How to become a Crorepati by investing 100 rs a day – Mutual Funds Vs PPF

Mutual Funds Vs PPF
How to become a Crorepati by investing 100 rs a day – Mutual Funds Vs PPF
How to become a Crorepati by investing 100 rs a day – Mutual Funds Vs PPF

If you are thinking of your retirement and not having any strategy towards mutual funds, then this article is for you.

Surprisingly, Rs 100 a day can help you save a fortune. Don’t believe me. Let me elaborate.

We all have heard about PPF from our parents to invest, but let me first share some brief about both PPF and Mutual Funds.

PPF being Public Provident Fund is backed by government and the current interest rate effective from 1 October 2018 is 8.0% Per annum (compounded annually). PPF also offers benefits like income tax exemption on deposit as well as withdrawal.

Now Mutual Funds are pool of investment in stocks impacted by market trends and usually offers a return of approx 12% per annum for long term investment.

So now lets face the truth of how investing rs. 1oo per day or 3000 per month or 36000 per annum looks like in PPF and Mutual Fund.

PPF (PUBLIC PROVIDENT FUND)

The below calculation explains what investing Rs 36,000 per annum in PPF looks like at different intervals. Things to note about PPF is that it has a lock in period of 15 years, with further optional locking extended to 5 years each.

Investing Rs 36,000 per annum would turn to 10,37,537.76 in 15 years, 27,55,712.64 in 25 years and 42,38,458.2 in 30 years (calculation is based on interest rate between 7.8% – 8% per annum compounded annually).

Duration Opening Balance Amount Deposits Interest Earned Closing Balance
Year 1 0 36000 2835 38835
Year 2 38835 36000 5837.16 80672.16
Year 3 80672.16 36000 9100.44 125772.6
Year 4 125772.6 36000 12618.24 174390.84
Year 5 174390.84 36000 16410.48 226801.32
Year 6 226801.32 36000 20498.52 283299.84
Year 7 283299.84 36000 24905.4 344205.24
Year 8 344205.24 36000 29655.96 409861.2
Year 9 409861.2 36000 34777.2 480638.4
Year 10 480638.4 36000 40297.8 556936.2
Year 11 556936.2 36000 46249.08 639185.28
Year 12 639185.28 36000 52664.4 727849.68
Year 13 727849.68 36000 59580.24 823429.92
Year 14 823429.92 36000 67035.48 926465.4
Year 15 926465.4 36000 75072.36 1037537.76
Year 16 1037537.76 36000 83736 1157273.76
Year 17 1157273.76 36000 93075.36 1286349.12
Year 18 1286349.12 36000 103143.24 1425492.36
Year 19 1425492.36 36000 113996.4 1575488.76
Year 20 1575488.76 36000 125696.16 1737184.92
Year 21 1737184.92 36000 138308.4 1911493.32
Year 22 1911493.32 36000 151904.52 2099397.84
Year 23 2099397.84 36000 166561.08 2301958.92
Year 24 2301958.92 36000 182360.76 2520319.68
Year 25 2520319.68 36000 199392.96 2755712.64
Year 26 2755712.64 36000 217753.56 3009466.2
Year 27 3009466.2 36000 237546.36 3283012.56
Year 28 3283012.56 36000 258882.96 3577895.52
Year 29 3577895.52 36000 281883.84 3895779.36
Year 30 3895779.36 36000 306678.84 4238458.2

(credits DailyTools.in PPF calculator)

MUTUAL FUNDS SIP

Now let’s suppose you invested Rs 36,000 per annum for a period of 30 years, it will turn out to 1,05,89,741.32 (Calculation done via HDFC Mutual Fund Calculator).

Voila, you are a CROREPATI now in 30 years, just by investing Rs 100 a day

HDFC Mutual Fund Calculator Snapshot 1
HDFC Mutual Fund Calculator Snapshot 1
HDFC Mutual Fund Calculator Snapshot 1
HDFC Mutual Fund Calculator Snapshot 2

But things to remember before investing in Mutual Funds is they are subject to market risk and your discretion is highly sought. For more details, refer Beginner’s Guide on Mutual Funds!!

DISCLAIMER: The above article is for illustration & education purpose only. We do not solicit any investment into PPF or SIP. The investor should read all details of a financial instrument carefully before making any investment.

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Author: AK

Ankit is a part-time blogger with full-time employment in an investment bank. He is a CA with interest in personal finance topics.

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