PPF vs SIP: Which Gives Better Returns on Rs 1 Lakh Annual Investment Over 15 Years?
PPF vs SIP: Which Gives Better Returns on Rs 1 Lakh Annual Investment Over 15 Years?
If you are planning for long-term savings, both the Public Provident Fund (PPF) and Systematic Investment Plan (SIP) are good options. But which one suits you better? Let’s compare the two with an example
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What is SIP?
SIP is a market-linked investment option. You can invest an amount based on your financial ability. On average, SIPs give a long-term return of around 12 per cent. However, returns are linked to the market and can vary.
What is PPF?
PPF is a government-backed savings scheme. It allows you to invest up to Rs 1.5 lakh per year. It offers a fixed interest rate of 7.1 per cent per annum. The lock-in period for PPF is 15 years.
Let’s assume you invest Rs 1,00,000 every year in both SIP and PPF for 15 years. Here is how much wealth you can build.
SIP Investment Calculation.
If you invest Rs 1,00,000 annually (Rs 8,333 per month) in SIP for 15 years, your total investment will be Rs 14,99,940. Assuming an average annual return of 12 per cent, the total corpus would grow to Rs 39,65,936. Out of this, Rs 24,65,996 will be capital gains.
PPF Investment Calculation
If you invest Rs 1,00,000 per year in PPF, the total investment over 15 years will be Rs 15,00,000. At an interest rate of 7.1 per cent, you will earn Rs 12,12,139 as interest. So, your total corpus will be Rs 27,12,139.
Therefore, SIPs can offer higher returns, but they are market-linked. PPF provides safe and fixed returns. Choose based on your risk appetite.
