Tipping Point: Should you allocate more to corporate, govt bond schemes?

Last year, tier one corporate bond schemes and government bond schemes of the National Pension System (NPS) outperformed equity schemes.

While equity schemes (E) fetched an average return of 9.9 per cent, government bond schemes (average 14.8 per cent) and corporate bond schemes (14.1 per cent) fared much better. 

If you are tempted to increase your allocation to schemes C and G based on past year’s returns, avoid doing so. 

Those returns were the result of conditions that prevailed last year, when only select large-cap stocks did well. Schemes C and G did well because interest rates came down. 

Those conditions may not get repeated this year. Your asset allocation within NPS should be a function of the number of years you have left for retirement and your risk appetite. Do not change it on the basis of last year’s performance.