Is it better to replace aggressive hybrid funds with NPS Tier 1, owing to the low expense and tax benefit? I plan to opt for 75 per cent equity allocation. Please advise.
- Ashish Jain
Yes, only if you are ready to compromise on liquidity. NPS now allows you to invest up to 75 per cent in equity and one of the main advantages is that it enforces discipline, which many investors lack. You cannot redeem money until you turn 60 except three-four circumstances where withdrawal is allowed. Although you cannot redeem the money in the interim, you can move it from one equity fund to another freely. The performance of different equity funds within NPS varies.
So, it is promising but I still feel that NPS is not being evaluated on performance. Some great multi-cap funds will beat NPS by a wide margin. But if you are an index fund investor, I would say go for NPS. It is very promising specifically when compared to large and large and mid-cap funds because of its low cost. But be sure that you are ready to compromise on liquidity.