NPS Mutual Fund Regime: 4 Investment Options to Fight Long-Term Inflation

Portfolio Management: The basic motto of long-term investing is to create a fund for a long-term goal like a child’s marriage, financial needs after retirement, etc. However, to achieve one’s long-term investment objective, one must beat the growth of inflation during the investment period.

According to tax and investment experts, one can assume an annual average inflation rate of around 6-7% and choose investment options that can yield more than 7% in the long term.

Listing investment options that can return more than 7% and beat inflation, the experts said stocks or a combination of debt and stocks should be chosen before other tools because they can easily beat growth. inflation of 7%.

Pankaj Mathpal, MD and CEO of Optima Money Mangers, explains why stocks should be chosen over other investment tools to beat inflation growth: “A long-term investor who has a longer time horizon 10 year old should opt for exposure to equities, be it direct stocks or mutual funds, but one should opt for equities as they would yield at least 12-15% return over the long term. term.”

On the average inflation that can be assumed while investing for the long term, Jitendra Solanki, a SEBI-registered tax and investment expert, said, “One can assume an average inflation growth of nearly 6 to 7% per year. However, for education inflation, it should be kept at around 10% per year”

Here we list investment options suggested by tax and investment experts:

1]Direct exchange: “To beat inflation, an investor with a high risk appetite can turn to direct investment in the stock market as it would yield 12-15% CAGR in the long term. However, one must be knowledgeable about investing stock market while opting for direct investment stock markets A knowledgeable stock market investor can expect a return on investment of 12-15% over the long term, so this option should be opted for if the objective investment is tied to a long-term goal related to education,” said Pankaj Mathpal.

2]FCP shares: “Those who are willing to take risks but don’t have much idea about stock market investments, they are advised to opt for equity mutual funds because the fund managers would manage their money for them In fact, some fund managers generate an alpha return that easily beats the return of the key benchmark index, so the long-term investment objective can be achieved here, because equity mutual funds yield the minus 12% in the long term,” said Jitendra Solanki.

3]NPS scheme: Investors who want to take limited risks and beat the growth of inflation, they are advised to opt for the National Pension System ((NPS) scheme. In this scheme, an investor has a mixed exposure to equities and to debt where an investor can choose an equity exposure of up to 75 percent.

Advising NPS account holders to maintain equity and debt exposure at a ratio of 50:50, Kartik Jhaveri, Director – Investments at Transcend Capital, said: “NPS account holders are advised to choose exposure to debt stocks in a ratio of 50:50. In this case, the long-term equity exposure would yield a return of 12% and the debt would yield a return of 8%. Thus, the overall net return on their investment NPS would be around 10% (6+4), which would easily beat inflation.” He said that here in the NPS scheme, one could claim an income tax exemption on the annual investment until 2 lakh in one exercise as well.

4]ULIP: In the long term, one can expect a better return from the ULIP (Unit Linked Investment Plan) because it allows an investor to choose up to 100% equity exposure. Thus, to fight inflation, one can also choose ULIP.

Speaking on the return that can be expected from a long-term ULIP plan, Pankaj Mathpal said, “Like NPS, ULIP is also a mixture of debt and equity. An investor here can opt for exposure up to 100 in equities. But to strike a balance, one can choose 50-60% exposure in equities and the rest in debt and can expect a double-digit return in the long run.”

Disclaimer: The opinions and recommendations made above are those of individual experts or personal finance companies, and not of Mint.

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