The Buyt Desk
Investment is an important financial decision for men and women to grow their money and stay financially strong for the future. There are several investment options available for all. Let us focus on two types of investment that can help you accumulate funds for your retirement.
NPS (National Pension Scheme) and Mutual Funds are the two best financial instruments that help in building an appropriate retirement corpus. Here is a look at how these two options differ from each other and which one is highly beneficial for women in their retirement planning.
NPS
The National Pension Scheme is an ideal way to plan your retirement. It provides the immense flexibility to switch from one investment option to another one or from seven different fund managers. NPS provides access to Government Debt securities, Corporate Bonds, Equity, and other asset classes. This investment instrument provides an average return of 8 to 10%. However, 40% of the corpus will be gained as an annuity. This means you will receive regular payments monthly after retirement.
The best advantage of this investment option is that you can begin with a minimum amount of INR 500 while opening an account. It provides the ease to switch to a new location or a job without leaving behind corpus build. PFRDA (Pension Fund Regulatory and Development Authority) regulates NPS with constant monitoring and NPS Trust regularly reviews the performance of fund managers. The investments are combined into a fund effectively managed by PFRDA-approved investors.
NPS investments are categorized into equity and debt. So, you’ll get market-associated returns plus good stability. The sooner you begin investing in this scheme, the better returns you will receive after a certain period. Since there is no maximum limit, you can choose the policy suitably. However, the minimum contribution you require is as low as INR 1000 every financial year.
Mutual Fund
If you’re looking for an investment option with moderate risk, mutual funds are worth considering for you. They are subjected to market risks. These investment options provide ordinary investors access to stock, gold, debt, foreign equity, and other asset classes. If you are willing to invest in a children’s education, house, or something else, then Mutual Funds are the right investment instrument.
Debt Funds and Equity Funds are the two main types of mutual funds. But, their selection is highly important to reduce the number of funds to 2 or 3. Housewives or homemakers can opt for the option where they can start investing with only INR 100. Unlike PMS, mutual funds provide tax benefits and daily liquidity. Debt mutual funds invest in safe government securities with a 7-9% average return. It has a better taxation policy as it allows users to adjust the inflation return which bank fixed deposits don’t allow. Equity mutual funds are good for long-term financial goals.
Conclusion
NPS is a good option for women who want to plan their retirement, while mutual funds are better to get the potential for higher returns at a higher risk. The selection of investment instruments must be done based on several important factors. For example, investment horizon, personal circumstances, risk tolerance, and financial objectives.
Go with the investment option that suits your pocket size. Before starting an investment, it’s recommended to consult an experienced and knowledgeable financial counselor.
