SIP vs PPF: Which Should You Choose for Wealth
Both SIP and PPF are long-term instruments, but they serve different purposes. SIP offers higher potential returns with market risk; PPF offers guaranteed, tax-free, government-backed returns.
SIP (Equity)vsPPFIndia
| Factor | SIP (Equity) | PPF |
|---|---|---|
| Returns | 10–15% CAGR (variable) | 7.1% (fixed, tax-free) |
| Risk | Market risk | Zero risk (sovereign) |
| Tax on returns | 12.5% LTCG above ₹1.25L | Fully tax-free |
| 80C benefit | ELSS only (3-yr lock-in) | Yes (any category, 15-yr lock-in) |
| Minimum investment | ₹500/month | ₹500/year |
| Maximum investment | No limit | ₹1.5L/year |
| Liquidity | High (T+1) | Low (partial from year 7) |
| Lock-in | None (except ELSS: 3 yr) | 15 years |
Our Verdict
For a 15-year horizon, a diversified SIP in equity funds historically outperforms PPF significantly. But PPF's zero-risk, fully tax-free nature makes it a vital foundation for risk-averse investors. Best practice: max out PPF first (₹1.5L/year) for stable tax-free base, then invest remaining savings via SIP for growth.