NPS Tier 2 vs Hybrid funds: Which is more suitable for you?

We know that the National Pension Scheme (NPS) Tier 1 is a popular option for retirement saving. (In fact, we recently compared it to mutual funds in our October Mutual Fund Insight edition .) However, on an anecdotal level, fewer people are aware that NPS has another side to it: NPS Tier-2. It functions like a mutual fund , offering greater withdrawal flexibility than NPS Tier 1. So, when a user recently asked us which is better - hybrid funds or NPS Tier 2 - we decided to dive deep to find an appropriate answer. But before we evaluate their performance and quality, let us quickly compare the two. Distinctions between NPS Tier 2 and Hybrid funds Basis NPS Hybrid Expense ratio Lower expense ratio. Capped at 0.09 per cent. Higher expense ratio- Aggressive hybrid direct funds: an average of 0.79 per cent- Conservative hybrid direct funds: an average of 0.89 per cent. Exit load No exit load on withdrawals. An exit load of 1 per cent is usually charged if more than 10-12 per cent of the total investment is withdrawn within a year. Investment Universe Top 200 stocks only. No such restriction.