SIP vs PPF: Where will you get higher returns if you invest ₹2500 every month for 10 years, and who will build a bigger fund first?
SIP vs PPF Calculation: If you want to earn excellent returns by investing small amounts, you have two options: SIP (Systematic Investment Plan) and PPF (Public Provident Fund). But the question arises: which option is better and offers higher returns? If you invest ₹2,500 for 10 years, which one will yield higher returns (SIP vs PPF comparison India) and which one will build a larger fund first? So, let's understand the benefits in simple calculations.
How large a fund will a SIP build?
SIP means investing a fixed amount each month in a mutual fund. The returns depend on the market. There are mutual funds in the market that offer returns of 30 to 35%. However, over the long term, the average return of equity mutual funds is estimated to be around 12% annually.
SIP Calculation
Monthly Investment - ₹2,500
Annual Average Return (with compounding) - 12%
Total Investment in 10 Years - ₹2,500 × 12 × 10 = ₹3,00,000
Fund Value as per SIP Calculator - ₹5,80,847
This means you will earn approximately ₹2,80,847 on your investment.
How Long Will PPF Take?
PPF is a secure scheme from the Government of India. The interest rate is fixed every quarter. Currently, its annual interest rate is approximately 7.1%.
PPF Calculation
Monthly Investment - ₹2,500
Average Annual Return - 7.1%
Total Investment over 10 Years - ₹2,500 × 12 × 10 = ₹3,00,000
7.1% Annual Interest Return (with compounding) - ₹4,16,658
This means you'll earn approximately ₹1,16,658 in interest on your investment.
Which is better, SIP or PPF?
SIP is based on the stock market, but it will yield higher average returns after 10 years. Investing ₹2,500 every month will yield ₹5,80,847 lakh. PPF, on the other hand, is safer and offers guaranteed interest. However, compared to SIP, it will yield only ₹4,16,658 after 10 years.
Where is it better to invest?
Financial experts say that if you want risk-free and secure returns, PPF is a good option. But if you want to take a little risk and earn higher returns, a SIP may be a better option. However, it's important to note that SIP returns are not fixed. They depend on market performance. PPF, on the other hand, is completely safe and guaranteed by the government.
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