@isika If you are in 30% tax bracket with NPS you get instant 30% profit thats a very good deal. So invest if the money you are going to invest is not a big portion of your total investment and you can wait for it till retirement for that.
NPS is for passive investors, set and forget. For actively managing investment MF or direct stocks will be better.
@isika NPS is good passive investment option. but putting all egg in one nest is not ideal. So, invest in other asset class along with NPS, is good idea.
@resjudicata NPS is a bad investment option if the investment isn't tax exempt, or your comoany matches it. Never put more than 50k annually in NPS unless you are a govt employre
@resjudicata Agree new investors like to do all these calculations and stuff. It gets boring quickly if you have another job and guess how boring it will be when you are old.
NPS provides stability as set and forget instrument, not allowing to withdraw thus saving for retirement only.
@1008 Yes. When your job is in other field other than finance, monthly investing 10-15% of your total investment corpus in NPS is good. It‘s gives less but stable return. Many people from Gen-X with no finance background still invest in FDs and RDs, because it’s simple, passive and risk free.
@resjudicata I disagree, its as risky as the debt and equity ratio you select, with the added lockin where you cannot access your own money.
In my prev comment I was just adding to the putting all egg in one nest comment, saying that you shouldn't be putting any more than the tax exempt investment in NPS, let alone thinking about putting everything in NPS
@isika In my experience, I feel tax saving through corporate contributions is worth it. I've been investing in NPS since Nov 2019 under aggressive auto choice and my current XIRR is at 14.4%. I'm saving like 50k in taxes due to NPS contributions.
@alexbright922 I have created a calculator to explain what I posted in the comment, you can modify the values by creating a copy in your google drive or downloading the excel.
@isika Thanks for the calculator, it really opened my eye looking at the annuity adjusted to inflation. I just want to add some points here and these are just my way of thinking:
1.) Instead of reducing MF contribution by 30% to account for taxes, I feel it's better to look at the money saved in taxes as an additional MF contribution.
2.) NPS contributions will increase with a yearly hike in case of the employer contribution which needs to be accounted for when looking at NPS returns.
@alexbright922 Money saved in taxes can not be additional MF contribution. You need to invest first and only then a tax exemption for a fraction of that amount.
You don't actually have any extra amount to invest.
@alexbright922 True, but the point is if it was in direct equity the XIRR would be even higher(atleast till retirement), but the investment amount itself would be lower. As long as you are in 30% bracket, regardless of the NPS amount(be it 10k or 2 lac) the post retirement ratio of annuity vs extra lumpsum in MF will be same
@isika NPS will be the best investment scheme. They are migrating govt and PSU employees to NPS. Remember these are the guys that make the rules, they are not going to screw themselves.
The maths of the scheme is clear. Risk is higher inflation and lower intrest. This a aflagship scheme from Modi, unless there is mass systemic breakdown nps is a good option. Ofcourse you have to hedge against a Sri Lanka like meltdowns, so you add Gold EtF and equity mutual funds
@isika What if equity didn’t give 12% return? Debt part is there to stabilise the portfolio and you won’t be in equity all your life. At some point of your life, you will want stability.
