Should I invest in PPF or ELSS?

Should I think about investing in infrastructure bonds now?

You can invest more than 20,000 in infrastructure bonds, but the tax break is only 20,000. Furthermore, the earned interest is taxable.

The best guaranteed post-tax return is PPF. So invest a considerable amount in this. Since your age group is low, you can afford to take risks and so could invest in ELSS [mutual funds] too.

A note on each of these investments:

LIC: If you've taken advantage of any of the foundation / money back plans, keep in mind that the returns are very low at 5-6%. It would make more sense to buy a pure term plan at a fraction of the cost and even invest the remaining premium in PPF or FD for more returns.

NSC / Postal Savings: They are a good option, but the interest is taxable. There is a 6 year ban.

PPF: The lock is great for 15 years, although you can partially withdraw after 7 years. The interest is not taxable.

ULIP: These are market-linked plans with insurance and balance invested in markets. The fees for the first few years are quite high and the returns are not comparable to normal mutual funds. Only invest when you need less paper and don't want to keep track of things separately.

ELSS / Mutual Funds: These offer good market returns, but there is market risk. When you are young you can afford to take the risk. Most ELSSs have given average results that are still higher than FD or PPF.

Retirement Plan: This is a great way to accumulate for retirement. Invest a small amount in these and do not take out insurance. Go for pure equity as you can still take the risk. This ensures that you have a kit for retirement. Read the terms and conditions on how to acquire a pension at the end of the term, etc.