SIP Vs PPF With ₹90,000 Annual Investment: Which Can Build A Bigger Corpus In 26 Years?

Planning your financial future requires a careful choice of investment instruments that balance returns, safety, and tax benefits. Among the most popular long-term investment avenues in India are Systematic Investment Plans (SIPs) in mutual funds and the Public Provident Fund (PPF). While SIPs offer market-linked returns with potential for higher wealth creation, PPF is a government-backed scheme known for its assured returns and tax efficiency. According to financial experts, choosing the right investment option based on your goals and risk appetite is essential for building a secure corpus. Let’s explore which of these two options can help you accumulate more wealth over time.

Understanding SIP And How It Works For Wealth Creation

A Systematic Investment Plan (SIP) is a disciplined approach to investing in mutual funds, where a fixed amount is invested at regular intervals—be it monthly, quarterly, or annually. This method encourages consistent savings and enables investors to benefit from the power of compounding and rupee cost averaging over the long term.

SIP returns are linked to market performance and vary based on the type of mutual fund chosen. For this analysis, we’ll consider three categories—debt funds (8% annualised returns), equity funds (10%), and hybrid funds (12%).

PPF: A Safe And Tax-Efficient Investment Avenue

The Public Provident Fund (PPF) is a government-backed savings scheme designed to encourage long-term financial discipline. Investments in PPF qualify for tax deductions under Section 80C of the Income Tax Act, making it a tax-efficient vehicle. Currently, PPF offers an interest rate of 7.1% per annum, which is revised quarterly by the government.

Although the returns are fixed and comparatively lower than market-linked options, PPF remains a preferred choice for conservative investors due to its guaranteed returns and tax-free maturity proceeds.

PPF Investment Scenario: Corpus After 26 Years Of Consistent Savings

Assuming an investor commits to an annual contribution of ₹90,000 (equivalent to ₹7,500 monthly) for 26 years in a PPF account, the total investment over this period would amount to ₹23,40,000.

With the current interest rate of 7.1%, the estimated maturity corpus after 26 years would be ₹67,20,320. Out of this, approximately ₹43,80,320 would be the accumulated interest, while the remaining ₹23,40,000 would be the total principal invested over the years.

SIP Investment Scenario: How Different Fund Types Affect Your Corpus

SIP In Hybrid Funds (12% Annualised Returns)

If the same ₹7,500 is invested monthly through SIPs in hybrid mutual funds, assuming an annualised return of 12%, the estimated corpus after 26 years would be around ₹1,43,94,284. In this scenario, the capital gain portion would be approximately ₹1,20,54,284, with the principal investment remaining at ₹23,40,000.

SIP In Equity Funds (10% Annualised Returns)

Opting for equity mutual funds with an expected annualised return of 10% would build a corpus of roughly ₹1,03,50,871 over 26 years. Here, the capital gains earned would stand at ₹80,10,871, considerably higher than PPF but lower than the hybrid fund scenario.

SIP In Debt Funds (8% Annualised Returns)

For those preferring safer debt mutual funds, a monthly SIP of ₹7,500 would grow to approximately ₹75,04,054 after 26 years, with capital gains of ₹51,64,054. Even with lower returns, debt SIPs still outperform PPF over a long-term horizon.

SIP Vs PPF: Which Option Can Help You Build A Larger Corpus?

A comparative analysis reveals that SIPs, particularly in hybrid and equity funds, can yield significantly higher returns than PPF over the same investment duration. An investment of ₹23.4 lakh in PPF grows to ₹67.2 lakh, while the same amount invested in equity SIPs can grow to ₹1.03 crore, and in hybrid SIPs, even up to ₹1.44 crore.

However, the choice between SIP and PPF should not be based solely on returns. According to experts, investors must assess their risk tolerance, financial goals, and liquidity needs. PPF offers capital safety and tax-free returns but limits liquidity with a lock-in period of 15 years. SIPs, though subject to market risks, offer the flexibility to adjust investments and have historically outperformed fixed-income instruments over the long term.

Conclusion: Choose Based On Your Goals, Not Just Returns

Both SIP and PPF serve distinct purposes in a financial portfolio. If your primary objective is wealth creation with a higher risk appetite, SIPs in mutual funds provide the potential for superior returns. On the other hand, if you prefer safety, guaranteed returns, and tax benefits, PPF is a solid option.

A blended approach, allocating funds to both SIPs and PPF, can help balance risk and security while optimising wealth accumulation. Financial planners advise periodic review of your portfolio to ensure alignment with evolving goals and market dynamics.

Disclaimer: This article is intended for informational purposes only. Investors are advised to consult certified financial advisors before making investment decisions, as returns are subject to market risks and individual financial circumstances.