If you’ve ever found yourself at the crossroads of choosing between a Mutual Fund SIP and a Public Provident Fund (PPF) to invest your hard-earned money, you’re not alone. It’s a common question for every retail investor who want to build wealth while keeping risk in check. In order to check, which is better, let’s assume Manoj, a salaried person want to build wealth over the 15 years of regular investment.
The Public Provident Fund (PPF) is a government-backed savings scheme offering an annual interest rate of 7.1%, compounded yearly. It has a 15-year lock-in period, and individuals can invest up to ₹1 lakh per year.
In contrast, mutual fund SIPs (Systematic Investment Plans) offer the potential for higher returns, particularly when invested in equity mutual funds over the long term. However, they do come with a level of market-related risk, as returns aren’t guaranteed.
Let’s break it down with real numbers and a practical comparison.
Option 1: Public Provident Fund (PPF)
PPF is a government-backed savings scheme known for its safety and tax benefits. Here are the key features:
- Interest Rate: 7.1% per annum (as of now), compounded yearly
- Investment Limit: Up to ₹1 lakh per year
- Lock-in Period: 15 years
- Tax Benefit: Exempt-Exempt-Exempt (EEE) – tax deduction on investment, no tax on interest, and no tax on maturity
| Year | Annual Investment | Total Investment | Estimated Value at 7.1% |
| 15 | ₹1,00,000/year | ₹15,00,000 | ₹27,12,000 (approx.) |
The returns are stable and risk-free, making PPF a solid choice for conservative investors focused on capital protection and guaranteed returns.
Option 2: Mutual Fund SIP (Equity-Oriented)
Mutual Fund SIPs (Systematic Investment Plans) allow regular investments into mutual funds, especially equity funds, which have historically offered higher returns over the long term. Key points:
- Return Potential: Varies, but long-term average for equity funds is 10–15%
- Risk Level: Market-linked, hence subject to volatility
- Liquidity: No fixed lock-in (except ELSS funds); you can withdraw any time
- Taxation: Gains above ₹1 lakh/year taxed at 10% (long-term capital gains)
| Year | SIP | Total Investment | Estimated Value at 12% |
| 15 | ₹8,500 | ₹15,30,000 | ₹42,88,896 (approx.) |
Despite market fluctuations, long-term SIPs tend to even out short-term volatility, especially with rupee cost averaging.
Which One Should You Choose?
Choosing between SIP and PPF depends on your financial goals and risk appetite:
- Choose PPF if you prefer capital protection, steady growth, and tax benefits over a long horizon.
- Choose Mutual Fund SIPs if you are comfortable with some risk in exchange for potentially higher returns.
Conclusion
Both PPFs and Mutual Fund SIPs are excellent tools for building wealth over time. The key is to align your investment choice with your goals, time horizon, and comfort with risk.
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.
