SIP vs PPF Comparison: Whether you are a working professional or a regular citizen, saving for your future financial needs is crucial. This will help you achieve your goals, both big and small, like buying a home, travelling, higher education, marriage, or saving for your retirement.
Now the question arises: where should one invest? If you are looking for a long-term investment option that can help you accumulate a substantial corpus for your post-retirement life, you can consider SIP or PPF.
Both are long-term investments that help investors to accumulate wealth for their future financial needs. But they differ from each other in various aspects, such as maximum and minimum investment amounts, maturity period, etc.
What is SIP, and what are its benefits?
SIP, which is called a Systematic Investment Plan, is a mutual fund investment option that is linked to the stock market and allows investors to invest a fixed amount at regular intervals.
- Returns are not fixed and can fluctuate
- People can invest as little as Rs 500 per month.
- No maximum investment limit.
- No lock-in period
- Risk level is higher.
What is PPF, and what are its benefits?
PPF, which is called Public Provident Fund, is a government-backed scheme where investors can invest their money on a yearly basis and get stable returns.
- Offers guaranteed returns
- Considered a safe investment
- Minimum investment amount Rs 500/year
- Maximum investment amount is Rs 1.5 lakh/year.
- Investment amount: Rs 1,22,333 per year
- Time: 15 years
In this write-up, we will compare both the investment options by investing Rs 1,22,333 per year for 15 years separately to see which option will give higher returns.
SIP Vs PPF: What rate of return are we using for calculation?
For SIP calculations, we’re assuming a 12 per cent annual return rate. We are using a 7.1 per cent rate for all PPF calculations.
PPF offers a fixed interest rate
Please note that, since PPF is a government scheme, the above-mentioned is a fixed interest rate.
SIP Investment Calculations —–
SIP investment with Rs 1,22,333 annually: How much money do you need to invest every month?
As per the calculations, if you invest approximately Rs 10,194 every month or Rs 1,22,333 annually for 15 years, the total investment will be around Rs 18,34,920.
SIP investment with Rs 1,22,333 annually: How much capital gain can be earned after 15 years?
Capital gains of approximately Rs 30,16,725 can be earned in 15 years.
SIP investment of Rs 1,22,333 annually: How much money can one get after 15 years in SIP?
The total corpus generated at the end of 15 years would be approximately Rs 48,51,645.
SIP investment calculations (with 12% annual interest rate):
- Monthly investment: Rs 10,194
- Total investment (15 years): Rs 18,34,920
- Estimated returns: Rs 30,16,725
- Total value: Rs 48,51,645
PPF Investment Calculations —–
PPF investment of Rs 1,22,333 annually: Total amount to be invested in 15 years
As per the calculations, if you invest Rs 1,22,333 annually for 15 years, the total investment will be around Rs 18,34,995 (almost the same as you are investing in SIP above).
PPF investment of Rs 1,22,333 annually: How much interest will be earned after 15 years?
An interest of Rs 14,82,847 will be earned in 15 years.
PPF investment of Rs 1,22,333 annually: How much money can one get after 15 years in PPF?
The final corpus generated at the end of 15 years will be Rs 33,17,842.
PPF investment calculations (with 7.1% annual interest rate):
- Annual Investment: Rs 1,22,333
- Total Investment (15 years): Rs 18,34,995
- Estimated Returns: Rs 14,82,847
- Total Corpus: Rs 33,17,842
(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning.)
