If you have a lump sum amount of Rs 22.5 lakh and a long-term investment horizon of 15 years, two popular options that come to mind are PPF and mutual funds. Both come with their own set of advantages, but the returns can vary widely depending on where you put your money.
What makes PPF a safe option?
Public Provident Fund (PPF) is a government-backed savings scheme that offers a fixed interest rate—currently at 7.1% per year. The returns are tax-free, and you also get tax benefits under Section 80C. It’s a secure option for conservative investors who prefer steady growth over high returns.
However, there’s a cap on how much you can invest in PPF each year—Rs 1.5 lakh. That means if you want to invest Rs 22.5 lakh, you’ll have to spread it out over 15 years with yearly deposits of Rs 1.5 lakh.
Returns from PPF after 15 years:
- Total investment: Rs 22,50,000
- Total interest earned: Rs 18,18,209
- Maturity value: Rs 40,68,209
What is a mutual fund lump sum investment?
A mutual fund lump sum investment involves putting in the entire Rs 22.5 lakh at once, without breaking it into installments. Since the entire amount starts earning from day one, the power of compounding kicks in early. If the market performs well, the returns can be significantly higher than fixed instruments like PPF.
Assuming a 12% annual return (which equity mutual funds have delivered on average over long periods), here’s what you could earn:
Returns from mutual fund lump sum in 15 years:
- Total investment: Rs 22,50,000
- Estimated gains: Rs 1,00,65,523
- Maturity value: Rs 1,23,15,523
So, which one should you pick?
If your priority is safety, assured returns and tax benefits, PPF is a reliable choice. It may not offer very high returns, but it gives peace of mind.
But if you’re open to some level of risk and want your money to grow aggressively, a lump sum mutual fund investment could be the better option.
PPF is for low-risk takers looking for tax-free, stable returns.
Mutual Funds are better for those who want higher returns and are comfortable with market ups and downs.
