PPF vs SIP with Rs 1,49,000/year Investment: PPF and SIP are popular options for long-term investment. Both can help investors build wealth over time. But the return potential is different. PPF offers a fixed interest rate, while SIP returns depend on market performance. So, what happens if an investor puts around Rs 1,49,000 every year into both options for 15 years? Let us compare the two based on the given return assumptions.
SIP Investment: Rs 1,49,000 a year
For this calculation, the monthly SIP investment is around Rs 12,416. This comes to roughly Rs 1,49,000 in a year.
The investment is assumed to earn an annual return of 12 per cent over 15 years.
At this rate, the total amount invested over the period is Rs 22,34,880.
The estimated capital gain comes to Rs 36,74,284.
This takes the total value of the investment to around Rs 59,09,164 after 15 years.
SIP calculation
- Monthly investment: Rs 12,416
- Yearly investment: Rs 1,49,000
- Rate of interest: 12%
- Time: 15 years
- Total investment (15 years): Rs 22,34,880
- Estimated capital gain: Rs 36,74,284
- Total value: Rs 59,09,164
How much can Rs 12,416 monthly SIP grow?
As per the calculations, a regular monthly investment can build a sizeable corpus over a long period. With a 12 per cent assumed annual return, the estimated gain is higher than the amount invested. The total SIP value after 15 years is estimated at around Rs 59.09 lakh.
However, SIP returns are linked to the market. So, the actual return may be different from the assumed 12 per cent.
PPF Investment: Rs 1,49,000 a year
For PPF, the annual investment is taken as Rs 1,49,000. We use an annual interest rate of 7.1 per cent (fixed) for a period of 15 years.
Over the full period, the total investment comes to Rs 22,35,000.
The estimated returns from the PPF investment are Rs 18,06,088.
This takes the total PPF value to around Rs 40,41,088 after 15 years.
PPF calculation
- Yearly investment: Rs 1,49,000
- Rate of interest: 7.1%
- Time: 15 years
- Total investment (15 years): Rs 22,35,000
- Total returns: Rs 18,06,088
- Total value: Rs 40,41,088
How much can Rs 1.49 lakh annual PPF investment grow?
As per the calculations, an annual investment of Rs 1.49 lakh can grow to around Rs 40.41 lakh over 15 years at the assumed 7.1 per cent interest rate.
Unlike a market-linked SIP, PPF offers returns at the applicable government-set interest rate.
PPF vs SIP: Which gives a higher corpus?
Based on these calculations, SIP creates the higher corpus. A Rs 1,49,000 annual investment in SIP is estimated to grow to Rs 59,09,164 in 15 years. The same annual investment in PPF is estimated to reach Rs 40,41,088.
This means the estimated SIP corpus is around Rs 18.68 lakh higher than the PPF corpus.
The key difference is the return assumption. The SIP calculation uses 12 per cent, while the PPF calculation uses 7.1 per cent.
(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning.)