The Employees Provident Fund scheme was amended on March 28th 2020 to include a non-refundable advance (tax-free) advance in view of the lockdown across the country. With the stock market in the middle of a crash, can this advance be used to invest in equity now? Who can do so and who should not. A discussion.
The EPFO has released an excellent FAQ on the subject. The advance is tax-free and can be obtained without any documentation. Follow these steps to find out how much can be taken out.
One: Compute (monthly basic + DA) x 3. Two: Compute 75% of EPF account balance. Three: Your eligible balance is the lower of the two numbers.
Should I withdraw from EPF and invest in equity now? The answer is not a simple yes or no. It depends on your motive, your asset allocation and age.
Many would find the very thought of withdrawing from EPF to invest in equity as a sin! The idea of interrupting guaranteed true, tax-free compounding in favour of stock market uncertainty is unacceptable to many. If you are one of them, then the rest of the article will not be of much use to you. I am expecting strong disagreement in the comments!
If you wish to withdraw from EPF only because the “stock market is down” and you wish to profit when it moves up, then I would recommend that you do not. Your EPF deserves much better respect than such short-term thinking.
If you are above 50 years of age, then regardless of your asset allocation, do not shift money from EPF to equity.
If your retirement is several years away and if you are capable of judging your investment at the portfolio level, that is, you have a target asset allocation, track changes in asset allocation and understand the importance of portfolio rebalacing, then yes, you can take advantage of this EPF advance and increase your equity exposure. The EPF advance may or may not help you achieve your target equity allocation, but for what it is worth this is a good opportunity to add some funds into equity.
If your retirement is several years away and if you have a debt-heavy portfolio and you are capable appreciating asset allocation and can take decisions without regret this is an opportunity for you to increase equity levels.
What the risks? The EPFO is already flooded with advance applications. So it could take days and days for the advance to hit your account! The market could recover by then leaving you filled with regret!
It would still be good to increase equity exposure if your asset allocation has room for it, but are you capable of looking at it that way? Regret has no place in portfolio management.
The market could fall further after you add the EPF advance. Can you handle that? Your spouse or parents might criticise you. Can you look at your plan then and reassure yourself that you have done the right thing?
Is it morally correct to do this? It is your money and the govt is allowed a no-questions-asked withdrawal for those affected by the lockdown. Is your equity portfolio not affected by the lockdown? Would it not be affected in future?
As long as you have a plan, as long as you know what you are doing and most importantly can live with your decisions, shifting money from EPF to equity is not a terrible idea. The question is, do you have a plan in place?
How to profit from content writing: is our new ebook for those interested in getting side income via content writing. It is at available at a 50% discount for Rs. 500 only!
Use our Robo-advisory Excel Template for a start-to-finish financial plan!
Join our courses in exclusive Facebook Groups!
- 520+ members are now part of our new course: How to get people to pay for your skills! (watch 1st lecture for free). Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show how to achieve by showcasing your skills and building a community that trusts you and pays you!
- Goal-based portfolio management! Join 2125+ members and get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment of Rs. 3000 only. No recurring fees! Life-long access to videos (10+ hours content) in an exclusive Facebook Group! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!) or you buy the new Tactical Buy/Sell timing tool!
We publish mutual fund screeners and momentum, low volatility stock screeners .every month.
About the Author

About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our Youtube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing

Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want

Your Ultimate Guide to Travel

Free android apps
- All calculators from our book, “You can be Rich Too” are now available on Google Play!
- Install the Financial Freedom App! (Google Play Store)
- Install Freefincal Retirement Planner App! (Google Play Store)
- Find out if you have enough to say "goodbye" to your employer (Google Play Store)