NPS investor? Don't make this mistake

When investing in the National Pension System (NPS), you're presented with two options: Auto choice and Active choice. On the surface, Auto choice feels like the simpler, more convenient option. It automatically handles asset allocation for you, adjusting your investments between equity, corporate bonds and government securities based on your age. This hands-free approach often tempts investors into choosing it. After all, who wouldn't want an "expert" system managing their money? But here's the catch—this default choice could be silently restricting your long-term returns. Understanding Auto choice The Auto choice in NPS offers four variants, each with varying levels of equity exposure designed for different risk preferences. While they differ slightly, all four follow a common pattern. Conservative life cycle fund (LC25) - Starts with just 25 per cent equity and begins tapering every year from the age of 35, reaching a mere 5 per cent by the time you hit 55. Moderate life cycle fund (LC50) (the default option) - Begins with 50 per cent equity but also starts reducing every year from 35, reaching 10 per cent by age 55. Balanced life cy

This article was originally published on January 13, 2025.