PPF vs SIP: Rs 12,000/month investment for 30 years; see which one can build a bigger retirement corpus
You can choose from both market-linked and non-market-linked options to generate a large retirement corpus. SIP is a market-linked investment in mutual funds where returns are uncertain while PPF is a non-market-linked investment plan with guaranteed returns. But both the schemes require consistent investment and discipline to achieve the required corpus. In this article, we will explore who among the two can build a higher retirement corpus with a monthly investment of Rs 12,000 for 30 years.
What is a systematic investment plan (SIP)?
SIP is a process of investing a fixed amount in mutual funds. People can invest daily, monthly, quarterly, or annually in a mutual fund scheme.
What is Public Provident Fund (PPF)?
A Public Provident Fund is a retirement-oriented scheme used by individuals to diversify their portfolio. One can open a PPF account at a bank or post office.
What is the minimum amount you can invest in SIP?
The minimum investment amount in SIP is Rs 100. One can increase, decrease, or stop his SIP.
What is the minimum and maximum investment for PPF?
The minimum deposit for a financial year is Rs 500, and Rs 1.5 lakh.
How does SIP work?
A fixed amount is automatically deducted from your bank account and invested in mutual funds. This investment happens regularly, and you get units based on the fund’s net worth (NAV).
How does PPF work?
This program, run by post offices and banks, offers voluntary contributions to account holders. The Post Office offers an interest rate of 7.1 percent compounded annually.
PPF calculation conditions: Monthly investment of Rs 12,000 for 30 years
Annual investment: Rs 1,44,000 (monthly investment Rs 12,000 x 12 months)
Term: 30 years
Interest rate: 7.1 percent
PPF: What will your company be in 30 years as you have invested Rs 12,000 every month?
For a monthly contribution of Rs 12,000, the retirement corpus in 30 years will be Rs 1,48,32,874.
SIP investment conditions
Since there is no fixed return on SIP investments, we calculate annual returns of 8 percent (debt fund), 10 percent (mixed fund) and 12 percent (equity fund)
SIP: Retirement corpus on Rs 12,000 investment for 30 years (equity fund)
At 12 percent annual growth, the estimated corpus over 30 years would be Rs 4,23,58,965. At that time, the amount invested will be Rs 43,20,000, and the maximum profit will be Rs 3,80,38,965.
SIP: Retirement corpus on Rs 12,000 investment for 30 years (pooled fund)
At 10 percent annual growth, the estimated corpus over 30 years would be Rs 2,73,51,904. The estimated capital gain will be Rs 2,30,31,904.
SIP: Society for retirement on investment of Rs 12,000 for 30 years (debt fund)
At an annual growth rate of 8 percent, the average amount over 30 years would be Rs 1,80,03,542. The estimated capital gain will be Rs 1,36,83,542.
(Disclaimer: Our calculations are guesswork and not investment advice. Do your best or consult an expert for financial planning)
