SIP Vs PPF: If an investor does not want to take any risk then Public Provident Fund (PPF) will be right for him. This is a fixed income investment option. This means that before starting the investment, the investor knows how much the money he is investing will grow to in 15 years.
SIP Vs PPF: To create a big fund in the long term, one can invest in SIP of mutual fund or PPF. Both are different products. Both have different features. Through SIP, you can invest in equity scheme of mutual fund. PPF is a government scheme, so investing in it is completely safe. Let us know which one will be right for you to invest in.
PPF is attractive for those who do not take risk
If an investor does not want to take any risk then Public Provident Fund (PPF) will be right for him. This is a fixed income investment option. This means that before starting the investment, the investor knows how much the money he is investing will grow to in 15 years. If a person is investing in PPF for his children’s higher education, marriage or his retirement, then he knows in advance how much money he will get after maturing the account.
There is risk involved in investing in mutual funds
The equity scheme of a mutual fund invests the investors’ money in the shares of companies. Through SIP, you can invest in the equity scheme of a mutual fund every month or every quarter. There is no maturity in mutual funds. You can continue investing as long as you want. Since mutual funds invest the investor’s money in shares, there is risk involved in it. The return on investment can increase or decrease according to the fluctuations in the market.
Calculation of PPF returns
Suppose you invest Rs 1,44,000 in PPF every year. You will have to make this investment for 15 years. The PPF account matures after 15 years. This means that you will invest Rs 21,60,000 in 15 years. Since the interest rate of PPF is 7.1 percent, after 15 years your money will grow to Rs 39,05,481. This means that you will get a total return of Rs 17,45,481 on your investment.
Calculation of SIP returns
Now let us assume that you invest Rs 12,000 every month in the equity scheme of a mutual fund through SIP. In this way, you will invest a total of Rs 1,44,000 in a year. You will have to make this investment for 15 years. We can assume the annual return of the equity scheme to be 12 percent. In this way, you invest a total of Rs 21,60,000 in 15 years. After 15 years your money will grow to Rs 57,11,177. In this way, you get a return of Rs 35,51,177 on your investment.
What should you do?
In this way, you get more returns by investing through SIP as compared to investing in PPF. You need to keep two things in mind. First, investing in PPF gives the benefit of deduction. If you use the old regime of income tax, then you can claim this deduction. Second, PPF is a government scheme, so it is quite safe. The fluctuations in the stock market do not affect the returns of PPF.
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