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NPS vs Mutual Funds vs Bank FDs: Where should women invest?


Abhishek Banerjee, Founder & CEO, Lotusdew

Women have a variety of investment alternatives open to them, including the National Pension Trust, mutual funds, and fixed deposits. Each of these investment alternatives has its own set of benefits and drawbacks. The NPS is a voluntary defined contribution retirement plan administered by Pension Fund Regulatory and Development Authority (PFRDA). The investments are pooled into a fund managed by PFRDA-approved professional investors. Anyone can swap from one investment choice to another in this pool, which may have cheaper costs. Nonetheless, regulatory constraints must be considered.

Mutual funds, on the other hand, offer ordinary investors access to debt, stock, foreign equity, gold, and other asset classes. They offer daily liquidity and tax advantages in contrast to PMS. However, the selection of mutual funds is critical, and it is necessary to reduce the number of funds to two or three. Fixed deposits are assured income and are subject to the highest tax rate. Hence, it is prudent to put only a portion of the funds in fixed deposits, and the remainder should be placed in low-risk investments with greater predicted returns.

In conclusion, the selection of investment options should be influenced by a variety of factors, including risk tolerance, financial objectives, and investment horizon. Depending on their financial objectives and risk tolerance, NPS, mutual funds, and term deposits can all be excellent investment options for women. Before making any investment decisions, it is crucial to consult a financial counsellor.

Himani Chaudhary – Finfluencer

All are good investment options and it doesn’t matter what the gender is, investment should be done as per the risk-adjusted benefits it provides to the individual so that they can achieve their financial goals. NPS is a retirement investment product and it provides access to diverse asset classes like Equity, Corporate Bonds, Government Debt securities and alternative investments. 

It has an avg return of 8-10%. But 40% of the corpus will be received as annuity ie. as regular payments per month after retirement. So it’s a must-have investment for retirement planning as your returns are market linked but still relatively safer and will provide regular income as a pension. However, if you want to invest for a house, children’s education or something else then NPS as an investment tool won’t work. 

Mutual Funds and FDs are two sides of a coin, one provides growth by investing for the long term in the stock market. And another provides a fixed return every year with practically no risk till 5 Lacs. However, there are debt mutual funds as well which invest in safe government securities with an avg return of 7-9% and have better taxation policy because it lets you adjust the return from inflation which Bank FDs do not allow. So for women, it’s better to invest in NPS for retirement, Equity Mutual Funds for other long-term financial goals and debt mutual funds for fixed income and shorter-tenor goals.

Gautam Kalia, SVP and Head Super Investor at Sharekhan by BNP Paribas

The investor having National Pension System (NPS) Tier I account can invest in equity, debt and government securities. The auto choice option allocates between equity and debt automatically as per the age of the investor. Mutual funds have multiple options to invest in across equity and debt. Investors should select Mutual fund schemes basis the risk-o-meter. Bank FDs provide the lowest risk while NPS and Mutual Funds carry market risks. NPS and ELSS (Mutual Funds) provide tax benefits as well.

Ashish Misra, Chief Operating Officer – Retail Banking at Fincare SFB

When it comes to investment decisions, it is crucial for women to consider their unique financial goals, risk appetite, and personal circumstances. The National Pension System (NPS) can be a viable option for women who wish to plan their retirement, while mutual funds may offer the potential for higher returns at a higher risk. For those who prioritize capital preservation, bank fixed deposits (FDs) can provide a low-risk investment option. Empowering women to make informed investment decisions is crucial, and seeking the guidance of a financial advisor can be a valuable step in this process.

Lovaii Navlakhi, Board Member- ARIA (Association of Registered Investment Advisers)

National Pension Scheme (NPS) is a Central Government scheme in which any individual citizen (either salaried or non-salaried) of India (both resident and non-resident) between the ages of 18 and 70 can participate and set aside an amount on a regular basis.

When the investor retires, he or she has the option of withdrawing upto 60% funds as lump sum while the rest can be used as an annuity plan for regular flow of income. There are standard deductions under Section 80C and 80CCD in a fiscal year if invested in NPS.

A mutual fund is an investment fund that is professionally managed. It invests the collected corpus in the best way possible to maximise returns and meet investment goals. When investing in mutual funds, it is important to ensure that the fund’s investment objective matches an individual’s risk tolerance level and investment horizon/goals.

Saving money with Fixed Deposits (FDs) is a great idea for both short-term and long-term needs. Since your returns are predetermined and unaffected by market fluctuations, they face little to no risk. NPS is a pension scheme designed to provide financial security after retirement. It needs to be considered for someone who wants to plan for retirement and has a lower risk tolerance level.

NPS, FDs and mutual funds provide excellent opportunities to grow your money intelligently. Mutual funds are ideal if you don’t mind taking on a little extra risk. NPS, on the other hand, is the best option if you want consistent growth without significant capital appreciation. FDs are interest-generating instruments that are also risk-free.

All these investment categories should be treated independently as it serves different parameters and are curated for specific needs.

Jaslene Bawa, Faculty of Finance at FLAME University

There is no ‘one size fits all’ solution in investments. Working women should invest in a mix of National Pension Scheme (NPS), Mutual Funds and Bank Fixed Deposits (FDs) based on their financial goals. The investment can be chosen based on their financial goals, risk-taking ability, amount available for investment, the expected returns and the mix of equity or debt.

If one is risk-taking and aims to build wealth, one could invest in a mix of large-cap, mid-cap and small-cap equity mutual fund schemes. These schemes are specifically oriented at creating wealth and carry high risk and returns.

If one wishes to opt for tax-saving on Rs. 200,000, one can choose saving Rs. 150,000 in a tax-saving fixed-deposit with a lock-in period for 5 years but interest earned is taxable. NPS is another option where tax-free investment is allowed up to Rs. 150,000 under Section 80CCD (1) and an additional Rs. 50,000 under Section 80CCD(2) (1B). The gains on maturity are tax-free if at least 40% of the returns are invested in the NPS annuity plan but withdrawals are restricted. If one is able to take risk, one can opt for Equity Linked Saving Scheme (ELSS) offered by mutual fund houses where one can invest Rs. 150,000 based on their risk profile but it has a lock-in for 3 years and receives a tax rebate under 80C.

Each investment option such as FD, NPS and mutual funds are suitable to the individual woman’s financial goals, risk-taking appetite and expected returns.

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