Return Comparison: SIP or PPF? Which can create larger corpus for Rs 1.3 lakh annual investment?
A comparison of Rs 1.3 lakh invested annually in SIPs vs PPF, examining how SIPs offer higher returns with market risks, while PPF provides secure, guaranteed growth with tax benefits.
Systematic Investment Plans (SIPs) and the Public Provident Fund (PPF) are two popular investment options for long-term savings. SIPs are market-linked investments in mutual funds that allow for disciplined, regular contributions with the potential for higher returns, though accompanied by market risks. In contrast, PPF is a low-risk, government-backed savings scheme that provides steady returns, tax benefits, and a secure investment environment. This comparison highlights how both investments work and their respective advantages in creating a larger corpus over time.
Comparing SIP vs PPF Investment
When investing Rs 1.3 lakh annually, SIPs and PPF are two leading options. This comparison explores which investment can generate a larger corpus after one year.
SIP: High Returns, Market-Linked Risks
SIPs are market-linked investments in mutual funds that allow disciplined, regular contributions and potential high returns, but they come with inherent risks due to market fluctuations.
How SIP Works
Regular fixed amount auto-debited from the bank account.
Units are allocated based on the NAV of the chosen mutual fund.
Compounding and market growth over time contribute to substantial returns.
SIP Example: Projected Returns
Monthly investment: Rs 10,850
Invested amount: Rs 19,53,000
Total interest: Rs 35,21,650
Maturity value: Rs 54,74,650
SIPs can result in significant corpus growth due to market performance.
PPF: A Secure, Government-Backed Investment
PPF is a low-risk, government-backed investment, ideal for conservative investors looking for steady returns and tax benefits.
Key Features of PPF
Interest rate: 7.1% per annum (compounded yearly).
Tenure: 15 years, extendable in blocks of 5 years.
Investment range: Rs 500 to Rs 1.5 lakh annually.
PPF Example: Projected Returns
Invested amount: Rs 19,50,000
Total interest: Rs 15,75,781
Maturity value: Rs 35,25,781
PPF provides guaranteed, tax-exempt returns, with a more stable but lower growth compared to SIPs.
SIP vs PPF: Risk and Return Trade-Off
SIPs offer higher returns with market risks, making them attractive for long-term wealth creation.
PPF offers secure returns with lower growth potential, suited for risk-averse investors.
SIP vs PPF
If you’re willing to take market risks, SIPs can yield a larger corpus.
If you prioritise safety and tax benefits, PPF is a better choice.
Disclaimer
The choice between SIP and PPF depends on your risk tolerance, financial goals, and investment horizon. SIPs offer higher returns at the cost of market risks, while PPF provides security and steady growth.