Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now

Wednesday, December 9, 2015

NPS - Help to Retire

 

Investing in gold and real estate won't help you build a substantial corpus for retirement.
 
We are a country of savers, with the average Indian putting away nearly a quarter of what he earns. But are we also saving it right? Household savings in India are skewed towards physical assets like real estate and gold. Such is the lure of owning property and the yellow metal that these constitute nearly 64% of all household investments.

Physical assets offer poor returns and low liquidity. Gold has been in a downtrend for two to three years now. Housing prices, though volatile, are also moving at a sluggish pace. According to the RBI, the year-on-year growth in residential property prices shot up to nearly 28% in JanuaryMarch 2013, but has now settled at 4%. Likewise, the CPI housing rental index has moderated from nearly 15% in April-June 2011 to around 5% now.

What does this mean for investors?

Leaning too much on physical assets can rob them of a comfortable retirement because their savings may not be able to match inflation. Also, the challenge in current financial investment ave nues for retiral savings is that the investment objectives are very different. Most retirement options (PF, PPF, etc) are predominantly invested in low-yield debt instruments. While inflation has averaged 10% over the past five years, the real return on the formal pension assets has hardly been positive.

Contrast this with the global pension experience, where a significant chunk of pension assets is invested in equities. According to a study by the OECD, the pension assets in 24 countries had a real return of over 2% between 2008 and 2013. Unfortunately, India was not among them. The weighted average allocation to equities of these pension funds was 40.3%.

The impact is evident in the net replacement ratio (NRR) in these countries. The NRR is the individual net pension entitlement divided by net pre-retirement earnings. If your last drawn salary was `1 lakh and your pension is `80,000, the NRR would be 80%.A 200 basis point difference in the rate of return over a 30-year period of saving would lead to a difference of 8-12% in the NRR.

It is good that Indians now have access to a pension system that has all the right features. The NPS allows greater allocation to equities, discourages premature withdrawals and offers greater transparency and flexibility. It also has an evolving investment governance framework and oversight mechanism. The NPS can fix a lot of problems for tomorrow's retirees. But they need to act today, not 20 years later, when it may be too late.

Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. IDFC Tax Advantage (ELSS) Fund

4. ICICI Prudential Long Term Equity Fund

5. Religare Tax Plan

6. Franklin India TaxShield

7. DSP BlackRock Tax Saver Fund

8. Birla Sun Life Tax Relief 96

9. Reliance Tax Saver (ELSS) Fund

10. HDFC TaxSaver

Invest Rs 1,50,000 and Save Tax under Section 80C. Get Good Returns by Investing in ELSS Mutual Funds Online

Invest in Tax Saver Mutual Funds Online

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

---------------------------------------------

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300

Post a Comment
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now
Related Posts Plugin for WordPress, Blogger...

Popular Posts

Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now