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Mutual Fund SIP Vs PPF: A Comparison of Benefits and Returns

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August 3, 2022


What’s Inside

What are Mutual Funds

A fund collectively accumulates money from several investors and then invests the proceeds in several asset classes like bonds, equities, and money market instruments. Such a collective investment vehicle is known as a mutual fund. The fund is managed by a fund manager with relevant industry experience and invests on your behalf.

In India, mutual funds are established as a trust and governed by SEBI, and mutual funds work under regulations laid out by SEBI (Mutual Funds) Regulations, 1996.

What is a Systematic Investment Plan?

A mutual fund generally provides you with the additional scope to invest money systematically either monthly, quarterly, semi-annually, or even annually, depending upon preferences and the type of mutual fund. This form of investing is a Systematic Investment Plan (SIP). It helps inculcate a sense of financial discipline and savings and makes it affordable at the same time.

What is the Public Provident Fund?

A Public Provident Fund is one of the oldest and the most traditional savings schemes. A PPF was introduced by the Government of India and regulated under the Public Provident Fund 1968. It’s a saving cum tax saving scheme designed to help build a retirement corpus. The ultimate objective of a PPF is to fetch stable returns in the long term for investors like you.

The amount contributed, interest earned, and the returns generated are not taxable, making them fall under the Exempt-Exempt-Exempt (EEE) category. A PPF is denoted as long-term if it has a tenure of 15 years; each year, the GOI decides the rate of return to be paid.

Mutual Funds vs PPF

Corporations and financial services firms and wider acceptance of financial literacy have made investing in financial markets and constituent securities much easier and investor-friendly. Now the question is PPF or Mutual Funds? Which investment option to choose?. You have a plethora of opportunities to choose from depending upon your ability and tolerance to take risks, liquidity horizon, and tax benefits.

A Public Provident Fund inculcates investors and investing public in the habit of saving regularly. As the central government guarantees it, it boosts confidence to park money for the long term.

If you are an investor with the bandwidth and capacity to take calculated risks, mutual funds let you do so. Mutual funds generally fetch a higher return than traditional asset classes and benchmark returns.

SIP or PPF: which works better?

A Systematic Investment Plan (SIP) is an investment option that comes naturally with mutual fund schemes. You can start a SIP with as low as ₹500 per month and no upper limit to the SIP you can create for yourself. There is no lockin period, while the investment tenure is as low as six months and the maximum period of 20 years. Mutual funds are subject to market risks, so the returns generated on mutual funds and SIP are market-linked.

Meanwhile, you can start investing in a PPF with a minimum amount of ₹500 and a maximum amount of ₹1,50,000 annually. The liquidity is low as there is a lockin period of 15 years. With a lockin period, you can only withdraw at the end of 7th year of your investment. Any PPF is a safe haven as the central government backs it. As of Q2 FY23, the return posted by PPF is 7.15%.

All in all, the ball is in your court to choose whether SIP or PPF; which is better? Only after thorough research and market study should you decide whether you want to invest in a risk-taking or risk-averse instrument.

Mutual Fund or PPF, which is better?

A PPF is secured by the government that fetches you a fixed annual interest income. If you wish to save a specific portion of your annual earnings in relatively safe security that is at the same time not taxable, PPF is a good option for you. It fetches you with a relatively higher return rate than any other traditional investments like FD and savings accounts. In contrast, mutual funds are a risky investment and are subjected to bear the volatility in the market. Mutual funds help you build your wealth aggressively.

Your investment decisions should be based on your risk profile, financial goals and time horizon. It is always a risk to invest all your money into one particular security; hence academic research and finance theories conclude that a wise investor always looks to diversify, allocating smaller portions of their available funds in multiple securities and asset classes.

Wrapping it up

It can be pointed out by saying that SIP, mutual funds, and PPF are ideal and good investment options. PPF gives a fixed, steady interest income, while mutual funds earn you a higher return than the market by taking an active bet in securities like equity, debt, gold, and other asset classes. A wise investor must allocate a certain portion of your funds to PPF, mutual funds, and SIP to make the best out of the funds.

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Frequently Asked Questions

1. Which is better: PPF or Mutual Funds?

Whether you invest in PPF or Mutual funds depends on your financial goals, needs, objective, and risk-taking appetite. If you wish to save a specific portion of your annual earnings on relatively safe security, then PPF is a good option. On the other hand, Mutual funds help you build your wealth aggressively.

2. What is the Public Provident Fund?

A Public Provident Fund is one of the oldest and the most traditional savings schemes available to investors to invest since time immemorial. A PPF is a safe haven introduced by the Government of India and regulated under the Public Provident Fund 1968.

Investing in PPF is ideal if you are a risk-averse investor seeing a regular passive and fixed income who does not have immediate requirements for cash in the short term. You can enjoy tax benefits under section 80C as PPFs are tax exempt.

3. How to invest in the Public Provident Fund?

Initially, if you do not have a PPF account, you need to open a PPF account which can be done at any bank or a post office. However, you can also open a PPF digitally through the online route. To open a PPF account, you must furnish your documents like a PAN card, passport, AADHAR card, proof of address, recent passport-sized photographs, and a fresh cheque. Once your PPF account is approved, you can transact and invest a minimum of Rs 500 and a maximum of Rs. 1,50,000.

4. How to invest in Mutual Funds?

There are several methods to invest in mutual funds. You can directly transact by reaching out to the respective fund house visiting its nearest branch, and furnishing your documents like proof of address, identity, cancelled cheque, and your photograph. You can instead reach out to a broker who will assist you in completing the formalities, and then you regularly invest in mutual funds through the broker. You can also use the Fi app or visit the official website of the mutual fund company.


Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.
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Mutual Fund SIP Vs PPF: A Comparison of Benefits and Returns


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