PPF vs SIP: Rs 12,000/month investment for 30 years; see which can create a larger retirement corpus

You can choose from both market-linked and non market-linked options to generate a sizeable retirement corpus. SIP is a market-linked investment in mutual funds where returns are not certain whereas PPF is a non market linked investment scheme with guaranteed returns. But both scheme requires consistent and disciplined investment to achieve the required target corpus. In this article, we will explore who among the both can create a higher retirement corpus with a Rs 12,000 monthly investment for 30 years. 

What is systematic investment plan (SIP)?

SIP is a process of investing a fixed amount in mutual funds. Individuals can invest daily, monthly, quarterly, or yearly in a mutual fund scheme.

What is Public Provident Fund (PPF)?

Public Provident Fund is a retirement-centric scheme that individuals also use for their portfolio diversification. One can open a PPF account in a bank or post office.

What is minimum amount to invest in SIP?

The minimum amount to invest in an SIP is Rs 100. One can also increase, decrease, or stop their SIP.

What is minimum and maximum PPF investment?

The minimum deposit in a financial year is 500, whereas the is Rs 1.5 lakh.

How does SIP work?

A fixed amount is automatically deducted from your bank account and invested in mutual funds. These investments happen regularly, and you get units based on the fund’s value (NAV).

How does PPF work?

This scheme, run by post offices and banks, offers voluntary contributions to its account holders. Post Office offers 7.1 per cent interest rate compounded yearly.

PPF calculation conditions: Monthly Rs 12,000 investment for 30 years

Yearly investment: Rs 1,44,000 (monthly investment Rs 12,000 x 12 months)
Time period: 30 years
Rate of interest: 7.1 per cent 

PPF: What will be your corpus in 30 years with Rs 12,000 monthly investment?

On a Rs 12,000 monthly contribution, the retirement corpus in 30 years will be Rs 1,48,32,874.

SIP investment conditions

Since there are no fixed returns in SIP investment, we are calculating as per annualised returns of 8 per cent (debt fund), 10 per cent (hybrid fund) and 12 per cent (equity fund) 

SIP: Retirement corpus on Rs 12,000 investment for 30 years (equity fund)

At 12 per cent annualised growth, the estimated corpus in 30 years will be Rs 4,23,58,965. During that time, the invested amount will be Rs 43,20,000, and capital gains will be Rs 3,80,38,965.

SIP: Retirement corpus on Rs 12,000 investment for 30 years (hybrid fund)

At 10 per cent annualised growth, the estimated corpus in 30 years will be Rs 2,73,51,904. The estimated capital gains will be Rs 2,30,31,904.

SIP: Retirement corpus on Rs 12,000 investment for 30 years (debt fund)

At 8 per cent annualised growth, the estimated corpus in 30 years will be Rs 1,80,03,542. The estimated capital gains will be Rs 1,36,83,542. 

(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)