SIP VS PPF Which is Better?

April 05, 2023

In India, there’s no dearth of investment options. From the humble fixed deposit to stock market investments, there are multiple asset classes with varying levels of risk-to-reward ratios. 

However, when it comes to long-term investments, two of the most popular options are mutual funds and Public Provident Funds (PPF). Here’s where the problem arises. Many individuals find it difficult to choose between starting a mutual fund SIP vs a PPF (Public Provident Fund).  

What is SIP? 

Systematic Investment Plan, also known as SIP, is not an investment option, but rather an automated mutual fund investment method. When you opt for a SIP, a certain fixed sum of money is automatically debited from your bank account and is invested in a mutual fund at a frequency of your choice. The investments in the mutual fund will continue to be made till the end of the chosen tenure.  

Generally, most individuals choose to opt for a monthly SIP, where investments in a mutual fund are made each month till the end of the selected tenure. However, depending on your financial goals, you may choose to opt for a bi-monthly, quarterly, half-yearly, or annual SIP as well.  


Benefits of SIP:

Investing in a mutual fund via a SIP offers you a host of exciting advantages. Here’s a quick look at what they are. 

  • Mutual fund SIP is very flexible. You get to choose the amount of investment and the tenure, and can withdraw the investment at any point in time.
  • As you continue to invest in a mutual fund via SIP, you get to utilize rupee cost averaging. This lowers your cost of investment and increases your returns significantly. 
  • Since mutual funds are market-linked, you get the ability to generate returns that are far higher than other traditional forms of investments. 


What is PPF? 

PPF, also known as Public Provident Fund, is a government-backed investment scheme. Here, you can choose to invest any amount between Rs. 500 and Rs. 1.5 lakhs in a financial year. However, there’s a mandatory lock-in period of 15 years, which can be further extended by blocks of 5 years. 

Although the lock-in period of PPF is 15 years, partial withdrawals are permitted from the 7th year onwards. The rate of interest on PPF is determined by the government of India and is revised quarterly. Currently, the rate of interest on PPF for Q4 of FY 2022–23 is 7.1% per annum. 


Benefits of Investing In PPF:

The Public Provident Fund (PPF) also has its fair share of benefits. Here’s a quick overview of some of the advantages of this investment option. 

  • Since PPF is a government-backed investment, it carries zero default risk. 
  • PPF is one of the few investments that come under the EEE (Exempt-Exempt-Exempt) category. As a result, the investments made in PPF and the maturity amount are both tax-free. 
  • You can start investing in PPF with contributions as low as just Rs. 500. This makes it very accessible to almost all investors.  


SIP Vs PPF: Which is Better? 

The answer to this question is not as simple as it may seem. If you’re a risk-aggressive investor who prefers having the ability to generate higher returns, investing in a mutual fund via SIP may just be the ideal option for you. Also, you get to enjoy benefits like no lock-in period, high liquidity, and no maximum investment limit. 

On the other hand, if you’re a very conservative investor, who is more interested in protecting your capital than getting high returns, then investing in a PPF may just be the right option for you. This is because investing in a Public Provident Fund gives you advantages like multiple tax benefits, complete security, and a low minimum investment limit. 

However, you should keep in mind that the Public Provident Fund is a long-term investment that requires a minimum commitment of 15 years (due to the lock-in period), which is not the case with a SIP since it can be redeemed whenever you wish.  



The decision on whether to start a mutual fund SIP vs a PPF should be made after taking into account factors like your financial goals and risk profile. That said, thanks to the low investment limits for both PPF and mutual fund SIPs, you can consider investing in both simultaneously. This will allow you to enjoy the benefits offered by SIP and PPF. 




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