SIP vs PPF: When it comes to creating a huge fund in the long term, options like SIP (Systematic Investment Plan) and PPF (Public Provident Fund) come to the fore. One guarantees security and the other has the potential for bumper profits. But if you invest equal money in both for 15 years, how big can be the difference in returns? Here in the slides below, know which option is better for you and where your money can grow at rocket speed.
1.5 lakh annually means an investment of ₹ 12,500 every month
Suppose you invest ₹ 1.5 lakh every year, then you will have to invest ₹ 12,500 every month. If you continue this investment for 15 years continuously, then your total investment in 15 years will be ₹ 22,50,000. See the returns of PPF and SIP in the slides below.
Government guarantees security in PPF
Public Provident Fund (PPF) is a government scheme, so your money is 100% safe in it. Its return is not affected by market fluctuations. The government decides its interest rate every three months. It is best for those investors who do not want to take any risk. Currently, you are getting 7.1 percent interest on PPF
How much return in 15 years in PPF?
If you deposit ₹12,500 (₹1.5 lakh annually) every month in PPF for 15 years, then you will deposit ₹22,50,000. According to the current interest rate of 7.1%, your interest income will be ₹18,18,209. In this way, your maturity amount will be ₹40,68,209.
SIP: No guaranteed return, but a chance to earn a bumper income
Through Systematic Investment Plan (SIP), your money is invested in mutual funds that invest in the stock market. This is a market-based scheme, so there is a risk in it. But you can earn a bumper income in this. Its average return is considered to be around 12 percent. In the long term, it has the potential of wealth creation.
How much return in 15 years in SIP?
If you invest ₹ 12,500 every month in SIP for 15 years, then the total investment in this will also be ₹ 22,50,000. According to an average return of 12%, it will give an interest of ₹ 36,99,142 and thus a total of ₹ 59,49,142 can be earned. Although this calculation is based on an estimated basis, the return can be less or more.
Who should choose PPF?
If you are a conservative investor and do not want to take any risk on your principal, then PPF is made for you. It gives you guaranteed returns and is also an excellent and safe option to save tax.
Who should choose SIP?
If you are young, can invest for a long period (10-15+ years) and are willing to take a little risk, then SIP is for you. Your dream of wealth creation and becoming a millionaire by beating inflation can be fulfilled through SIP.
What is the smartest strategy?
The smartest strategy is to split your investments. Create a combo of PPF + SIP. Invest in PPF for stability and security in your portfolio and also take the SIP route for growth and high returns. This will keep your risk balanced and you will get great returns too.
