SIP vs PPF: If you're planning to build a substantial corpus for your retirement over the next 15 years, you may consider two popular investment options: Systematic Investment Plans (SIPs) and Public Provident Funds (PPF). Both are excellent long-term investment choices for individuals who can invest consistently and with discipline.

What is PPF?

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PPF, or Public Provident Fund, is a government-backed savings scheme that guarantees returns. You can invest up to Rs 1.5 lakh per year, and the maturity period is 15 years. Currently, PPF offers an interest rate of 7.1 per cent per annum.

What is SIP?

SIP, or Systematic Investment Plan, is a market-linked investment plan, where the returns depend on the performance of the market. You can invest in SIPs on a monthly, quarterly, or annual basis, depending on your financial capacity. The average long-term return from SIPs is around 12 per cent.

Investment Comparison: PPF vs SIP

Let’s take an example where you invest Rs 1 lakh per year in both PPF and SIP for 15 years. Here’s how your corpus would grow:

SIP Investment Calculation: How much will you generate in 15 years?

If you invest Rs 1 lakh per year (which equals Rs 8,333 per month), your total investment over 15 years will amount to Rs 14,99,940. Assuming an average annual return of 12 per cent, your capital gain after 15 years would be approximately Rs 27,04,692. Adding both the investment and the capital gain, your corpus at the end of 15 years would be around Rs 42,04,632.

PPF Investment Calculation: How much will you generate in 15 years?

If you invest Rs 1 lakh per year in a PPF, your total investment over 15 years would be Rs 15,00,000. With an annualized return of 7.1 per cent, the interest earned would amount to Rs 12,12,139. Adding both the principal and the interest, your corpus at the end of 15 years would grow to approximately Rs 27,12,139.

Important Note on SIP Investments

Since SIPs are market-linked, the returns are not guaranteed. The 12% return mentioned above is an estimate, and actual returns may vary depending on market conditions.