For investors seeking long-term wealth creation, both Systematic Investment Plans (SIPs) in mutual funds and Public Provident Fund (PPF) are popular choices. However, they differ significantly in terms of risk, returns, and liquidity. Suppose you invest ₹1,20,000 per year in both instruments for 20 years. How much corpus will you generate by the end of this period? Let’s break it down.
An SIP is a disciplined investment approach in mutual funds where a fixed amount is invested periodically (monthly or annually). The returns are market-linked, and the power of compounding and rupee cost averaging play a key role in wealth accumulation.
PPF is a government-backed investment scheme that provides fixed, tax-free returns. It has a 15-year lock-in period, which can be extended in blocks of 5 years. The interest rate is set by the government and generally remains stable compared to equity-based investments.
If an investor starts a PPF account today, it will mature after 15 years.
To reach 20 years, they must extend the account by 5 years.
This means that PPF can be compared to SIP over 20 years only if the investor chooses to extend it for 5 more years.
SIPs offer higher returns due to their equity exposure, but they are also subject to market fluctuations.
PPF offers stable and risk-free returns, but the corpus generated is significantly lower compared to SIPs.
The choice between SIP and PPF depends on risk appetite, financial goals, and investment horizon. If you seek higher returns and can withstand market volatility, SIP in equity mutual funds may be more rewarding in the long run. However, if capital protection and fixed returns are your priority, PPF remains a reliable option.
Over a 20-year period, investing ₹1,20,000 annually in an SIP can generate almost double the corpus compared to PPF. While PPF provides stability, SIPs have the potential for wealth creation through compounding and market growth. The decision ultimately depends on your investment objective and risk-taking capacity.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Mutual Fund investments in the securities market are subject to market risks, read all the related documents carefully before investing.
Published on: Mar 18, 2025, 4:43 PM IST
Team Angel One
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