People usually have this confusion over investing their money: PPF or SIP which is a better choice?

SIP refers to the Systematic Investment Plan. It is considered to be an investment strategy that is offered by several mutual fund schemes to the investors. With the help of an SIP investment, the investors are granted the opportunity for investing smaller amounts of money on a regular basis instead of investing a huge lump sum of money.

The PPF refers to the Public Provident Fund which is a savings cum tax-savings scheme. This scheme was introduced by the National Savings Organization of India in 1968. Once a person has been enrolled for PPF, then he or she has to invest a certain amount of money into this scheme every year for another 15 years. The invested amount by the investor gains interest during these years and therefore, helps in building wealth.

PPF Vs SIP: Structure of the Product

Systematic Investment Plan: An SIP is a type of investment style into mutual fund schemes that helps the investors into investing small amounts of money on a regular basis. With the help of this invested money, the investor gains regular units of the mutual fund scheme. The gains would depend on the prevailing price of a particular fund known as the NAV (Net Asset Value). Every month as the value of NAV changes, the investor would be receiving different number of units. When the NAV tends to be high, the investor gets lower number of units and vice versa.

Public Provident Fund: In any PPF, a particular person is able to invest a maximum amount of 1.5 Lakhs INR per year. In a single year, the deposits can be made as a lump sum or even under multiple installments for a maximum of 12 times. At the end of the stipulated period, the investor gets backs the invested amount along with added interests.

PPF Vs SIP: Returns

An SIP tends to be a mutual fund investment strategy. Therefore, the returns are directly linked to the market trends as well as the strategy of asset allocation. In an SIP, the investment valuations equals the total of the investment amount plus the profit or loss earned.

On the other hand, the PPF interest gets calculated on an annual basis and is therefore, credited at the end of each year. The calculation of the interest is done on a monthly basis that is based on the lowest balance present in the account between 5th and the last date of the month.

PPF Vs SIP: Volatility

The mutual fund investment in the market is linked to the products like bonds and stocks. Therefore, there could be significant volatility in the investment value when it comes to investing in the SIPs.

On the other hand, the PPF is a semi-fixed product of generating income. For the given year, the interest rates remain fixed. However, the rates might vary from one year to another.

PPF Vs SIP: Goals & Investment Horizons

Systematic Investment Plan: When one tends to have long-term financial goals like with respect to child’s education or marriage, then one is usually looking for higher returns, the potential for wealth building and the overall safety. For such cases, an SIP can be a good equity mutual fund option. Websites like gives a clear idea of the most invested portfolios, in order to make an appropriate choice.

Public Provident Fund: One should be willing to make the investment in PPF only if one is ready to commit for a long-term horizon (15 years or more). PPF is a great option when one is considering the higher returns scenario in case of retirement life.