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NPS returns – Reaches double digit in the past 5 Years.

New Pension Scheme deposits earns more than 10% return for the past 5 Years. This is more than any other provident fund scheme in which interest hovering around 8%

Young government employees rejoicing over the Seventh Pay Commission bonanza have another reason to cheer. The NPS funds for central government employees have earned 11.43% in the past three years, and 10.5% in the past five. In the past six months, their retirement savings have earned more than what the Provident Fund offers in a full year.

Other NPS funds have also churned out double-digit returns for investors. The bond rally that began in February last year has seen long-term bond yields decline by almost 175 basis points.

With their portfolios lined with long-term bonds, the government bond funds of the NPS have shot up, while equity funds have benefited from the stock market rally. If we look at the one-year returns, the bond rally has rewarded ultra-safe investors who stayed away from equities.

NPS returns reaches double digit returns in the past 5 yearsThe bond rally is expected to continue because the market expects interest rates to be cut by at least 25 basis points in October. However, retirement savings are long-term investments and experts say one should not be swayed by the short term performance. While a pure debt-based approach ap pears safe, it will not be able to beat inflation in the long term. A balanced approach or a conservative allocation, that takes some exposure to stocks, can yield better results.

In the long-term (3-5 years), balanced investors who divided the corpus across the three categories or aggressive investors who put the maximum 50% in equities have been amply rewarded.

Source: Economic Times

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