SIP vs PPF: Rs 1,15,000/year investment for 20 years, which can generate a higher corpus?
SIP (Systematic Investment Plan) and PPF (Public Provident Fund) are popular investment options, but where to invest is for you to decide. Let’s make it simple for you. Suppose you are thinking of investing Rs 1,15,000/year, but where to invest is what you are confused about regarding these 2 investment schemes. Let’s explore the details below to find out which would be a better option for you.
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. Now, let’s compare them to find which can generate a higher corpus on a Rs 1,15,000/year investment for 20 years.
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DISCLAIMER: Not financial advice; invest at your own risk
What is Systematic Investment Plan (SIP)?
In SIP, you can invest a fixed amount in mutual funds. Also, some mutual funds allow you to start investing with as little as Rs 100. You can invest either daily, monthly, quarterly, or yearly in a mutual fund scheme.
What is PPF?
Public Provident Fund is a retirement-centric scheme that individuals also use for their portfolio diversification. You can invest up to 1.5 lakh annually and benefit from tax exemptions.
What is minimum amount to invest in an SIP?
The minimum amount to invest in an SIP is Rs 100. One can also increase, decrease, or stop their SIP.
What is the minimum and maximum amount to invest in PPF?
The minimum deposit in a financial year is 500, whereas the maximum is Rs 1.5 lakh.
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).
How does PPF work?
This scheme, run by post offices and banks, offers voluntary contributions to its account holders. Post Office offers a 7.1 per cent interest rate compounded yearly.
PPF calculation conditions: Rs 1,15,000/year investment for 20 years
Yearly investment: Rs 1,15,000 (monthly investment Rs 9,583x 12 months)
Time period: 20 years
Rate of interest: 7.1 per cent
PPF: What will be your retirement corpus in 20 years with Rs 1,15,000/year investment?
On a Rs 1,15,000/year investment, the retirement corpus in 20 years will be Rs 51,04,688. The estimated total interest during that time will be Rs 28,04,688, and the total investment during that period will be Rs 23,00,000.
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 9,583(1,15,000/12)
SIP: What will you get on a Rs 9,583 monthly investment for 20 years (hybrid fund)
At 12 per cent annualised growth, the estimated corpus in 20 years will be Rs 88,14,993. During that time, the invested amount will be Rs 22,99,920, and capital gains will be Rs 65,15,073.
SIP: What will you get on a Rs 9,583 monthly investment for 20 years (equity fund)
At 10 per cent annualised growth, the estimated corpus in 20 years will be Rs 69,37,965. The estimated capital gains will be Rs 46,38,045.
SIP: What will you get on Rs 9,583 monthly investment for 20 years (debt fund)
At 8 per cent annualised growth, the estimated corpus in 20 years will be Rs 54,87,801. The estimated capital gains will be Rs 31,87,881.