SIP vs PPF: Rs 1.2 lakh per year investment for 15 years; which can create higher corpus?
Discover the potential returns of SIP vs PPF with a Rs 1.2 lakh yearly investment for 15 years. Compare features, benefits and returns.
SIP vs PPF: Potential returns on a Rs 1.2 lakh annual investment over 15 years. This article explores some of the key benefits of the two investment avenues. Here are some of the key points to remember while picking between the two.
(Disclaimer: This is an not investment advice. Do your own due diligence or consult an expert for financial planning)
SIP (Systematic Investment Plan)
SIP allows investors to invest a fixed amount regularly in mutual funds. Instead of investing a lump sum, small recurring investments are made, leveraging market fluctuations for better returns over time.
How does SIP work?
- Fixed amounts are auto-debited from your bank account and invested in mutual funds.
- Investments are made at regular intervals, accumulating units based on the mutual fund's Net Asset Value (NAV).
- Returns grow with compounding and market fluctuations, benefiting long-term investors.
SIP: Rs 1.2 lakh a year investment for 15 years
- Monthly Investment: Rs 10,000
- Invested Amount: Rs 18,00,000 (over 15 years)
- Estimated Returns: Rs 32,45,760
- Total Value: Rs 50,45,760
Benefits of SIP
- Low Initial Investment: Start with as little as Rs 500 per month.
- Market Averaging: Reduces the risk of timing the market by spreading investments.
- Disciplined Approach: Ensures consistent saving and investing habits.
What is PPF (Public Provident Fund)?
PPF is a government-backed long-term savings scheme offering guaranteed returns. It has fixed interest rates and tax benefits under Section 80C of the Income Tax Act.
PPF: Key features
- Interest Rate: 7.1% per annum (compounded annually).
- Investment Limits: Minimum Rs 500; Maximum Rs 1.5 lakh per financial year.
- Tenure: 15 years, extendable in blocks of 5 years.
- Tax Benefits: Interest earned is tax-free.
PPF: Rs 1.2 lakh a year investment for 15 years
- Yearly Investment: Rs 1,20,000
- Invested Amount: Rs 18,00,000 (over 15 years)
- Estimated Returns: Rs 14,54,567
- Total Value: Rs 32,54,567
Comparison of returns
- SIP: Higher potential returns of Rs 50,45,760 due to market-linked growth and compounding.
- PPF: Guaranteed but lower returns of Rs 32,54,567 due to fixed interest rates.
When to choose SIP?
- Suitable for investors with a higher risk appetite.
- Best for long-term goals with market-linked growth potential.
- Flexibility to increase or pause investments.
When to choose PPF?
- Ideal for risk-averse investors seeking guaranteed returns.
- Offers tax-free interest and principal security.
- Long-term financial security with fixed returns.