SIP vs PPF: It is important to invest carefully in order to ensure one’s financial security. Both SIP (Systematic Investment Plan) and PPF (Public Provident Fund) are widely followed investment instruments in India. Although SIP carries the possibility of higher returns with mutual fund investments, PPF is a steady and tax-effective approach to saving for the long term. Knowing the distinction between the vehicles can enable individuals to make wise decisions considering their risk appetite, objectives of investments, and time horizon. This analysis can help investors make the most appropriate choice for themselves. An informed choice can be a key to a safer financial future. Explore to find out which investment option can generate higher corpus.
What is Systematic Investment Plan (SIP)?
SIP is a method of investing a fixed sum in mutual funds. People can invest on a daily basis, monthly, quarterly, or annually in a mutual fund scheme.
What is PPF?
Public Provident Fund is a government-guaranteed retirement plan that comes under Section 80C of the Income Tax Act, which qualifies for deduction.
Interest rate in PPF
Currently, Public Provident Fund is offering an interest rate of 7.1 per cent.
Annualised return
Since there are no fixed returns in SIP investment, we are calculating as per annualised returns of 8 per cent (debt fund), 10 per cent (equity fund), and 12 per cent (hybrid fund).
PPF calculation conditions: Rs 90,000/year investment for 26 years
Yearly investment: Rs 90,000 (monthly investment Rs 7,500x 12 months)
Time period: 26 years
Rate of interest: 7.1 per cent
PPF: What will be your retirement corpus in 26 years with Rs 90,000/year investment?
On a Rs 90,000/year investment, the retirement corpus in 26 years will be Rs 67,20,320. The estimated total interest during the investment period will be Rs 43,80,320, and the invested amount will be Rs 23,40,000.
SIP investment conditions
Since there are no fixed returns in SIP investment, we are calculating as per annualised returns of 8 per cent (debt fund), 10 per cent (equity fund), and 12 per cent (hybrid fund). We’re also assuming a monthly investment of Rs 7,500(90,000/12)
SIP: What you can get on Rs 7,500 monthly investment for 26 years (hybrid fund)
At 12 per cent annualised growth, the estimated retirement corpus in 26 years will be Rs 1,43,94,284. The invested amount will be Rs 23,40,000, and the estimated capital gains will be Rs 1,20,54,284.
SIP: What you can get on Rs 7,500 monthly investment for 26 years (equity fund)
At 10 per cent annualised growth, the estimated retirement corpus in 26 years will be Rs 1,03,50,871. The estimated capital gains will be Rs 80,10,871.
SIP: What you can get on Rs 7,500 monthly investment for 26 years (debt fund)
At 8 per cent annualised growth, the estimated retirement corpus in 26 years will be Rs 75,04,054. The estimated capital gains will be Rs 51,64,054.
Also Read: Top Hybrid Mutual Funds with Highest SIP Returns: Rs 20,000 monthly investment in No. 1 fund has grown to Rs 20.68 in just 5 years