FD, PPF or Mutual Fund: Which option would make you a crorepati quickly?

Everyone dreams of staring at an 8-digit bank balance that would move them to a crorepati club. However, which is better among FD, PPF and Mutual Funds to reach there? Let’s find out in this article.

Who doesn’t want to be rich and stare at an 8-digit bank balance? Most people have this goal and try their ways of achieving it. However, there are various ways one can achieve this dream such as investing your savings in bank fixed deposits (FDs), public provident funds (PPF) or mutual funds. Having said that, in this article, we would learn which will make you crorepati quickly. 

Bank FDs

This is one of the most popular investment avenues in India with most of the money of an individual being concentrated here. This is because the level of safety of principals that they offer is relatively higher. 

In fact, bank FDs are insured up to Rs 5 lakh on an aggregate basis. Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the Reserve Bank of India (RBI), covers these deposits. 

At present, the interest rate of a 5-year bank FD is hovering around 7 per cent. However, historically post-tax interest rates on FDs have not been 5.5 per cent to 6 per cent. Assuming you receive 6 per cent over the next 20 years, you need to make a one-time investment of Rs 31.18 lakh to become a crorepati. 

Public Provident Fund

PPF is one of the safest investments that is backed by the faith of the Government of India and enjoys the Exempt-Exempt-Exempt (EEE) tax status. So, technically investment in PPF is completely tax-free. Currently, the interest rate of PPF is 7.1 per cent. So, if you invest in the PPF at the present rate for 20 years (with an additional block of five years after maturity), then you need to either make a one-time investment of Rs 25.36 lakh or you need to invest Rs 2.25 lakh annually for 20 years to become a crorepati. 

Mutual Funds

Mutual funds have gained a lot of traction in recent years with retail investors mostly contributing towards equity mutual funds. You can invest in mutual funds by making a one-time lumpsum payment or systematically invest every month via a systematic investment plan (SIP). To gauge the returns, we would take average 3-year rolling returns of Nifty 50 from January 2000 to December 2022. The average 3-year rolling returns of Nifty 50 work out to be 14 per cent. So, to become a crorepati in 20 years, you either need to make a one-time investment of Rs 7.28 lakh or invest Rs 8,500 every month for 20 years. 

Final Words

Choosing the right investment is important for wealth creation. If you wish to become a crorepati, there are various investment avenues available and the most popular ones are bank FDs, PPFs and mutual funds. However, who can make you crorepati quickly? Our analysis of all three avenues shows that equity mutual funds are the best option to become a crorepati. 

This is because with equity mutual funds the likelihood of your investments getting doubled is quite impressive compared to bank FDs and PPF. In the case of Bank FDs and PPF, your amount would get doubled every 12 and 10 years, respectively. However, the same for equity mutual funds is 5 years. 

However, one needs to note that investing in equity mutual funds is riskier than bank FDs and PPF as it is market-linked. And as they are market-linked, it makes them highly volatile. Hence, it is advisable to have a proper asset allocation in place based on your risk appetite. This although not quickly, surely makes you a crorepati in the long term.