Picking Asset Allocation for Your NPS Investments

Personal Finance

Do you not long for a retirement that is free of financial worries? Yes, of course, you do. You may pave the way by formulating a high-risk approach to investing. In this situation, the national pension scheme is a popular investment choice. This strategy optimises your assets over time. It protects them from market volatility. It helps them grow so you can have a secure retirement fund.

It helps people have a safe and secure future. Also, it eases the mental burden on people.

What is NPS?

The National Pension Scheme is an investment plan and retirement savings programme. The government of India came up with this. It was to provide financial security for its senior citizens. It is vital to have measures like these that will help people.

As a result of this strategy, your earnings will mirror the stock market’s earnings. It offers valuable tax benefits and a range of investment terms to suit your needs. This programme will help you in retirement by providing a regular pension check. It also gives you a large chunk of money to use in any way you see appropriate. This helps the elderly have a stress-free life. Old age does not bother them much then.

Understanding the Varieties of NPS Assets

Regular contributions to an NPS scheme over time allow the money to grow over a wide range. Besides, you may decide what share of your portfolio to put into various asset classes. It is so you can get the best possible returns. See below for a rundown of the many investment options.


The majority of people put their money into stocks and shares. It is because they have the potential to provide high rates of return over the long term. To do this, you buy stocks and other instruments linked to the equity market.

Government Securities

It is the safest investment option. Government bonds provide poor returns and little liquidity. Here, you would put your money into government-issued bonds.

Corporate Debt

The vast bulk of the money in this category will be in bonds issued by large infrastructure firms. It may also be in government agencies and other enterprises.

Different Types of Investment Funds

There are some sectors that get more money. Real Estate, infrastructure, mortgage-backed securities get the money. Let us learn more about it in detail through this blog.

Distribution of Your NPS’s Assets

There are several types of assets, each with pros and cons. For this reason, deciding how you distribute your national pension scheme assets may take time. We’ve included recommendations on distributing your NPS scheme investments’ assets for convenience.

For your national pension scheme asset allocation strategy, you may choose either the active or automatic route.

Auto Asset Allocation

As the name implies, this method uses a computer-generated approach to allocating assets. Your fund’s asset allocation and investment strategy will evolve. This will be according to the choice as you approach retirement age. To safeguard savings from short-term fluctuations, the asset allocation shifts as retirement nears. Young people often have access to investments more focused on long-term growth.

Aggressive Life Cycle Fund

As a member of the Aggressive Life Cycle Fund, 75% of your savings are for stocks. It is also for other equity instruments until you reach age 35.

The remaining of your NPS scheme stock allocation investment is in corporate debt. It is also in government securities.

Both future contributions and existing fund assets will scatter in this manner. The first 75% equity allocation allows you to chase high market returns. After the collection of the money, the investment is in riskier asset classes to safeguard it from market fluctuations.

Investing in a Low-Life Cycle Fund

The Moderate Life Cycle Fund will invest up to half of your money in stocks and bonds until you reach age 35.

Every year, 2% of your national pension scheme stock allocation moves into the lower-risk category. The design of the fund is so that you may reap the benefits of both stable growth and security for your holdings.

A wise investment in the life cycle

This distribution of funds is the safest because of how the structure and design. Only 25% of your portfolio will is invested in equities until you reach age 35. Every year, 1% of your national pension scheme stock allocation rebalances away from stocks. It goes towards other fixed-income investments, including corporate debt and government securities. If you have a low-risk tolerance and want to play it safe with your money rather than try to grow it, this is your path.

Active asset allocation

This is your best bet if you want to make all the asset allocation decisions yourself. But it does come with certain boundaries. It will allow you to become as precise as you’d like.

  • You can only invest 75% of your money in equities until age 50.
  • The greatest exposure limit of your national pension scheme stock allocation will drop by 2.5% per year beginning at age 51.
  • You may put up to 5% of your portfolio into non-traditional investment vehicles.

During the end of your work, the short-term volatility of your NPS investment falls. It is by adhering to the limits inherent to active asset allocation.


NPS ensures good retirement for people. Your choice about risk and reward will determine the asset allocation that you go with. These preferences will depend on your financial goals. To know more of the scheme, you may consult with an expert at Piramal Housing Finance. Give your finance knowledge a good boost by reading blogs and articles.