The Path to Rs. 1 Crore – PPF or Mutual Funds?

While getting to a savings corpus of Rs. 1 crore is the elusive dream of many Indians, most never get there due to one reason: Not staying invested long enough. As long as you manage to stay disciplined, this goal can be achieved irrespective of the amounts being invested. There’s no need to look for the best mutual funds. The simple strategy mentioned below will suffice.

Let’s take a look at how Rs. 1 crore can be saved either via Public Provident Fund (PPF) or Mutual Funds.


PPF is a fixed interest rate savings account that has a minimum lock-in of 15 years but can be extended further in blocks of 5 years. It can be opened online through your bank. The interest rate is decided by the Government of India every quarter. The current PPF interest rate is fixed at 7.1%. (For Apr-Jun 2020). The attractive feature of PPF is it has a fixed interest rate which is not based on stock market returns. The entire sum at the end of 15 years is tax-free. There are tax benefits as well under Section 80c while making contributions to your PPF account.

At present the maximum amount that can be invested in a PPF account per financial year is Rs. 1,50,000. Let’s look at a scenario in which a monthly contribution of Rs. 10,000 is made to your PPF account.

The interest rate will not be constant but we will keep it at 7% for this calculation.

Time to reach Rs. 1 Crore investing Rs. 10,000 per month in PPF – 28 years

(Assuming 7% fixed interest rate).

At 7% Interest Rate, a monthly investment of Rs. 10,000 in a PPF account will take 28 years to reach Rs. 1 Crore.

Mutual Funds

Let’s try the same calculation with mutual funds whose returns are linked to the stock market. There is no definitive way of calculating future returns from a mutual fund. Even the best mutual funds have ups and downs. However if we assume 9% as the rate of return, and a monthly contribution of Rs. 10,000, it would take 24 years to reach 1 Crore.

A 2% increase in the return rate can get you to the goal of Rs. 1 crore in 20 years.

It’s important to note that the returns from mutual funds are not fixed and the returns may be lower than the PPF account as well.

Time to reach Rs. 1 Crore investing Rs. 10,000 per month in Mutual Funds (@9% return) – 24 years

(9% is an assumption here, not a fixed return).

Basic Principles to Follow

1) Be Consistent: Stock market cycles have ups and downs. It is important to keep the systematic investment plans (SIPs) going even when markets are down.

2) Stay Invested for the Long Term: While the stock market has ups and downs, over the long term this tends to average out. Stay put for at least 10 years.

3) Keep Costs Low: Opt for direct plans of mutual funds via apps such as Zerodha, PayTM & ET Money. Distributor commissions eat up about 1% of your fund value each year. Those investing via banks pay these commissions.

Check out our review of the best mutual fund apps.

Bottom Line

Looking for the best mutual fund is pointless. There is no such fund. Consistency and keeping costs low over the long term will provide good returns. An ideal strategy would be to split the investment in a mix of mutual funds and a PPF account. The PPF guarantees a fixed return, while the mutual funds offer the opportunity for higher returns over the long term.

Play around with your own calculations for interest rate and years on this calculator.

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