PPF vs SIP: The Public Provident Fund (PPF) and Systematic Investment Plan (SIP) are popular investment options for long-term financial goals. While PPF offers a government-backed interest rate, SIP returns depend on the performance of the mutual fund in which you invest.
If you invest ₹1,50,000 annually for 15 years, which option could help you build a bigger corpus? Here is a comparison based on an equivalent monthly investment of ₹12,500 in both options.
Note: For this comparison, we assume an annual SIP return of 12% and a PPF interest rate of 7.1%. SIP returns are market-linked and are not guaranteed.
PPF vs SIP: Which can generate a bigger corpus?
An investment of ₹12,500 every month for 15 years amounts to a total contribution of ₹22.5 lakh in either option.
For SIP, we assume a 12% annual return, calculated at a monthly rate of 1%. For PPF, we assume monthly deposits of ₹12,500, with interest calculated according to the scheme’s rules and a constant annual interest rate of 7.1% throughout the investment period.
SIP: How much can ₹12,500 grow in 15 years?
Investing ₹12,500 every month through a SIP for 15 years would take the total investment to ₹22.5 lakh.
At an assumed annual return of 12%, with monthly compounding and investments made at the end of each month, the investment could grow to approximately ₹62.45 lakh. This includes estimated gains of around ₹39.95 lakh.
Actual returns may vary depending on market conditions and the performance of the mutual fund.
SIP calculation at 12% annual returns
- Monthly investment: ₹12,500
- Investment period: 15 years
- Total investment: ₹22,50,000
- Assumed annual return: 12%
- Estimated gains: ₹39,94,752
- Estimated corpus: ₹62,44,752
PPF: How much can ₹12,500 grow in 15 years?
PPF allows deposits throughout the financial year, subject to a maximum annual investment of ₹1.5 lakh. Investing ₹12,500 every month would bring the annual contribution to ₹1.5 lakh.
Assuming deposits are made before the fifth day of each month and the interest rate remains constant at 7.1% throughout the 15-year period, the investment could grow to approximately ₹40.68 lakh at maturity.
The total investment would be ₹22.5 lakh, while the estimated interest earned would be around ₹18.18 lakh.
The actual maturity amount may differ if the government revises the interest rate during the investment period.
PPF calculation at 7.1% interest
- Monthly investment: ₹12,500
- Investment period: 15 years
- Total investment: ₹22,50,000
- Assumed annual interest rate: 7.1%
- Estimated interest earned: ₹18,18,209
- Estimated corpus: ₹40,68,209
PPF vs SIP: Which creates higher corpus?
Based on these assumptions, the SIP investment could generate a corpus of approximately ₹62.45 lakh, compared with around ₹40.68 lakh from PPF. The estimated difference is ₹21.77 lakh in favour of SIP. However, the two options carry different levels of risk. SIP returns are market-linked and can fluctuate, while PPF offers a government-backed interest rate that may change over time. Investors should consider their financial goals, investment horizon and risk appetite before choosing between them.