PPF vs SIP: With Rs 12,000 monthly investment for 30 years; which can create highest retirement corpus
SIP vs PPF: One can choose from both market-linked and non-market-linked options to build their retirement corpus. The key is to stay consistent and start planning for retirement as early as possible.
SIP vs PPF: The Public Provident Fund (PPF), and mutual fund Systematic Investment Plan (SIP) are popular options to save for retirement. PPF offers fixed interest rates and good tax benefits, while SIP is linked to the stock market and has the potential to give higher returns compared to PPF. Therefore, let's learn more about these investment options and which schemes can generate the highest corpus with a monthly investment of Rs 12,000 in 30 years.
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(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)
What is Public Provident Fund (PPF)?
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
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.
Minimum and maximum deposit amount in PPF
The minimum investment is Rs 500, while the maximum is Rs 1.50 lakh in a financial year.
Lock-in period in PPF
It has a lock-in period of 15 years. After that duration, one can take an extension of 5 years of unlimited blocks with or without contribution.
What is Systematic Investment Plan (SIP)?
SIP is a method to invest in mutual funds. It allows one to invest a prefixed amount daily, monthly, quarterly, or yearly in a mutual fund scheme.
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.
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). In the long run, your returns grow through compounding and market changes, which benefits long-term investors.
Benefits of SIP
Flexible Investment
Long term growth
Convenient
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.