Spread your NPS corpus across fund managers; Opt for multiple funds for higher returns
时间:2024-06-26 11:44:42 阅读(143)
THE Pension Fund Regulatory and Development Authority (PFRDA) has allowed investors of National Pension System (NPS) to select multiple pension funds for the various asset classes. So investors must review the performance of the funds at the beginning of the year and spread the corpus across three top-performing pension fund managers to earn higher long-term returns.
Unlike mutual funds, there is no tax implication of switching from one fund to another for investing in equity, corporate bonds or government securities. Under the active mode, a subscriber decides on the asset allocation percentage in different classes subject to their upper limits. And in the auto mode, the asset allocation is decided by the age of the investor.
While the portfolio guidelines for all the fund managers in NPS are common, there is a marginal difference in the overall returns across different asset classes and portfolio managers. Harshad Chetanwala, co-founder, MyWealthGrowth.com, says it is always good to check how your fund is doing compared to its peers and review the portfolio and performance on a periodic basis.
Tier 1 — equity schemesWith the benchmark indices touching new highs, aggressive investors in NPS have gained the most. In fact, private sector investors who opt for active choice may invest up to 75% in equity. In equity, fund managers invest about 85% in large-cap stocks and the rest in mid- and small-cap stocks for growth. Over a five-year period, Kotak Mahindra Pension Fund is the best performer with 16.6% returns followed by ICICI Prudential Pension Fund, data from NPS Trust show. Over a longer seven-year period, HDFC Pension Fund has clocked the highest at 16.3%, followed by Kotak Mahindra Pension Fund at 16%.
As NPS is a very long-term investment product, experts say young investors should allocate the maximum 75% in equity and even existing investors should review the allocation of funds periodically. Chetanwala says there are many investors who had selected the allocation at the time of opening the account and had never reviewed it despite changes in market dynamics. “Irrespective of how long an investor continues to invest in an NPS account, a mismatch in allocation will have a huge impact on the overall corpus,” he says.
Tier 1 — government securitiesThe returns from government securities were muted as the rise in interest rates since May 2022 drove down bond prices. However, when the interest rate cycle turns, returns from gilt funds are expected to rise as fund managers hold the paper till maturity. Over a five-year period, LIC Pension Fund is the outperformer with 8.1% returns, followed by Aditya Birla Pension Fund and HDFC Pension Fund at 7.9%. The benchmark return is 7.4%. Over a seven-year period, LIC Pension Fund remains the top performer with 7.9% returns.
Tier 1 — corporate bondsEven corporate bonds were hit because of the rising interest rates. Over a five-year period, HDFC Pension Fund is the top performer with 8.5%, followed by Aditya Birla Pension Fund at 8.3%. Over a seven-year period HDFC Pension Fund is the top performer, with 7.7% returns, higher than the benchmark’s 7.4%.
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