybrid, sectoral and others. Investors may select schemes that match their objectives, risk tolerance, and investment length.
  5. Transparency – Mutual funds regularly disclose their portfolios and the value of investments. This helps investors track the performance of their funds.
  6. Regulatory oversight – Securities regulators impose strict operational and reporting requirements on mutual funds to protect investor interests. This provides an added layer of security.

In summary, mutual fund schemes offer diversification, professional management, liquidity, flexibility, transparency and regulatory oversight. By pooling money into funds, small investors can participate in a much broader basket of securities than investing individually. This makes mutual funds a beneficial investment vehicle for many types of investors.

What are post office schemes?

Post Office Savings Schemes offer various investment alternatives focusing on individuals looking to save small sums of money. This post office mutual fund seeks to provide risk free and guaranteed returns to investors. 

It lists several investment alternatives that include-

  • Post Office Savings Accounts
  • Post Office Monthly Income Scheme Accounts
  • Post Office Time Deposit Accounts
  • Senior Citizen Savings Schemes
  • National Savings Certificates and others

These options generate rewards depending on varying interest rates. You may also claim tax deductions of up to Rs 1.5 lakh per year for your investment in these Plans. 

6 benefits of investing in post office schemes

  1. Government Backing – The government backs post office schemes, so the investments are safe and secure. There is virtually no risk of default.
  2. Reasonable Returns – While returns are not very high, post office schemes offer reasonable and steady returns of 7-8% on average. This can beat bank fixed deposit returns.
  3. Tax Benefits – Some plans like Post Office Monthly Income Scheme and Senior Citizen Savings Scheme offer tax benefits. This is under Section 80C and 80TTB for principal and post office mutual fund interest rate respectively.
  4. Liquidity – Many post office schemes allow premature withdrawals and loans against the investment. This provides liquidity to the investor when needed.
  5. Low Investment Amount – Many schemes have low minimum investment amounts making them accessible for lower income groups. Some post office mutual fund calculation start at just Rs. 100 per month.
  6. Simplicity – Investing in post office mutual fund is easy with minimal paperwork. There are no complex rules or conditions. This makes it hassle-free.

In summary, SIP post office schemes offer safety, steady returns, tax benefits, liquidity, low investment amounts and simplicity. Mutual funds in post office can be ideal investment options for conservative investors who prioritise capital protection over high returns. The government backing provides peace of mind to investors as well.

Mutual funds versus post office schemes

Below is a comparison table between post office schemes vs mutual fund.

AspectMutual FundsPost Office Schemes
Type of InvestmentPooled investment in various securitiesFixed-income and savings schemes
ReturnsVariable; can range from negative to high returnsFixed; typically lower compared to market returns
RiskMarket risk can fluctuate with market conditionsLower risk; usually guaranteed returns
LiquidityGenerally high; can redeem investments anytimeVaries; some schemes have lock-in periods
FlexibilityOffers various investment options and strategiesLimited options, primarily fixed-term deposits
TaxationTaxed based on capital gains, dividends, and interestTaxed based on interest income and capital gains
RegulationRegulated by the Securities and Exchange Board of India (SEBI)Regulated by the Indian government through the Department of Posts
Investment AmountVariable; can start with small amountsFixed; minimum investment amounts specified
Investment HorizonShort-term or long-term depending on investor preferencePrimarily long-term, some schemes offer short-term options

Where to invest- post office schemes and mutual funds?

A senior citizen could be searching for a consistent source of income. In this case, mutual funds in post office could be the best option for these individuals. Nevertheless, younger people are often prepared to take risks in their lives. For these individuals, mutual fund investments could be a perfect choice. 

When you are investing in mutual fund schemes, doing it for the long term can be beneficial. It will help your assets withstand the effect of the volatile market. All that counts in your investment is your budget and risk tolerance. The post office mutual fund are an excellent option for conservation investors. Similarly, mutual fund schemes are suitable for the risk-takers. 


To sum up, mutual funds are an investment tool that combines funds from several participants. These funds are invested in the bonds, stocks and other assets. The post office schemes are various investment choices provided by Indian Post. You could be prepared to accept risks in order to grow wealth by selecting from a variety of mutual funds. However, individuals who are unwilling and unable to take chances should stick to post office plans.


What are the critical differences between post office schemes and mutual funds?

SIP post office schemes are government-backed investments that offer fixed returns and high safety, but lower liquidity and returns. Mutual funds are market-linked investments managed by professional fund managers that offer higher potential returns and liquidity but carry higher risk.

Which type of investment is better for conservative investors?

Conservative investors prioritising capital protection and steady returns may prefer post office schemes. These schemes offer assured returns and government backing, making them very low risk. Mutual funds, being market-linked, can be more volatile.

Can I get tax benefits from both post office schemes and mutual funds?

Yes, specific post office schemes like the Public Provident Fund, National Savings Certificate and Senior Citizens Savings Scheme offer tax deductions on investment and exemptions on interest earned. Equity Linked Savings Schemes offer tax deductions under Section 80C for mutual funds. However, the specific tax benefits vary for each scheme.

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