NPS – Is it Worth?

Recently Government of India has launched the New Pension Scheme (NPS) which is a defined contribution Retirement Plan. You can chose between two options One is Manual and second is Auto. In the Auto option, your fund’s Equity:Debt allocation will be reduced according to your age.

Now the Question is that, Is it worth to Invest in NPS?

Well, I don’t know that what the opinion of Certified financial planners. But here is my opinion. Please note that I am not a certified Financial Planner. This is just my view so it may be different from the opinion of the Financial Planners.

Well, the first thing I don’t like about the NPS is its long (30 years) lock-in period. You are locking your money for 3 decades than why to invest that money in Debt? Because in the long-run, Equity is the Best Asset Class which can give you highest returns in comparison to any other Asset classes.

My another concern is that, PFRDA has mandated that you can invest only in those shares that are in Nifty or Sensex. Hence, choice is going to be about 51 shares.

So in the Equity option also the Fund Manager is bound by the definition and the regulations of the PFRDA. The main growth of Equity is in Mid caps. Large cap stocks which are in Nifty or Sensex can’t grow aggressively. And thus in the long run they can’t give so much capital gains.

My concern is that, via NPS, Public is going to invest for 30 years and that is 3 decades. For such a long time horizon, we can take any amount of risk. We can also allocate the fund in mid cap aggressive stocks for first or second decades. And later on we can shift to Large Cap Sensex & Nifty Stocks. But No…. Here our government wants to provide a high level of safety to people. And that’s why it doesn’t allow fund managers to invest aggressively.

My Opinion -

If we talk about me, than I myself will never prefer NPS. The reason is simple. Because I am just 25 years today and I prefer to invest in Aggressive Mid Cap stocks during the first 10 years of my earning life (up to 35 years). Later on I can gradually shift my money to some Large Cap oriented fund.

Another thing is that, during the very first few years of my earning life, I personally prefer Private Equity for Investments because it has an exponential growth potential (Of course it is extremely risky also). Say for Example, take the example of this blog. This Blog is my Asset & I own this Asset (Blog) through my Company “PATEL EDUCATION PRIVATE LIMITED”. Right now I am investing  my hard earned money behind growing this Asset (This Blog). Just few weeks back, I have invested Rs.20,000 behind buying a portfolio of 40 SEO Articles (Rs.500 per Article). I have launched this Blog just 1 year back and today after 1 year the Valuation of this Asset is US $ 7339 (Rs.3.65 Lakh). And the Value of this blog is growing at the rate of 50% per Annum.

In short, I prefer to invest in my own Business during the initial years of life rather than in stable Investments…!!!