Public Provident Fund vs Mutual Fund SIP: What Rs 200 a day may become in 15, 20, 25, 30 years - Surprising numbers here

Public Provident Fund vs Mutual Fund SIP: Rs 200 a day can help you save in crores for retirement. Rs 200 may seem a small amount. But if you save this amount, say at the age of 25, for investment in popular financial instruments like Public Provident Fund (PPF) and Mutual Fund SIP for a longer period of time, you may be able to get richer by over a crore of rupees. Both instruments come with different terms and conditions. 

While PPF is backed by the government and curently offers 8% interest along with guaranteed income tax exemption on the deposit as well as the withdrawal amount. Mutual fund SIPs are affected by market trends but one can expect a return of 12% per annum at a conservative estimate in the long run. Take a look at how saving Rs 200 a day for a monthly investment of Rs 6000 or an annual investment of Rs 72,000 in the PPF will give you: 

The following chart explains what investing Rs 72,000 a year in PPF can give you. Remember, PPF account comes with a lock-in period of 15 years, which can be extended further in blocks of 5-years each. Calculating at the current interest rate of 8%, which is compounded annually, your investment of Rs 72,000 will turn into Rs 2,111,338 in 15 years. The amount will grow to Rs 3558433,  Rs 5684690,  Rs 8808861,  Rs 13399328 in 20, 25, 30 and 35 years respectively. 

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PPF calculation chart

Mutual Fund SIP investment returns:

At a conservative return of 12%, investing Rs 6000/month (which is Rs 200 a day), you may get Rs 30,27,456 in 15 years. The returns in 20, 25, 30 and 35 years may likely be around Rs 59,94,888, Rs 1,13,85,811, Rs 2,11,79,483 and Rs 3,89,71,615 respectively. (Calulation done via online SIP calculator of HDFC Mutual Fund.)

*Source: HDFC Mutual Fund

So you see, with Rs 200 a day, you may be able to accumulate up to Rs 3 crore in 35 years. However, remember that SIPs are subject to market risks. So you need to monitor you investment. It is advised to not be greedy with the mutual funds. Invest your money to meet specific goals. Once, your goal is over, you should ideally pull out, or start a new SIP, to avoid risks. And, in any case, you should be always vigilant about how your fund is performing.  

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(*The above article is for illustration purpose only. It is not meant to suggest you should invest in PPF or SIP. The investor should read all details of a financial instrument carefully before making any investment.)