I am investing in large-cap funds and NPS tier-1. Ought to I transfer all of it to NPS tier-1?

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I’m investing in a number of actively-managed large-cap funds and in addition in NPS Tier-I for my retirement corpus. I discover their returns to be virtually related. Ought to I transfer all my cash to NPS Tier-I (75:25) solely?
– Ramesh

I might counsel you retain a good mixture of each mutual funds in addition to NPS within the portfolio. In fact, NPS is an effective product and its extremelylow value is considered one of its benefits but it surely comes with sure restrictions. It’s pretty illiquid until the time the investor turns 60. There are particular circumstances below which NPS supplies liquidity within the interim but it surely comes with numerous situations. In order I mentioned, for all sensible functions, one has to imagine the NPS allocation in his portfolio to be illiquid until the time one attains the age of 60.

Even on the age of 60 when one redeems from NPS, a minimum of 40 per cent of the corpus needs to be essentially used to put money into an annuity product. In order that provides one other restriction to what you are able to do together with your accumulation in NPS.

In distinction to that, mutual funds don’t include any such restrictions. They supply superior liquidity and in addition there aren’t any situations on the way in which it’s essential to utilise the redemption proceeds or the buildup. So I might counsel that you simply maintain a good mixture of each in your portfolio. To decrease the fee, since you’re anyway investing in large-cap funds, you can begin investing in index funds as an alternative of activelymanaged funds and that might decrease the fee even on the mutual fund aspect.

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