SIP vs PPF: Whether you are a salaried employee or an individual, it is essential for every person to plan for their retirement. This helps an individual to be financially independent post-retirement. If you also want to accumulate a substantial corpus then you may choose between Public Provident Funds (PPF) or Systematic Investment Plans (SIPs). Both are popular long-term investment options. PPF is a government-backed savings scheme, and SIP is a market-linked investment plan.
What is SIP?
SIP mutual funds is a market-linked investment plan that allows investors to invest periodically – monthly, quarterly, or annually based on their financial capacity. The average long-term return is around 12 per cent.
What is PPF?
PPF or Public Provident Funds is a government-backed savings scheme where you can invest up to Rs 1.5 lakh per year, and the maturity period is 15 years. It offers an interest rate of 7.1 per cent per annum.
Can you guess how much corpus you will have after 15 years in both investments if you invest Rs 70,000 per year? Let’s find out.
SIP Investment Calculation: How much corpus will you generate in 15 years with Rs 70,000 annual investment?
If you invest Rs 70,000 per year (Rs 5,833 per month), your total investment over 15 years will amount to Rs 10,49,940. Assuming an average annual return of 12 per cent, your corpus at the end of 15 years would be approximately Rs 29,43,192, including Rs 18,93,252 as capital gains.
PPF Investment Calculation: How much will corpus you generate in 15 years with Rs 70,000 annual investment?
If you invest Rs 70,000 per year in a PPF, your total investment over 15 years will also be Rs 10,50,000. However, with an annualised return of 7.1 per cent, the interest earned would amount to Rs 8,48,498. The final corpus would grow to around Rs 18,98,498 (the sum of both the principal and the interest).
Investment Summary (Figures in Rupees)
Investment Type | Total Investment (15 years) | Capital Gain | Final Corpus |
SIP | 10,50,000 | 18,93,252 | 29,43,192 |
PPF | 10,50,000 | 8,48,498 | 18,98,498 |
SIP Investment Summary –
PPF Investment Summary –
Key Considerations:
– SIPs are market-linked, meaning returns are not guaranteed. The 12 per cent return mentioned above is an estimate, and actual returns may vary depending on market conditions.
– PPF offers guaranteed returns, but the interest rate is fixed and lower than that of SIPs.
(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)