The secret to accumulating money and reaching financial freedom is prudent investing. Three well-known investment programmes stand out among the many that are available: the Systematic Investment Plan (SIP), National Pension System (NPS), and Public Provident Fund (PPF) (SIP). Each of these plans can assist you in becoming a millionaire by offering a unique combination of advantages, interest rates, and timeframes. This piece will examine all three of these plans, contrasting their yields to provide you with an idea of which may convert you into a millionaire the fastest.
Understanding Interest Rates for PPF, NPS, and SIP
Systematic Investment Plan (SIP)
SIP investing involves making regular, fixed-amount investments in mutual funds at specified periods. SIPs have a 12% average return, which makes them a well-liked option for building long-term wealth.
Public Provident Fund (PPF)
With an annual rate of about 7.1%, PPF is a government-backed savings plan that provides a risk-free and secure investment choice. Though it can be extended in increments of five years, the PPF account matures after fifteen years.
National Pension System (NPS)
NPS is an investment plan with an emphasis on retirement that provides a combination of government securities, corporate bonds, and equity. The range of the anticipated return rate is 9% to 12%. NPS provides a pension at retirement and permits partial withdrawals.
Calculating Returns: SIP, PPF and NPS
Systematic Investment Plan (SIP)
If you invest ₹10,000 monthly in SIPs with an expected annual return of 12%, here’s how your investment grows over time:
| Duration | SIP Amount (₹) | Future Value (₹) |
|---|---|---|
| 5 years | 10,000 | 8.2 Lakhs |
| 8 years | 10,000 | 16.2 Lakhs |
| 10 years | 10,000 | 23.2 Lakhs |
| 12 years | 10,000 | 32.2 Lakhs |
| 15 years | 10,000 | 50.5 Lakhs |
| 18 years | 10,000 | 76.5 Lakhs |
| 20 years | 10,000 | 99.9 Lakhs |
| 22 years | 10,000 | 1.3 Crores |
It takes approximately 22 years to become a millionaire by investing ₹10,000 monthly in SIPs at a 12% return rate.
Public Provident Fund (PPF)
With a monthly investment of ₹10,000 in PPF at an interest rate of 7.1%, here’s the investment timeline:
- 28 years: Total investment of ₹33,60,000 grows to ₹1,05,44,142.
- 30 years: Total investment of ₹36,00,000 grows to ₹1,23,60,728.
You will need around 28 years to accumulate over ₹1 crore through PPF investments.
National Pension System (NPS)
Assuming a monthly contribution of ₹20,000 starting at age 44 and continuing until age 70 (26 years) with an expected return of 10%, here’s the breakdown:
- Total investment: ₹62,40,000
- Corpus at maturity: ₹2,98,13,105
- Total gain: ₹2,35,73,105
- Expected monthly pension: ₹59,626 (assuming 40% annuity purchase at 6%)
In this scenario, your total corpus will be nearly ₹3 crores, as we have taken 20,000 rupees monthly investment.
Disclaimer: (This information is provided solely for informational purposes. It is important to note that investing in the market or a business idea involves market risks. Before investing money as an investor/ owner/ partner, always consult an expert. DNP News Network Private Limited never advises to invest money on stocks or any specific business idea. We will not be liable for any financial losses.)
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