According to Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors since NPS is used for a long-term goal like retirement, allowing younger investors to have higher exposure to equities will give them a chance to earn higher returns. It will enable their NPS portfolio returns to beat inflation meaningfully. The higher interim volatility, according to him, does not matter since investors are unlikely to withdraw the money before 60 and hence suffer a loss. According to Tarun Birani, founder and chief executive officer, TBNG Capital Advisors, “Equities are the only asset class that can generate higher returns if held for a long period of time.
Considering the voluntary nature of the scheme, a more liberal allocation may attract more subscribers to it.” Experts suggest that as soon as the new norm is implemented, younger investors who have gone for the active choice option should consider hiking their equity allocation to 75 per cent. However, they should look at their overall portfolio asset allocation (including mutual funds, direct equity investments, etc) and ensure that hiking equity allocation in NPS will not make their overall portfolio too risky.