SIP vs PPF: Which can give better returns on annual investment of Rs 55,000 over 15 years?

SIP vs PPF: SIP and PPF are two long-term investment options that help in accumulating money for future financial needs like retirement, marriage, higher education, buying a home, etc. However, both are different from each other in many ways. What are these? And which investment option can make a larger corpus in 15 years with an investment of Rs 55,000 per year? Let’s compare them to find - 

What is SIP?

Systematic Investment Plan (SIP) is a market-linked long-term investment option that allows investors to invest a fixed amount in mutual funds based on their financial capacity. One can start investing in SIP with as low as Rs 500 per month, while there is no maximum limit. It has no lock-in period, and the investor gets to choose. Since SIPs are market-linked investments, returns are not fixed and can fluctuate. However, we are assuming a 12 per cent annual return rate for these calculations.

What is PPF?

Public Provident Fund (PPF) is a government-backed scheme that allows investors to invest money annually and get stable returns. The minimum amount to invest is Rs 500 per financial year. The maximum amount that can be invested per year is Rs 1.5 lakh. The maturity and lock-in period is 15 years. Also, the government-backed scheme offers an interest rate of 7.1 per cent yearly.

Now, suppose you are investing Rs 55,000 per year in a SIP mutual fund at a 12 per cent annualised return rate. This means you are investing Rs 6,250 each month. At the same time, let's suppose you are investing the same amount per year in PPF at a 7.1 per cent fixed interest rate.

Can you guess which investment option can generate a larger corpus in 15 years? Let's calculate and find.

SIP investment calculation for Rs 55,000 annual investment

As per the calculations, your total investment will amount to Rs 8,24,940 in 15 years. The capital gains earned in these years would be Rs 13,56,254. And the total corpus generated at the end of 15 years would be approximately Rs 21,81,194.

SIP Returns (with 12% annual interest rate):

• Monthly investment: Rs 4,583
• Total investment (15 years): Rs 8,24,940
• Estimated returns: Rs 13,56,254
• Total value: Rs 21,81,194

PPF investment calculation for a Rs 55,000 annual investment

As per the calculations, your total investment will amount to Rs 8,25,000 in 15 years. The interest earned would be Rs 6,66,677. With this, the final corpus will be around Rs 14,91,677.

PPF Returns (with 7.1% annual interest rate):

• Annual Investment: Rs 55,000
• Total Investment (15 years): Rs 8,25,000
• Interest Earned: Rs 6,66,677
• Total Corpus: Rs 14,91,677

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