SIP vs PPF: Systematic Investment Plan (SIP) and Public Provident Fund (PPF) are both long-term investment options that help you accumulate a substantial corpus. However, they differ in various aspects such as maturity period and lock-in period. One is a market-linked investment that can be paused or redeemed at any time, while the other is government-backed and comes with a tenure of 15 years. Let’s learn more about them and compare which option can generate a higher corpus over 15 years with an annual investment of Rs 1,15,000.
What is an SIP?
SIP, or Systematic Investment Plan, is a market-linked long-term investment option that allows investors to invest a fixed amount in mutual funds. at regular intervals (usually every month).
What is PPF?
PPF, or Public Provident Fund, is also a long-term investment, but it is a government-backed scheme in which one can invest annually and get stable returns.
Key difference between SIP and PPF
| SIP | PPF |
| Flexibility in investment | Maximum investment is Rs 1.5 lakh/year |
| No maturity period | Maturity period is 15 years |
| Depends on equity market performance | Offers fixed interest rate of 7.1% |
| Highly liquid | Low liquid |
Scenario 1: Suppose you are investing Rs 1,15,000 per year in a SIP mutual fund at 12 per cent annualised return rate.
Scenario 2: Suppose you are investing Rs 1,15,000 per year in PPF at 7.1 per cent fixed interest rate.
Now, can you guess which investment option can generate a larger corpus in 15 years? Let’s calculate and find.
SIP investment calculation for Rs 1,15,000 annual investment: How much corpus can you generate in 15 years?
If you invest Rs 1,15,000 yearly in SIP (i.e., Rs 9583 per month), then as per the calculations, your total investment will amount to Rs 17,24,940 in 15 years. Assuming an average annual return of 12 per cent, the capital gains earned in these years would be Rs 28,35,911. Adding the two, the total corpus generated at the end of 15 years would be approximately Rs 45,60,851.
SIP Returns (with 12% annual interest rate):
- Monthly investment: Rs 9,583
- Total investment (15 years): Rs 17,24,940
- Estimated returns: Rs 28,35,911
- Total value: Rs 45,60,851
PPF investment calculation for Rs 1,15,000 annual investment: How much corpus can you generate in 15 years?
In a PPF, if you invest Rs 1,15,000 per year, then your total investment will amount to Rs 17,25,000 in 15 years. With an annualised return of 7.1 per cent, the interest earned would be Rs 13,93,960. With this, the final corpus will be around Rs 31,18,960 (principal + interest).
PPF Returns (with 7.1% annual interest rate):
- Annual Investment: Rs 1,15,000
- Total Investment (15 years): Rs 17,25,000
- Estimated Returns: Rs 13,93,960
- Total Corpus: Rs 31,18,960
(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning.)
