I want to invest Rs 1,000 per month for 20 years. Will NPS be better than mutual funds?
Aman
The National Pension System (NPS) is the least expensive vehicle available today, its cost comes to around 1/6th of what a mutual fund charges. This difference in expense can have a major impact. However, for a long period like 20 years, the exposure to equities given by the NPS is inadequate; its most aggressive plan invests up to 50 per cent of its assets in equities. On that front, a mutual fund would be better. But on the other hand, NPS investments will give you a tax rebate for as long as you invest in it. Hence, to decide between the two, you should figure out what you want from your investment. Go for mutual funds in case you seek better returns or the NPS if you want tax benefits and lower costs.
This article was originally published on August 14, 2012.
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