SIP vs PPF: Rs 1,30,000/year investment for 20 years, which can generate a higher corpus?

SIPs carry a higher level of risk as they are market-linked investment schemes. Therefore, returns received on SIP investments fluctuate, depending on the market performance. Whereas PPF is considered a safe investment plan, which is characterised by guaranteed returns, considering that it is backed by the government and offers fixed returns. 

Systematic Investment Plans offer high liquidity. If you have invested in an SIP, you have the freedom of stopping your investment at any point in time, and you can redeem the shares within a short period of 1 or 2 business days. However, some penal charges may apply. On the other hand, PPF investments offer very low liquidity. Since it is a long-term investment, investors will only be allowed to withdraw the invested money after the 7th year from the date on which the investment has commenced. Thus, let’s find out which can create a higher corpus in 20 years on a Rs 1,30,000/year investment, SIP, or PPF.

Also read: SIP vs PPF with Rs 1,40,000/year investment: Which can create a larger corpus in 25 years? 

What is SIP investment?

Systematic Investment Plans, popularly known as SIPs, allow investors to invest in mutual funds. Under an SIP, investors make regular investments of a pre-decided amount into mutual funds on a regular basis.

What is Public Provident Fund?

Public Provident Fund, also known as PPF, is a long-term investment scheme that was introduced by the Government of India under the Public Provident Fund Act, 1968. It allows a deposit of Rs 1.5 lakh annually, which is eligible for tax exemptions under Section 80C of the Income Tax Act. 

What is the minimum investment amount in SIP?

The minimum investment amount in SIP is Rs 100. You can also increase, decrease, or stop their SIP.

What is the minimum and maximum investment amount in PPF?

The minimum investment in a year is Rs 500, whereas the maximum investment in a year is Rs 1.5 lakh.

How does SIP work?

In a systematic investment plan, 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).

How does PPF work?

This savings scheme, available at post offices and banks, allows you to make voluntary deposits. The Post Office version offers a 7.1 per cent annual interest rate, compounded yearly.

PPF calculation conditions: Rs 1,30,000/year investment for 20 years

• Yearly investment: Rs 1,30,000 (monthly investment Rs 10,833x 12 months)
• Period: 20 years
• Rate of interest: 7.1 per cent 

PPF: What will be your retirement corpus in 20 years with Rs 1,30,000/year investment?

On a Rs 1,30,000/year investment, the retirement corpus in 20 years will be Rs 57,70,516. The estimated total interest during that time will be Rs 31,70,516. 

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 (equity fund), and 12 per cent (hybrid fund). We're also assuming a monthly investment of Rs 10,833(1,30,000/12)

SIP: What will you get on Rs 10,833 monthly investment for 20 years (hybrid fund)

At 12 per cent annualised growth, the estimated corpus in 20 years will be Rs 99,64,815. During that time, the investment amount will be Rs 25,99,920, and capital gains will be Rs 73,64,895.

SIP: What will you get on Rs 10,833 monthly investment for 20 years (equity fund)

At 10 per cent annualised growth, the estimated corpus in 20 years will be Rs 78,42,948. The estimated capital gains will be Rs 52,43,028.

SIP: What will you get on Rs 10,833 monthly investment for 20 years (debt fund)

At 8 per cent annualised growth, the estimated corpus in 20 years will be Rs 62,03,626. The estimated capital gains will be Rs 36,03,706. 

DISCLAIMER: Not financial advice; invest at your own risk