Public Provident Fund vs Mutual Fund SIP: Rs 200 a day can help you save in crores for retirement. Rs 200 may seem a small amount. But if you save this amount, say at the age of 25, for investment in popular financial instruments like Public Provident Fund (PPF) and Mutual Fund SIP for a longer period of time, you may be able to get richer by over a crore of rupees. Both instruments come with different terms and conditions. 

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While PPF is backed by the government and curently offers 8% interest along with guaranteed income tax exemption on the deposit as well as the withdrawal amount. Mutual fund SIPs are affected by market trends but one can expect a return of 12% per annum at a conservative estimate in the long run. Take a look at how saving Rs 200 a day for a monthly investment of Rs 6000 or an annual investment of Rs 72,000 in the PPF will give you: 

The following chart explains what investing Rs 72,000 a year in PPF can give you. Remember, PPF account comes with a lock-in period of 15 years, which can be extended further in blocks of 5-years each. Calculating at the current interest rate of 8%, which is compounded annually, your investment of Rs 72,000 will turn into Rs 2,111,338 in 15 years. The amount will grow to Rs 3558433,  Rs 5684690,  Rs 8808861,  Rs 13399328 in 20, 25, 30 and 35 years respectively. 

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PPF calculation chart

Yr Opening Balance Yearly Amt Interest Closing Bal  
1 0 72,000 5,760 77,760  
2 77,760 72,000 11,980 161,740  
3 161,740 72,000 18,700 252,439  
4 252,439 72,000 25,955 350,394  
5 350,394 72,000 33,791 456,185  
6 456,185 72,000 42,254 570,439  
7 570,439 72,000 51,395 693,834  
8 693,834 72,000 61,266 827,100  
9 827,100 72,000 71,928 971,028  
10 971,028 72,000 83,442 1,126,470  
11 1,126,470 72,000 95,877 1,294,347  
12 1,294,347 72,000 109,307 1,475,654  
13 1,475,654 72,000 123,812 1,671,466  
14 1,671,466 72,000 139,477 1,882,943  
15 1,882,943 72,000 156,395 2,111,338  
16 2111338 72000 174667 2358005  
17 2358005 72000 194400 2624405  
18 2624405 72000 215712 2912117  
19 2912117 72000 238729 3222846  
20 3222846 72000 263587 3558433  
21 3558433 72000 290434 3920867  
22 3920867 72000 319429 4312296  
23 4312296 72000 350743 4735039  
24 4735039 72000 384563 5191602  
25 5191602 72000 421088 5684690  
26 5684690 72000 460535 6217225  
27 6217225 72000 503130 6792363  
28 6792363 72000 549149 7413513  
29 7413513 72000 598840 8084353  
30 8084353 72000 652508 8808861  
31 8808861 72000 719468 9591329  
32 9591329 72000 773066 10436425  
33 10436425 72000 840674 11349099  
34 11349099 72000 913687 12334786  
35 12334786 72000 992542 13399328  

Mutual Fund SIP investment returns:

At a conservative return of 12%, investing Rs 6000/month (which is Rs 200 a day), you may get Rs 30,27,456 in 15 years. The returns in 20, 25, 30 and 35 years may likely be around Rs 59,94,888, Rs 1,13,85,811, Rs 2,11,79,483 and Rs 3,89,71,615 respectively. (Calulation done via online SIP calculator of HDFC Mutual Fund.)

*Source: HDFC Mutual Fund

So you see, with Rs 200 a day, you may be able to accumulate up to Rs 3 crore in 35 years. However, remember that SIPs are subject to market risks. So you need to monitor you investment. It is advised to not be greedy with the mutual funds. Invest your money to meet specific goals. Once, your goal is over, you should ideally pull out, or start a new SIP, to avoid risks. And, in any case, you should be always vigilant about how your fund is performing.  

(*The above article is for illustration purpose only. It is not meant to suggest you should invest in PPF or SIP. The investor should read all details of a financial instrument carefully before making any investment.)