Everyone is bullish when the market is green and you just need one tail swing and there is nothing but bearishness in the market.
As the markets are falling, EPF investment has suddenly become the cynosure of everyone and equity markets have started bothering everyone. Little do they understand that, with the equity markets falling, so is the guaranteed return on investment in the EPF which has come down to a record low of 8.1% – lowest in 4 decades perhaps.
But why is this happening ?
EPF was constituted way back in 1952 where they used to invest in government securities, state guaranteed bonds etc. With the onset of 2015, as the political scenario of the country was about to change, so did the economic scenario because the government decided to keep an equity exposure of about 5% which was eventually increased to 15%. Now the government is even mulling to increase it to 25% as well.
But this doesn’t answer our initial question- why is the government reducing its guarantee?
The simple reason for the same lies in the fact that with EPFO also having equity exposure, guaranteed return has become a too big a promise for them and with this guaranteed thing looming over the government’s head, they are soon planning to reduce the rate of interest even further and we might see it soon come down even below 8% as well. Hence with every passing year, we see the disappointment and despair run down the eyes of the investor.
Keeping view of the same, pure equity investment in general have fared well above the EPF investment keeping the same period of investment.
Still want to invest in EPF ?
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