SIP vs PPF for Rs 1,25,000/year Investment: Which can create larger corpus in 15 years?

SIP vs PPF for Rs 1,25,000/year investment: SIPs (Systematic Investment Plans) in mutual funds and the PPF (Public Provident Fund) are two popular options that stand out when we talk about long-term investments. Both serve to different depositors profiles, with varying risk levels and return potential. 

SIP Returns: Market-linked growth with higher return potential

A SIP allows investors to contribute a fixed amount regularly into mutual funds, benefiting from rupee cost averaging and the power of compounding. However, returns are market-linked, making SIPs more suitable for investors with a higher risk appetite.

SIP Returns (with 12% annual interest rate):

• Monthly investment: Rs 10,420
• Total investment (15 years): Rs 18,75,600
• Estimated returns: Rs 30,83,605
• Total value: Rs 49,59,205

While SIPs have the potential to generate significant wealth, they are subject to market volatility, requiring a long-term approach and patience.

PPF Returns: Secure, fixed returns with tax benefits

PPF, a government-backed savings scheme, offers stable returns with complete tax exemptions. It is ideal for risk-averse investors looking for security and guaranteed growth.

Key Features of PPF:

• Interest Rate: 7.1% per annum (compounded annually)
• Tenure: 15 years, extendable in 5-year blocks
• Investment Limit: Rs 500 to Rs 1.5 lakh annually
• Tax Benefits: Contributions, interest, and maturity proceeds are tax-exempt under Section 80C

PPF Returns (with 7.1% annual interest rate):

• Annual Investment: Rs 1,25,000
• Total Investment (15 years): Rs 18,75,000
• Estimated Returns: Rs 15,15,174
• Total Value: Rs 33,90,174

PPF ensures risk-free returns but has a lower wealth creation potential compared to equity-based investments like SIPs.

SIP vs PPF: Which One to Choose?

• SIP Advantage: Higher return potential, suitable for investors comfortable with market risks.
• PPF Advantage: Guaranteed returns with tax benefits, ideal for conservative investors seeking stability.

For money building, SIPs offer better returns over the long run despite market fluctuations. However, for those focusing security and tax benefits, PPF remains a trusted choice.