January 16, 2011 7:16 pm
Inevestment in NPS (New pension scheme )or investment in Mutual Funds directly .
Which is better ?
isn’t NPS Tier II is good option to have better returns with more equity exposure?
Please consdier the following points
1. Purpose of NPS and Equity MF are different. NPS is a purely retirement product.
Equity MF is to take care of your long term goals such as child’s education or
2. Your retirement investment should be on safer side. For long term goals, you can afford
to take risks.
3. NPS is a safe product. It allows you to invest in the stocks but in a safe manner. You
can invest 50% in equity. This amount is invested in index funds. Rest is in Government
bonds and coroprate bonds
4. Since the investment is done in a passive manner, fund managers have little to do. So
your investment does not depend on the fund manager’s performance.
5. NPS is very cheap.
So I think you should in vest in NPS so that you can get pension after you have retired. Of course, if your job is such that you will get pension after your retire, NPS is ruled out.
I don’t agree with you Milind on certain points.
1.Equity MF can also be taken as retirement fund. Why only till children’s marriage or education? It’s tax free money can be used to further invest in some monthly income plans.
2. If the time horizon is 15-20 years, do you think one should go for defensive way. Do you want to say if an investor wants money for long term target children marriage, say after 20 years, he can take risk; but for retirement, after 30 years, he should take defensive way.
I think all long term goals can easily be achieved by disciplined investing in equities for long term.
Hope it will help you.
NPS fund managers need to prove themselves and deliver good returns as good as MF. Wait for another 2-3 years.
Mutual fund has past history and good funds delivering good returns.
Also make sure to exit when returns match your expectations and keeping your equity exposure.
I am referring to Equity MFs only.
At this stage, NPS offers max. of 50% exposure. So, you’ll get less returns here as compared to 100% equity diversified mutual funds. Secondly, some changes regarding taxation of NPS is expected in this budget. So, wait till then.
However, you can start investing in mutual funds for better returns.
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