Investment schemes

1. Scheme G- Amount under this scheme is invested in government securities
2. Scheme C- Investment made in fixed income instruments other than G-sec
3. Scheme E- Investment in equities
4. Scheme A- Investment in AIFs or alternative investment funds

Auto choice:

 If you wish to have a passive approach in relation to your NPS investment, then auto option is just right for you as in the given option funds are deployed to different asset classes based on the life cycle of the individual investor. Note, that of 4 funds or schemes available, funds in the auto choice are invested only in Scheme G, C and E i.e Scheme A finds no place in the Auto mode.

So, in the younger years, more funds are allocated to equity and towards maturity less of exposure is taken in them and the scheme thus becomes more concentrated around Scheme G instruments. This lessens risk while optimizing returns for the investor. For providing more flexibility to investors, the auto choice provides three options conservative life-cycle approach, moderate life-cycle and aggressive life cycle exposure which vary in the degree of exposure to equity class at various life-stages

Active choice:

Of the 4 investment schemes, investors can choose between the different options together with the proportion for each of them. Currently, a limit has been set forth in respect of investment in Scheme E and Scheme A which is 50% and 5% respectively i.e not over 50% and 5% funds can be deployed towards equity or AIF category.

Also, note that there are 8 pension fund managers currently and investors can choose either one of them. While the asset allocation is allowed to be changed twice a year, investors can switch to a different pension fund manager only once.

Conclusion

So, if you want to better control your investment  in NPS and have the required acumen to do so, you can go with the active option. As else, auto mode will also not falter on return parameter as its based on the basic life-cycle based investing model.