ET
Bureau | Jul 25, 2016, 12.21 PM IST
The
NPS funds for central government employees have earned 11.43% in the past three
years, and 10.5% in the past five.
NEW
DELHI: 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. The 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.
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