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|
(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
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.