When it comes to long-term investments, two options that often stand out are Systematic Investment Plans (SIPs) in mutual funds and the Public Provident Fund (PPF). Both cater to different types of investors—SIPs offer higher return potential but come with market risks, while PPF ensures stability and tax-free growth. If you invest Rs 1,25,000 per year, which option will help you build a larger corpus over 15 years? Let’s break it down.
SIP Returns
SIPs allow investors to invest a fixed amount regularly in mutual funds, benefiting from compounding and rupee cost averaging. Since returns are market-driven, SIPs are ideal for those willing to take risks for potentially higher gains.
Assumed Return Rate: 12% per annum
PPF Returns for Rs 1,25,000 Annual Investment:
- Monthly deposit: Rs 10,420
- Total investment over 15 years: Rs 18,75,600
- Estimated returns: Rs 30,83,605
- Maturity amount: Rs 49,59,205
SIPs can generate significant wealth, but since they are tied to market performance, they require patience and a long-term perspective.
PPF Returns
PPF is a government-backed savings scheme that offers fixed returns and complete tax exemptions. It is best suited for risk-averse investors looking for guaranteed growth.
Interest Rate: 7.1 per cent per annum (compounded annually)
Investment Limit: Rs 500 to Rs 1,50,000 annually
Tenure: 15 years (extendable in 5-year blocks)
Tax Benefits: Contributions, interest, and maturity proceeds are tax-free under Section 80C
PPF Returns for Rs 1,25,000 Annual Investment:
- Total investment over 15 Years: Rs 18,75,000
- Estimated returns: Rs 15,15,174
- Maturity amount: Rs 33,90,174
PPF provides a risk-free way to grow your money, but its returns are lower compared to equity-linked investments like SIPs.
SIP vs PPF: Which investment scheme should you choose?
- SIP benefits: Higher return potential, suitable for investors comfortable with market risks.
- PPF Benefits: Guaranteed returns with tax benefits, ideal for conservative investors seeking stability.
If you are focused on long-term wealth creation and can handle market fluctuations, SIPs may be the better choice. However, if safety and tax savings are your top priorities, PPF remains a good option.
