PPF Vs NPS Vs Mutual Funds: Becoming rich is a dream of almost everyone.  As soon as people start earning they aim to accumulate a corpus of Rs 1 crore as soon as possible. But young earners who don’t have a large amount for lump sum investment, they aim to become a crorepati by saving a fixed amount every month. Worth mentioning here is anyone who invests regularly can easily become a crorepati within 20 years. Systematic investment over a long period of time can easily make you a crorepati as the power of compounding plays a big role in multiplying your wealth. 

Let us check out how much time it will take to accumulate a corpus of Rs 1 crore if you invest Rs 10,000 every month in popular investment schemes like Public Provident Fund (PPF), National Pension Scheme (NPS) and equity mutual funds (MF). 

Public Provident Fund (PPF)

PPF is the most popular long term saving instrument as it provides tax-free returns. Also, the amount you invest every year in PPF qualifies for tax benefit under Section 80C. But in the new tax regime, the benefits of Section 80C are not available. A PPF account can be opened in a bank or in a post office. Unlike RDs, interest rate of PPF is the same across banks and post offices as it is decided by the government every quarter. 

Assuming that the current PPF interest of 7.9% remains constant throughout the investment period, you may accumulate Rs 1 crore in 26 years by investing Rs 10,000 at the beginning of every month or Rs 1.2 lakh at the beginning of every year. Worth mentioning here is out of the Rs 1.036 crore that you will accumulate through PPF in 26 years, around 72% come as interest and you invest only Rs 31 lakh over 26 years. 

National Pension Scheme (NPS)

Of late NPS has gained popularity as a retirement saving instrument. Earlier it was opened to government employees only but since 2009 it is open to all. You can either invest a lump sum or fixed amount every month in NPS. 

The average return of NPS funds over the last 10 years has been above 10% if you allocate 50% of your NPS contribution to equities and 50% to government securities. Assuming long-term compound annual growth rate (CAGR) of 10%, you may accumulate Rs 1 crore in 23 years by investing Rs 10,000 in NPS at the beginning of every month.

Mutual Fund (MF)

Equity mutual funds are considered as the best instrument to create wealth faster if you can bear with volatility.  For risk-averse investors, index funds are best suited as they are less volatile and offer attractive returns over fixed deposits in the long term. You can invest in index funds that track either Nifty or Sensex. These funds have the potential to offer as around 12% CAGR over the long term.

Assuming long-term CAGR of 12%, you may accumulate Rs 1 crore in 20 years by investing Rs 10,000 at the beginning of every month. You can achieve this goal even faster if you use SIP top-up. If you increase your monthly SIP of Rs 10,000 every year by 10% then you will be able to accumulate Rs 1 crore corpus in 16 years assuming a CAGR of 12%.

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