Learn How to Choose Between Public Provident Fund (PPF) & Equity Linked Savings Scheme(ELSS)

How should one choose between PPF Vs ELSS

Those who are not covered by Employee Provident Fund & are lucky enough to avoid the trap laid by their Bank RMs & LIC Agents to invest in Low-Yield Insurance Linked Plans, generally are left with a choice between Public Provident Fund (PPF) & Equity Linked Savings Scheme (ELSS).

Here comparisons are presented if Rs. 1,00,000 was invested every year in PPF & if the same amount was invested in an ELSS during 15-year blocks i.e from 1994 to 2009; from 1995 to 2010 and so on:

PPF Comparison Summary: PPF vs ELSS 1994-2015

Time Period Amount Invested (Rs.) Approx. Corpus at the End of the Period
PPF
Approx. Corpus at the End of the Period
ELSS
Valuation as on
Year 1994-2009 ₹1,500,000 ₹3,376,000 ₹8,380,000 April 2009
Year 1995-2010 ₹1,500,000 ₹3,312,000 ₹13,442,000 April 2010
Year 1996-2011 ₹1,500,000 ₹3,146,000 ₹12,828,000 April 2011
Year 1997-2012 ₹1,500,000 ₹3,082,000 ₹18,000,000 April 2012
Year 1998-2013 ₹1,500,000 ₹3,048,000 ₹13,000,000 April 2013
Year 1999-2014 ₹1,500,000 ₹3,026,000 ₹10,900,000 April 2014
Year 2000-2015 ₹1,500,000 ₹3,014,000 ₹11,673,446 April 2015

 

The table below shows the detailed calculation for investments made in PPF & ELSS from year 2000 to 2015. The ELSS calculations are based on NAVs of HDFC Tax Saver Fund.

The shaded columns show the accumulated corpus from PPF & from ELSS investments for each year.

PPF Vs ELSS CALCULATION: 2001-2015

Date Amount Invested PPF Corpus PPF Interest ELSS Entry Load Effective Nav Units Allotted Cumulative Units ELSS Valuation
2-Apr-2001 ₹100,000 ₹100,000 9.50% 2.25% 15.76 6,345.18 6,345.18 ₹100,000
2-Apr-2002 ₹100,000 ₹209,500 9.00% 2.25% 20.44 4,892.37 11,237.55 ₹229,695
2-Apr-2003 ₹100,000 ₹328,355 8.00% 2.25% 19.47 5,136.11 16,373.65 ₹318,795
2-Apr-2004 ₹100,000 ₹454,623 8.00% 2.25% 42.25 2,366.86 18,740.52 ₹791,787
2-Apr-2005 ₹100,000 ₹590,993 8.00% 2.25% 70.48 1,418.84 20,159.36 ₹1,420,832
2-Apr-2006 ₹100,000 ₹738,273 8.00% 2.25% 137.35 728.07 20,887.43 ₹2,868,888
2-Apr-2007 ₹100,000 ₹897,335 8.00% 2.25% 131.31 761.56 21,648.98 ₹2,842,728
2-Apr-2008 ₹100,000 ₹1,069,121 8.00% 2.25% 154.86 645.74 22,294.73 ₹3,452,561
2-Apr-2009 ₹100,000 ₹1,254,651 8.00% 2.25% 102.89 971.91 23,266.64 ₹2,393,904
2-Apr-2010 ₹100,000 ₹1,455,023 8.00% 0.00% 210.26 475.60 23,742.24 ₹4,992,043
2-Apr-2011 ₹100,000 ₹1,671,425 8.00% 0.00% 235.12 425.31 24,167.55 ₹5,682,275
2-Apr-2012 ₹100,000 ₹1,905,139 8.60% 0.00% 223.7 447.03 24,614.58 ₹5,506,282
2-Apr-2013 ₹100,000 ₹2,168,981 8.80% 0.00% 229.01 436.66 25,051.24 ₹5,736,985
2-Apr-2014 ₹100,000 ₹2,459,851 8.70% 0.00% 280.82 356.10 25,407.34 ₹7,134,890
2-Apr-2015 ₹100,000 ₹2,773,858 8.70% 0.00% 403.27 247.97 25,655.32 ₹10,346,020

 

One can observe that the ELSS valuation fluctuates from year to year (some years the valuation of ELSS even decreases as compared to last year) Even after such fluctuations, the accumulated value of ELSS is higher than PPF for 13 out of 14 years!!

CLICK HERE to see the PPF Vs ELSS comparison from the year 1994 to 2009

How much to invest in each will depend on 2 main factors – your risk tolerance capacity & your time horizon. If you are looking to invest for tax savings for at least over the next 10 years and if you can tolerate fluctuations, you should allocate more to ELSS. If you are a ‘Safe’ investor, PPF may suit you better because of the Guaranteed returns. Please note that Guarantees always come with low returns!!

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