What investment options are there in NPS for aggressive investors?
For NPS subscribers, returns over time depend on how much of the money goes into equity and which fund manager they pick.
Saving for retirement is one of the most important goals for any retail investor, and the National Pension System (NPS) is a popular way to do it. It is often recommended to people who want a safe place for their money. It's also flexible, since subscribers can decide how to split their money across equity, government securities, corporate debt, and alternative investment funds (REITs and InvITs).
Your investment choices
NPS gives you two broad choices: active choice and auto choice.
Active choice: You decide the split yourself. Equity can go up to 75%, which is the maximum. Alternative investment funds are capped at 5%, and debt can go up to 100%. So if you want to take more risk, you can put 75% in equity.
Auto choice: This has four options: low, moderate, high, and aggressive, based on how much risk you're willing to take. If you're an aggressive investor, the aggressive option is the one to look at. Your money is invested with 50% in equity until you turn 45. After that, the equity share gradually falls to 35% by age 55, and stays there until you exit.
Picking a pension fund manager
Once you've chosen your investment approach, you pick a pension fund manager. The options are Aditya Birla, Axis, DSP, HDFC, ICICI, Kotak, LIC, SBI, Tata, and UTI.
Their past returns on equity are a good, objective way to judge how they've performed. Over the past three years, these returns have ranged widely, from about 14% to 18% a year.
Tata (18.17%) and Kotak (17.72%) are at the top. Other strong performers include UTI (17.62%) and Aditya Birla (16.33%).
If you're saving for retirement and want to be aggressive, you can:
- Go for active choice and put 75% in equity.
- Go for auto choice and pick the aggressive option.
- Choose a pension fund manager with a record of strong equity returns.
