5,000 SIP vs PPF: Who will give bigger fund in 15 years? Whom should investors choose?

New Delhi. Public Provident Fund is one of the most popular government savings schemes in the country, which has a lock-in period of 15 years. It gives 7.1 percent annual interest and the entire income remains tax-free, which makes it a safe option. By investing Rs 5,000 monthly, a total of Rs 9 lakh is invested in 15 years, on which interest of around Rs 6.78 lakh is earned and on maturity the total amount becomes around Rs 15.78 lakh. PPF continues to be a reliable instrument for investors seeking stability and tax benefits.

SIP: Market linked, but option for rapidly increasing returns
On the other hand, mutual fund SIP allows investors to participate in the market with small amounts every month. Although returns are market dependent, equity SIPs have given an average annual return of 10–12 per cent in the long run. With the same investment i.e. Rs 5,000 per month and a total of Rs 9 lakh invested over a period of 15 years, an estimated return of Rs 14.8 lakh is generated and the total fund can reach approximately Rs 23.8 lakh. That means about Rs 8 lakh more than PPF. However, there is capital gains tax on SIP, so the net return may be slightly less.

How much flexibility and how much risk?
The biggest difference between both the investment instruments is their flexibility and risk. PPF is completely risk-free, but the lock-in of 15 years makes it less flexible. Whereas in SIP there is no fixed lock-in (except ELSS), and money can be withdrawn as and when required. There is market risk, but the power of compounding helps it get better returns in the long run. The decision for investors depends on whether they want security or rapid growth.