Topic: SIP vs PPF

Pls let me know which is the best option to inviest ? SIP or PPF .. cosindering long term investment (10 yrs +) which is better and where can I get good returns. Planning to inveest 10k/month for the next 10 years.

Hey i would say u can choose both modes of investment are good. Income from SIP is tax-free if you hold your investment for at least one year. But a person above 50 years of age should continue to invest in the old account instead of going for SIP.

But if you don't have an account and you are above 45 years of age, I suggest, investment in a new PPF account is not a good idea given it's lock-in period of 15 years. You can invest in SIP instead. Young people can invest in PPF also if they fear their spending habits. One person can open only one PPF account.
hope u get the point out there..
thanks.

Thanks for the reply. Basically I was looking at the returns that I get in investing in PPF & SIP for next 15 yrs.
10000/month for next 15 yrs.

The max amount which you can invest in PPF in a year is 70000, so you can't invest Rs. 10000/month.
Also both the options are good, PPF gives you 8% of return on your investments wheras SIP investments can very depending upon market.

Both - SIP and PPF are good investment options, but it totally depends upon your financial goals so as to select the right one. If you are considering long term investments then I would suggest you to go for SIP. SIPs are the best investment option for long terms as that would spread your investments over a long time and protect you from the daily volatility/fluctuations in the market. You can consult reputed stock brokers - GEPL Capital to help you guide in your investment needs.

Dear All,

I would like discuss this article with the below questions.

Q1) I am wondering where is the concept of compounding comes in SIP and it works just based on the Rupee Cost Average rule only. I think Reinvesting the profit / interest is NOT considered as Compounding. SIP yields good returns because of the volatility nature of equity markets. This gives best returns only if there is extreme volatility and if the market goes with minimal volatility you end up in less profit. Also even in SIP we need to make a close monitoring and come out of it once we reaches our targeted returns. Otherwise there is chance that our profits will get eroded in a quick time and you need to wait minimum 3 to 4 years for the Rupee Cost Averaging happens again. I personally experienced this. No mutual fund company declares interest compounding interest annually like PPF.

Q2) On the other side if you take PPF this removes all of the above issues like close monitoring etc and I believe only PPF alone gives the real benefit of compounding besides tax benefits. No other instruments exists to match this. Do you think any other financial instruments / methods exists to give the same return as if i invest Rs 1000 every month for 25 to 35 years in PPF continuously.

Q3) Also is there is any mutual fund exists for more than 25 years like PPF? The reason behind this question is i have seen many good funds like Magnum contra , reliance vision , growth are all considered to be the best mutual funds across the globe but if you see their current ratings it all dropped to three str ratings. I am not sure whether the fund houses will keep them or close them in next few years. So even it i performs the power of compounding may get abruptly get closed by the fund houses. But in PPF the probability of happening this would be very less and this scheme exits already for more than several decades.

I sincerely request you to validate my thoughts and provide clear directions on this topic with your detailed analysis separately for each question.

Cheers
Sowmi
sowmi.narayanan@planetsoft.com

Hi,
There is no right or wrong answer for this post. It all depends upon the risk appetite of the investor. However, as a thumb rule, every investor must open a PPF account in which they should deposit a minimum amount. SIPs in equity funds are for long duration investments.

PPF - you can not withdraw before 15 years.
SIP in Equity Funds - if you give them 15 years regular investments, you may get much better returns than PPF. Check out http://insight.banyanfa.com/?p=95 for a bit more details on SIP.

Regards
BFA

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