PPF Vs SIP Comparison: How Much Rs 12,500 A Month Will Make By Retirement

Planning for retirement requires disciplined saving and choosing the right investment vehicle. For Indian investors, the Public Provident Fund (PPF) and Systematic Investment Plans (SIPs) in mutual funds are two of the most popular long-term investment options.

With a wide range of long-term investment options available in the market, PPF is often preferred by risk-averse investors due to its secure nature. On the other hand, SIP is preferred by investors across income groups due to high returns, flexibility and better liquidity.

The PPF scheme tenure is fixed at 15 years and it can be extended in blocks of 5 years each. On the other hand, you can choose the tenure for mutual fund SIPs as per your financial goals.

An investor can invest a maximum of Rs 1.5 lakh per annum, or Rs 12,500 a month, in the PPF scheme in a financial year. If you are looking forward to investing this amount, let’s see how the corpus could grow when invested in PPF and SIP.

PPF is a government-backed investment scheme that offers tax-free returns and capital protection. Currently, the PPF interest rate stands at 7.1% per annum. The PPF interest rate is revised by the government periodically.

• Investment per year: Rs 1.5 lakh

• Investment period: 15 years

• Total return: Rs 16.94 lakh

• Estimated maturity amount: Around Rs 39.44 lakh

PPF returns are stable and guaranteed by the government, making it suitable for conservative investors. Moreover, the tax benefits on the investments, interest earnings and maturity make it a more efficient choice for those looking forward to reducing overall income tax liability.

SIPs invest in equity mutual funds, which are market-linked and have the potential to generate higher returns than fixed-income instruments. Let’s assume an average return of 12% per annum over 15 years.

• Monthly SIP: Rs 12,500

• Investment period: 15 years

• Total investment: Rs 22.5 lakh

• Total returns: Rs 40.5 lakh

• Estimated maturity amount: Around Rs 63 lakh

Equity mutual funds offer inflation-beating returns and flexibility, but they come with higher risk. Additionally, capital gains tax on mutual fund SIP maturity amount could reduce overall returns.

If you are risk-averse and prioritise capital protection along with tax-free returns, PPF is a suitable choice. On the other hand, if you have a higher risk appetite, wish to outpace inflation and aim for greater corpus growth, SIPs could be more appropriate. For a balanced approach towards your retirement corpus fund generation, investing in both — maximise your PPF contributions for stability, while using SIPs to enhance long-term wealth creation.