NPS: Which is Better Active or Auto Investment?

The National Pension Scheme or NPS is an essential investment plan which takes care of your expenses after retirement and you don’t need to rely on anyone in your vulnerable state.

NPS Which is Better Active or Auto Investment

National Pension Scheme

NPS or National Pension Scheme was started in 2004 exclusively for Government employees. Later on, it was opened for all employees in 2009. NPS is a well-known retirement scheme with which users create a large corpus of funds for their retirement by investing monthly in small amounts. Hence, its affordable, risk-free, and high return offers the best investment tool from the Government.

Furthermore, “The National Pension System provides people with the option of investing in corporate bonds, government securities or equity. If you are an Indian citizen between the age of 18 to 70 years, you can invest in NPS. Under this scheme, you can contribute regularly during your working age. After this, at the age of 60, you can withdraw a part of the accumulated money and can get regular pension income from the remaining amount,” mentioned News18.

Two Investment Options for NPS Investors

NPS provides two types of investment options to the subscribers: Active and Auto. If a subscriber chooses auto then he’s willingly giving the freedom to the fund managers to invest their money in different financial fields as they like. Whereas, after choosing active, the subscribers will have the freedom to instruct the fund managers where to invest their money.

NPS Active Choice

“This option is available to NPS members who want to select their own asset blend. Subscribers can select the ratio in which their money will be spread across different asset classes under this choice. In other words, you have a say in the assets you own. Even within this option, there are restrictions because a maximum of 75% can be allocated to stocks. This maximum was increased a few years ago from 50%,” mentioned News18.

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NPS Auto Choice

“There are three funds in NPS for auto allocation (NPS auto choice option). There is a Default Moderate Life Cycle Fund. In this, the maximum equity investment can be up to 50 percent. The second is the Conservative Life Cycle Fund, which allows only up to 25% investment in equities. The third is the Aggressive Life Cycle Fund in which you can invest up to 75% in equity,” further explained.

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Rishabh Sharma

Rishabh is an experienced content writer and editor, he is working for Viralbake to cover a diversified range of categories. His articles mainly focus on providing information, being a travel guide, educating others, and also making people aware of technology, after all, he is a technophile. When not writing he can be found gaming, watching movies, and travelling.

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