SIP vs PPF: Rs 1 lakh in SIP vs Rs 1.5 lakh in PPF investment in a year; which can create higher corpus
SIP vs PPF: Whether you’re looking to invest for the short or long term, there are plenty of investment options available. However, if you want to build a substantial retirement corpus through long-term investments, both Systematic Investment Plans (SIPs) in mutual funds and Public Provident Funds (PPF) are excellent choices.
Public Provident Funds or PPF
The PPF has a maturity period of 15 years, and you can invest up to Rs 1.5 lakh per year.
Systematic Investment Plans or SIP
SIPs allow you to invest any amount and continue for any number of years, offering flexibility.
PPF Interest Rate
PPF offers an interest rate of 7.1 per cent.
SIP Annualised Return
The average annualised return for SIPs over the long term is approximately 12 per cent.
Key Difference Between PPF and SIP
The key difference between the two lies in their nature: PPF is a government-backed scheme that guarantees returns, while SIPs are market-linked, meaning returns depend on the performance of the market.
Rs 1 Lakh in SIP vs Rs 1.5 Lakh in PPF
Let’s assume you invest Rs 1 lakh annually in SIP (i.e., Rs 8,333 per month) and Rs 1.5 lakh annually in PPF (i.e., Rs 12,500 per month).
Which Investment Will Create a Higher Corpus?
To compare the two, let’s calculate the corpus each investment would generate over 15 years, as the interest rates for each scheme differ.
SIP Investment: Building a Retirement Corpus in 15 Years with Rs 8,333 Monthly Investment
- Total Investment: Rs 14,99,940
- Expected Capital Gain: Rs 27,04,692
- Total Corpus: Rs 42,04,632
PPF Investment: Building a Retirement Corpus in 15 Years with Rs 1.5 Lakh Annual Investment
- Total Investment: Rs 22,50,000
- Expected Capital Gain: Rs 18,18,209
- Total Corpus: Rs 40,68,209
SIP vs PPF: The Comparison
Based on the above calculations, SIPs generate a higher return than PPF. However, which option is more suitable for you depends on your specific financial goals and investment preferences.
Important Note on SIP Investment
Since SIPs are market-linked, the returns are not guaranteed. The 12 per cent return mentioned above is an estimate, and actual returns may vary depending on market conditions.