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NPS Account VS. Mutual Funds

Updated On Jan 28, 2022

NPS is a sort of investment in which working people may lock in their savings for a secure retirement. Mutual Funds, on the other hand, are open-ended, professionally managed investment vehicles that pool money from many participants in order to acquire assets. However, both are market-linked investment programmes.
Both the National Pension System and Mutual Assets allow investors to pool their funds at specified, regular periods (if you opt to invest via SIP) over the long term. It should be noted that many investors conflate SIPs with mutual funds and use the terms interchangeably. SIPs (Systematic Investment Plans) are a type of mutual fund investment (that are an investment option for investors). To find out the difference between NPS Account & Mutual Funds, read on.

NPS Account VS. Mutual Funds

About NPS

This pension scheme is offered to employees in the public, private, and even unorganised sectors, with the exclusion of military personnel. As part of the system, employees are urged to pay into a pension account at set intervals throughout their employment. Subscribers can access a portion of the fund once they retire. If you have an NPS account, the leftover monies will be given to you monthly as a pension. Previously, the NPS plan only extended to federal government employees. The PFRDA has already made it available to all Indians on a voluntary basis.
Anyone who operates in the private sector and needs a regular pension after retirement would benefit greatly from the NPS programme. Because of tax breaks under Sections 80C and 80CCD, the programme is transportable between occupations and locations.

Why Should People Invest In NPS?

The National Pension Scheme (NPS) is a pension plan designed to provide financial security after retirement. It is a superior investment opportunity for an individual who wants to plan for retirement and has a low risk tolerance level. It also provides the added benefit of a tax deduction of up to Rs 2 lakh under Section 80C and Section 80CCD. The National Pension System (NPS) invests a proportion of its assets in equities. This component of the stock portfolio is vulnerable to market volatility, risks, and returns. As a result, the investment choice must be chosen based on the investor's investment aim, cost of living and earnings, and level of risk tolerance.

About Mutual Funds

There are several myths about mutual funds and their application. People are sceptical of mutual funds because of the financial dangers they entail. A mutual fund pools money from many sources and invests it in various securities.
They benefit new or individual investors by allowing their assets to be properly handled at a cheap cost. The entire amount can be divided into multiple groups based on the kind of security, investment aim, and desired return.

Why Should People Invest In Mutual Funds?

Following are the reasons for people to invest in mutual funds -
1. Expert money management provided by a team of specialists who actively and constantly strive to maximise development potential for its investors. Asset management firms charge an expense ratio in return for such services. This varies from mutual fund to mutual fund.
2. Mutual funds offer portfolios that are diverse in terms of equity, debt, market size, sectors, and industries.
It is a low-cost investment that provides professional management, flexibility, and diversity. The price payable ranges between 0.50 and 1.50 percent.
3. You may cash out your investments at any moment, with no lock-in period. However, if you have deposited in an ELSS, you are subject to a three-year lock-in term. Furthermore, while investing in equities mutual funds, it is usually best to set a long-term goal.


In the world of investing, one standard does not suit all. Everyone has various goals, aspirations, and financial resources. Equity mutual funds are a wiser alternative for capital growth. If you want to build a retirement corpus through consistent investments over time, NPS is the way to go. You should exercise caution when making these judgments, and you should conduct extensive research before going into any scam.

You may also like: Understand Why Retirement Planning Is Important

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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