Investing your hard-earned money is a crucial decision that requires careful consideration of various options available in the financial market. Fixed Deposits (FD), Public Provident Fund (PPF), and Systematic Investment Plan (SIP) are three popular investment avenues, and they each have their own unique features and benefits.

So, let’s delve into the intricacies of FD, PPF, and SIP and comprehensively understand how your money can multiply over 3 to 30 years.

## Comparison of FD vs SIP vs PPF

Here’s an overview of the differences between FDs, PPFs, and SIPs, and their defining features:

Particulars |
Fixed Deposits |
Public Provident Funds |
Systematic Investment Plans |

Type of Investment | FDs provide steady returns through fixed interest rates on investments | Government-backed security that offers tax benefits | A systematic investment method enabling investors to contribute at regular intervals. |

Risk | Low | Low | N/A |

Benefits | Guaranteed returns, capital preservation, and assured safety | Long-term wealth creation, fixed interest rates, and assured returns | Rupee cost averaging and reduced market timing risks |

Tenor | Offers flexibility in tenor options | Lock-in period of 15 years | Flexibility in investment amount and frequency |

Liquidity | Provides liquidity options, subject to premature withdrawal penalties | Limited liquidity due to lock-in period | N/A |

## FD vs PPF vs SIP: Your Corpus Over 30 Years

Here’s a look at how an investor’s corpus could multiple over a period of 30 years through different investment vehicles or modes.

**Fixed Deposits**

Use this formula to calculate a compound interest FD: **M= P + P {(1 + i/100) t – 1}**

Here,

- M is the maturity amount
- P is the principal amount (initial investment)
- i is the annual interest rate (in percentage)
- t is the number of years the money is invested or borrowed

Now, let’s consider an example:

Suppose you invest ₹10,000 (P) for 5 years (t) at an annual interest rate of 8% (i).

[ M = P + P {(1 +{i}{100})^t – 1}{{i}{100}}]

[ M = 10000 + 10000 {(1 + {8}{100})^5 – 1}{{8}{100}]

[ M = 10000 + 10000 {(1.08)^5 – 1}{0.08}

[ M = 10000 + 10000 {1.477455 – 1}{0.08}

[ M = 10000 + 10000 {0.477455}{0.08}

[ M = 10000 + 10000 x 5.9681875]

[ M = 10000 + 59681.875]

[ M = 69681.875]

Therefore, the maturity amount after 5 years would be approximately ₹69,681.88.

**Public Provident Fund (PF):**

Here’s the formula to calculate interest earned on PPF:** F = P[({(1+i)^n}-1)/i]**

Here,

- F is future value
- P is periodic payment
- i is interest rate per period
- n is number of periods

Consider calculating the future value of monthly ₹1,000 payments over 5 years at a 6% annual interest rate, compounded monthly.

Here’s how you can use the formula:

[ F = P[({{(1+i)^n – 1}}{i}) ]

[ F = 1000 [ ( {{(1 + 0.06/12)^{12 times 5} – 1}}{0.06/12} ) ]

Now, plug in the values and calculate:

[ F = 1000 [ ( {{(1 + 0.005)^{60} – 1}}{0.005} ) ]

[ F = 1000 [ ( {{(1.005)^{60} – 1}}{0.005} ) ]

[ F = 1000 [ ( {{1.34856 – 1}}{0.005} ) ]

[ F = 1000 [ ( {{0.34856}}{0.005} ) ]

[ F = 1000 x 69.712 ]

[ F = ₹69,712 ]

So, the future value is approximately ₹69,712.

**Systematic Investment Plan (SIP):**

Utilise this formula to calculate the returns on mutual fund investments through SIPs:

**FV = P [ (1+i)^n-1 ] * (1+i)/i**

Say, you want to calculate the future value with a periodic payment of ₹1,000, an interest rate of 5% per month, and the investment spans 10 months.

[ P = ₹1,000 ]

[ i = 0.05 ]

[ n = 10 ]

Substitute these values into the formula:

[ FV = ₹1,000 [ {(1+0.05)^{10} – 1}{0.05} ]

Now, calculate the expression within the square brackets:

[ FV = ₹1,000 [ {(1.05)^{10} – 1}{0.05} ]

[ FV = ₹1,000 [ (1.647009 – 1}{0.05} ]

[ FV = ₹1,000 [ {0.647009}{0.05} ]

[ FV = ₹1,000 x 12.94018 ]

[ FV approx ₹12,940.18 ]

Therefore, the future value after 10 months is approximately ₹12,940.18.

## Conclusion

In the debate of FD vs PPF vs SIP, there is no one-size-fits-all answer. The choice among these investment avenues depends on your financial goals, risk tolerance, and investment horizon. Ultimately, a well-balanced portfolio may include a mix of these instruments to cater to different financial needs and risk appetites.

Achieve comprehensive wealth creation by diversifying across FDs, PPF, and SIPs, aligning with your financial goals for long-term wealth creation.