NPS Returns: Best NPS Funds to Invest in
Finance 160

NPS Returns: Best NPS Funds to Invest in

NPS Returns: Best NPS Funds to Invest in

The National Pension System (NPS) scheme is a market-linked investment scheme where the money that you invest is directed to market-linked NPS funds. The growth provided under the NPS scheme, therefore, depends on the performance of the market and is inflation-adjusted. 

NPS funds are of four types which include the following –

  • Asset Class E – this fund invests at least 50% of its portfolio in equity and equity-oriented securities. The fund, therefore, offers attractive returns but is exposed to market volatility
  • Asset Class C – this fund invests in fixed income debt instruments except for Government securities. Since the portfolio is invested entirely in fixed income instruments, the fund has a low-risk profile and offers low but stable returns
  • Asset Class G – this fund invests only in fixed income Government securities. The fund is, therefore, another debt fund which is not exposed to market volatility and offers stable returns
  • Asset Class A – this fund invests in alternate securities like REITS, AIF, etc. Investment to this fund is capped at a maximum of 5% thereby allowing you protection against volatility

When you invest in NPS online, you get the choice of two investment modes – 

  • Active Choice under which you choose the NPS funds as per your investment style and risk appetite
  • Auto Choice under which you choose the risk profile and then the investment is allocated among the NPS funds (except Asset Class A) in a predefined manner

You also get to choose the NPS fund managers whom you would like to manage your investments. Presently, there are eight NPS fund managers and you can choose anyone from them. 

Choice of the best NPS funds

To get the maximum returns on your investments, you should invest in the best NPS funds. So, here is the list of different fund choices which you have when you invest in NPS online and the returns offered under each choice –

Auto Choice 

Under the Auto Choice investment strategy, the fund performance depends on the risk profile selected. So, here are the returns you can get under different risk profiles –

Risk profile Investment pattern Expected returns
Aggressive  75% in Asset Class E

10% in Asset Class C

15% in Asset Class G

7.62% to 8.91% per annum
Moderate  50% in Asset Class E

30% in Asset Class C

20% in Asset Class G

8.24% to 9.3% per annum
Conservative  25% in Asset Class E

45% in Asset Class C

30% in Asset Class G

8.88% to 9.75% per annum

(Source: https://www.etmoney.com/nps/investment-scheme?dob=01-01-1985

Active Choice

If, however, you choose to invest as per your choice, the return would depend on the NPS fund manager that you choose. So, here is a list showing the average returns offered by different NPS fund managers assuming that you invest 75% in Asset Class E, 10% in Asset Class C and 15% in Asset Class G –

NPS Fund Managers  5-year returns
HDFC Pension  Fund 9.11% per annum
SBI Pension  Fund 8.37% per annum
UTI Retirement Solutions Fund 8.31% per annum
ICICI Prudential Pension  Fund 8.24% per annum
LIC Pension  Fund 7.39% per annum
Kotak Mahindra Pension  Fund 8.45% per annum

(Source: https://www.etmoney.com/nps/best-pension-fund-manager?dob=01-01-1985&ac1=75&ac2=10&ac3=15&ac4=0&pfid=4

So, when investing, first, choose your investment strategy and then choose the NPS fund managers to get the maximum returns on your investments. Keep in mind the following before you start investing in the NPS scheme – 

  • You can switch between the investment choices, i.e. from Active Choice to Auto Choice and vice-versa
  • You can switch between the investment funds if you have selected the Active Choice investment preference
  • Once you invest in NPS online, you would have to continue investing in the scheme every year till you reach 60 years of age
  • Your investments would earn tax deductions under Section 80CCD (1) up to Rs.1.5 lakhs. You can claim an additional deduction  of up to Rs.50, 000 by investing in NPS under Section 80 CCD (1B)

So, invest in the NPS scheme for availing attractive returns and building a substantial retirement corpus. To invest, you can choose www.etmoney.com which is the best investment website. At ETMONEY’s best investment website you would get the facility of investing in NPS online without hassles. All the paperwork would be done virtually and you can start your investment at the earliest. Moreover, you can also compare the returns offered by different NPS fund managers on ETMONEY’s best investment website so that you can invest in a fund which gives the best returns. So, invest in NPS with ETMONEY for ease and convenience.

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Finance 160