There are so many financial instruments available in the market to make an investment. However, fixed deposit (FD) and National Pension Scheme (NPS) are the most reliable investment options among them. Both have their own advantages.
Here are the details about both the instruments. Investors can compare the features and advantages of each instrument before investing their funds.
NPS (National Pension System)
The National Pension Scheme (NPS) is a voluntary contribution system to make an investment. NPS allows you to make investment in two types of accounts – Tier 1 and Tier 2 accounts. Both the accounts have their own advantages and benefits. NPS is the investment used by the investors to build a retirement corpus.
There are specifically four types of asset classes available under the NPS scheme that an investor can choose from. The asset classes are as follows:
- Class G: Government Bonds
- Class E: Equities
- Class C: Corporate Funds
- Class A: For Real Estate Investments Trust (REIT), Commercial Mortgage-Backed Securities and Alternative Investment Funds (AIFs)
Features and Benefits of NPS
Flexible in Nature
The National Pension System is the flexible option where investors can choose the asset class and the amount to invest in. There are two ways to invest in it –
- Auto choice – it is the default option for the investors who find it tough to decide on investments therefore a fund manager manages their investments.
- Active choice – it is for the investors who want to take control of their investments and select the asset classes in which their funds get invested.
The tax advantage is the most attractive feature of the NPS scheme. Investors can get deductions under Section 80C of the income tax, 1961 up to Rs 2 lakh every financial year.
NPS is the scheme linked to the market. Therefore the returns on the NPS will eventually depend on the performance of the asset that an investor chooses to invest funds in.
Bajaj Finance Fixed Deposit
A fixed deposit is the investment scheme available with banks and non-banking financing companies (NBFCs). FDs are well-known for the fixed rate of returns on the principal amount irrespective of market conditions. NBFC FDs like Bajaj Finance FD are called corporate FDs/company FDs offer a higher rate of returns as compared to the returns on banks FDS. Bajaj Finance fixed deposit is popular for its lucrative interest rates that have been increased recently.
NBFC fixed deposit is the best investment option that comes with low-risk and stable returns. Bajaj Finance provides an online FD return calculator that helps an investor to get an insight into the return on investments and the amount he/she should invest to meet the financial goal.
Comparison between NPS and Bajaj Finance Fixed Deposits
Before deciding on any investment avenue, it is always a good idea to compare with the next best alternative. Here, the next best alternative to the NPS scheme is nothing but Fixed Deposits. Let us compare the NPS scheme and Bajaj Finance Fixed Deposit schemes.
The main purpose to invest in the NPS scheme is to accumulate funds for the post-retirement period whereas a fixed deposit helps investors to generate funds for short-term as well as long-term financial goals.
The NPS investors can exit only after the period of 10 years whereas in the case of the Bajaj Finance fixed deposit one can opt for the flexible tenor ranging from 12 months to 60 months.
The NPS investment returns depend on the market conditions as they are market-linked securities whereas the fixed deposit schemes are free from market risk and fluctuations.
The rate of returns from NPS depends on the asset classes in which the investor has made investments whereas with the Bajaj Finance fixed deposit one can expect fixed returns up to 6.75%
Both the options, NPS and fixed deposits are lucrative and growth-oriented. The investment in any one of them is the complete choice of an investor. However, an investor may consider the goals and his/her respective risk appetite before making any final decision.
Gaurav khanna is an experienced tech enthusiast, digital marketer and blogger who is well known for his ability to predict market trends. Check out his blog at HighlightStory.