Spread your NPS corpus across fund managers; Opt for multiple funds for higher returns

financialexpress.com:

THE Pension Fund Regulatory and Development Authority (PFRDA) has allowed investors of National Pension System (NPS) to select multiple pension funds for the various asset classes. So investors must review the performance of the funds at the beginning of the year and spread the corpus across three top-performing pension fund managers to earn higher long-term returns.

Unlike mutual funds, there is no tax implication of switching from one fund to another for investing in equity, corporate bonds or government securities. Under the active mode, a subscriber decides on the asset allocation percentage in different classes subject to their upper limits. And in the auto mode, the asset allocation is decided by the age of the investor.

Sushil Jain, CEO, PersonalCFO.in, a wealth management firm, says investors should review their funds and fund managers regularly because even a minor difference will create a huge impact in the long run. “Investors should choose a fund which gives consistent returns over a longer period and should review the performance once every three years. If the fund is in the top three of its category then once should be happy with the performance,” he says.

While the portfolio guidelines for all the fund managers in NPS are common, there is a marginal difference in the overall returns across different asset classes and portfolio managers. Harshad Chetanwala, co-founder, MyWealthGrowth.com, says it is always good to check how your fund is doing compared to its peers and review the portfolio and performance on a periodic basis.

With the benchmark indices touching new highs, aggressive investors in NPS have gained the most. In fact, private sector investors who opt for active choice may invest up to 75% in