XIRR: PPF vs Mutual Fund Real Returns Compared
PPF at 7.1% is guaranteed and tax-free. On Rs 12,500/month for 15 years in PPF, maturity is approximately Rs 40.5 lakh - XIRR of 7.1%. The same SIP in equity mutual funds at 12% XIRR grows to Rs 50.5 lakh before tax, Rs 47-48 lakh after LTCG tax. Equity mutual fund post-tax XIRR beats PPF by about 5% over 15 years.
XIRR
17.11%
Annualized return using Newton-Raphson method
XIRR (Extended Internal Rate of Return) handles irregular cashflows. Use negative values for investments and positive for redemptions.
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Common questions about XIRR: PPF vs Mutual Fund Real Returns Compared
Why is PPF considered better despite lower returns?
PPF's advantages: fully risk-free (government guarantee), EEE tax status (exempt at investment, growth, and withdrawal), partial liquidity after year 7, and loan facility against PPF balance. The 7.1% is real, certain, and tax-free. At 30% tax bracket, the tax-free nature adds 2-3% to effective yield vs a comparable taxed instrument. For conservative investors, PPF remains excellent.
Can I use XIRR to compare PPF partial withdrawals with SIP redemptions?
Yes. PPF allows partial withdrawals from year 7 onwards. If you withdraw Rs 2 lakh in year 8 and Rs 3 lakh in year 12 and take the maturity Rs 30 lakh at year 15, you can calculate XIRR on all these cashflows to get the actual annualized return from your PPF account including the partial withdrawals.
What is the maximum PPF contribution per year and its XIRR implication?
PPF maximum is Rs 1.5 lakh per year (Rs 12,500/month). On Rs 1.5 lakh/year for 15 years at 7.1%, maturity is approximately Rs 40.7 lakh from Rs 22.5 lakh invested. XIRR: 7.1% guaranteed, tax-free. For larger investments (Rs 2-3 lakh/month), PPF is capped and equity mutual funds become the primary vehicle for the excess.