NPS Vs Mutual Fund Vs Bank FD: Where Should Women Invest?

Abhishek Banerjee, Founder & CEO, LotusStudy

Women have a variety of investment options open to them, including National Pension Trust, Mutual Funds and Fixed Deposits. Each of these investment options has its own benefits and drawbacks. NPS is a voluntary defined contribution retirement scheme administered by the Pension Fund Regulatory and Development Authority (PFRDA). Investments are made in funds managed by professional investors approved by PFRDA. One can swap from one investment option to another in this pool, which may cost less. Nonetheless, regulatory constraints must be considered.

On the other hand, mutual funds provide general investors access to debt, stocks, foreign equity, gold and other asset classes. They provide daily liquidity and tax benefits unlike PMS. However, the selection of mutual funds is important, and narrowing down the number of funds to two or three is essential. Fixed deposits are assured income and are subject to the highest tax rate. Therefore, it is wise to keep only a portion of the funds in fixed deposits, and the rest in low-risk investments with more predictable returns.

Ultimately, 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 fixed deposits can all be excellent investment options for women. Before making any investment decision, it is important to consult a financial advisor.

Himani Chowdhary – Fininfluencer

All are good investment options and no matter what the gender, investments should be made according to the risk-adjusted returns offered to the individual so that they can achieve their financial goals. NPS is a retirement investment product and provides access to diverse asset classes such as equity, corporate bonds, government debt securities and alternative investments.

It has an average return of 8-10 per cent. But 40% of the corpus will be received as annuity ie. As regular payment per month after retirement. Hence it is a must-have investment for retirement planning as your returns are market linked yet relatively safe and will provide regular income in the form of pension. However, if you want to invest for home, children’s education or anything else then NPS will not work as an investment vehicle.

Mutual funds and FDs are two sides of a coin, one provides growth by investing in the stock market for the long term. And the second one offers a fixed return up to 5 lakhs every year with practically no risk. However, there are also debt mutual funds which invest in safe government securities with an average return of 7-9% and have a better taxation policy as it lets you adjust the returns to inflation which bank FDs do not allow. So for women, it is better to invest in NPS for retirement, equity mutual funds for other long term financial goals and debt mutual funds for fixed income and short term goals.

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

An investor having a National Pension System (NPS) Tier I account can invest in equity, debt and government securities. The Auto Choice option automatically allocates between equity and debt as per the age of the investor. Mutual funds have many options to invest in equity and debt. Investors should choose mutual fund schemes on the basis of risk-o-meter. Bank FDs offer the lowest risk while NPS and mutual funds carry market risk. NPS and ELSS (Mutual Funds) also offer tax benefits.

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

When it comes to investment decisions, it is important 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 want to plan for their retirement, while mutual funds can offer the potential for higher returns at 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 important, and the guidance of a financial advisor can be an important step in this process.

Lowai Navlakhi, Board Member – ARIA (Association of Registered Investment Advisors)

National Pension Scheme (NPS) is a Central Government scheme in which any citizen of India (either salaried or non-salaried) (both resident and non-resident) between the age of 18 to 70 years can participate and set an amount Could Regular basis.

When the investor retires, he has the option of withdrawing up to 60% as a lump sum amount, while the rest can be used as an annuity plan for a regular flow of income. Investment in NPS is eligible for standard deduction under section 80C and 80CCD in a financial year.

A mutual fund is an investment fund that is professionally managed. It invests the accumulated corpus in the best way to maximize returns and meet investment goals. While investing in Mutual Funds, it is important to ensure that the investment objective of the fund matches the risk tolerance level and investment horizon/goals of an individual.

Saving money through Fixed Deposit (FD) is a good idea for both short-term and long-term needs. Since your returns are pre-determined and unaffected by market fluctuations, they carry little or 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 low risk tolerance level.

NPS, FD and Mutual Funds provide excellent opportunities to grow your money wisely. Mutual funds are ideal if you don’t mind taking a little extra risk. On the other hand, NPS is the best option if you want steady growth without significant capital appreciation. FDs are interest generating instruments which are also risk free.

All these investment categories should be considered independently as they meet different parameters and are curated for specific needs.

Jasleen Bawa, Faculty of Finance, Flame University

There is no ‘one size fits all’ solution in investing. Working women should invest in a mix of National Pension Scheme (NPS), mutual funds and bank fixed deposits (FDs) depending on their financial goals. Investments can be selected based on their financial goals, risk appetite, amount available for investment, expected returns and a mix of equity or debt.

If one is risk averse and wants to build wealth, he can invest in a mix of large-cap, mid-cap and small-cap equity mutual fund schemes. These schemes are exclusively focused on wealth creation and offer high risk and returns.

If one wants to opt for tax-saving option on Rs. 200,000, one can choose to save Rs. 150,000 in a tax-saving fixed deposit with a lock-in period of 5 years but the 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). If at least 40% of the returns are invested in an NPS annuity plan, but withdrawals are restricted, the gains on maturity are tax-free. If one is able to take the risk, he/she can opt for Equity Linked Savings Scheme (ELSS) offered by mutual fund houses, where one can invest Rs. 150,000 depending on their risk profile but it has a lock-in of 3 years and gets tax exemption under 80C.

Each investment option like FD, NPS and mutual funds is suitable for a woman’s individual financial goals, risk appetite and expected returns.