With its array of investment possibilities and tax benefits, the National Pension System (NPS) is one of the most widely used retirement planning instruments in India. However, just like any investment, the performance of NPS funds might change depending on your decisions, especially when it comes to the asset class and Pension Fund Manager (PFM) that you choose to invest in.
We’ll examine the best-performing NPS funds over the past few years in this post, evaluating their returns and offering explanations for their success. This will enable you to invest in NPS with greater knowledge and confidence.
Understanding NPS Funding Alternatives
Understanding the NPS investment structure is crucial before we examine the top achievers. There exist three primary asset classifications within NPS funds
Equity (E): Invests in the stock market, which carries a higher risk but the possibility of big gains.
Corporate Bonds (C): Invests in fixed-income securities that provide reduced risk and moderate returns.
Government Securities (G): Invests in securities and bonds issued by the government; returns are usually steady but lower.
You have two options for allocating your allocation: either actively (Active Choice) or automatically (Auto Choice), depending on your age.
Read Also: How to Generate ₹1 Lakh Pension Per Month Using NPS
Top Performing NPS Funds: A Look at the Last Few Years
Based on historical data, here are the top-performing NPS funds across the different asset classes over the last few years. This analysis covers the returns and performance of these funds, managed by different PFMs.
1. Equity (E) Funds
HDFC Pension Fund – Equity (E)
- 3-Year CAGR: ~14-16%
- 5-Year CAGR: ~12-14%
- Analysis: The equity plan of HDFC Pension Fund has continuously outperformed other plans in the NPS market. It has profited from having a diverse portfolio with large-cap equities, which have shown strong growth recently. The fund manager’s excellent success has also been aided by its smart allocation to high-growth industries including financial services and IT.
SBI Pension Fund – Equity (E)
- 3-Year CAGR: ~13-15%
- 5-Year CAGR: ~11-13%
- Analysis: SBI Pension Fund has produced outstanding returns by utilising its thorough market analysis and thoughtful portfolio selection. Even during times of market volatility, the fund has remained steadfast in its emphasis on blue-chip firms, which have delivered stability and growth.
ICICI Prudential Pension Fund – Equity (E)
- 3-Year CAGR: ~13-14%
- 5-Year CAGR: ~10-12%
- Analysis: Performance from this fund has been steady; investments in consumer products and financial services have been especially profitable. It has been able to profit from market upswings while reducing risks because to its balanced strategy between large-cap and mid-cap equities.
2. Corporate Bonds (C) Funds
UTI Retirement Solutions – Corporate Bonds (C)
- 3-Year CAGR: ~9-11%
- 5-Year CAGR: ~8-10%
- Analysis: Because it focusses on premium corporate bonds with excellent credit ratings, UTI’s Corporate Bond fund has beaten many of its competitors. The fund has been able to sustain consistent returns by choosing carefully among bonds and concentrating on industries like infrastructure and banking.
LIC Pension Fund – Corporate Bonds (C)
- 3-Year CAGR: ~8-10%
- 5-Year CAGR: ~7-9%
- Analysis: The cautious approach of LIC Pension Fund prioritises safety over aggressive returns. This fund makes its principal investments in AAA-rated bonds, which guarantees low investment risk and decent returns.
3. Government Securities (G) Funds
SBI Pension Fund – Government Securities (G)
- 3-Year CAGR: ~8-9%
- 5-Year CAGR: ~7-8%
- Analysis: The government securities program offered by SBI Pension Fund has always produced excellent results. Over the years, consistent returns have been guaranteed by the fund’s strategy of owning long-term government bonds, which profit from stable interest rates. Particularly appealing to investors who are risk cautious is this fund.
HDFC Pension Fund – Government Securities (G)
- 3-Year CAGR: ~7-8%
- 5-Year CAGR: ~6-7%
- Analysis: The G-Sec plan of HDFC Pension Fund has done well because it includes a deliberate allocation towards government bonds with longer maturities. In times of falling interest rates, this strategy has paid off, resulting in capital appreciation and steady returns.
Kotak Pension Fund – Government Securities (G)
- 3-Year CAGR: ~7-8%
- 5-Year CAGR: ~6-7%
- Analysis: Kotak Pension Fund has successfully balanced risk and return by concentrating on a combination of short- and long-term government bonds. Because of this, the fund has been able to consistently generate returns, making it a dependable choice for cautious investors.
Should You Switch to These Top Performers?
Even if historical performance is a crucial feature, you shouldn’t base your decision only on it when selecting an NPS fund. Prior to switching, take into account the following:
- Risk Appetite: Greater profits frequently entail greater risk. Make sure the fund you’ve chosen fits your tolerance for risk.
- Investment Horizon: Take into account how long you will have to wait to retire. You may be able to afford more risk (and maybe larger profits) if you have a lengthy time horizon.
- Diversification: Avoid putting all of your money in one place. It makes sense to spread your investments among several fund managers and asset types.
- Financial Advisor Consultation: Seeking expert guidance is usually a smart idea if you’re not sure whether to make the transition.
Conclusion
Long-term retirement savings may be supported by NPS, and choosing the best fund manager and asset mix is essential to optimizing your results. Given their impressive returns over the last several years, the top-performing NPS funds we’ve covered should definitely be taken into account for your investing portfolio.
But keep in mind that previous success does not guarantee future outcomes, so it’s critical to match your investing plan to your risk tolerance and financial objectives. You may improve your decision-making for a safe financial future by periodically assessing your NPS investments and keeping up with market developments.
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