Investors who allocated a small portion of their corpus to equity funds have also earned good returns. Admittedly, the short-term picture is not very attractive, with insipid returns in the past 6-12 months. But the mediumand longterm returns are fairly attractive. The best performing fund ICICI Prudential Pension Fund has given double-digit returns. It is interesting to note that the 3-year and 5-year SIP returns of all the pension funds are in double digits as well. But this is largely due to the rally in bond prices in the past one year.

Including 15-20% equity in your retirement portfolio is a sound strategy because financial advisers say that an ultra-safe portfolio won't be able to beat inflation in the very long-term. NPS funds for government employees also follow a conservative allocation, with a 15% cap on equity exposure. These funds have also done fairly well, beating the 100% debt-based EPF by almost 100-125 percentage points in the past five years. Debt-oriented hybrid mutual funds, also known as monthly income plans or MIPs, have given similar returns during this period.

However, younger investors (below 35) will be making a mistake if they play too safe. They can afford to have a larger portion of their NPS corpus in equity funds. Though in the long term equities can potentially give superior returns than debt, this must take into account the risk profile of the individual and his ability to realign the portfolio in case the scenario changes

Also, it is not correct to assume that bond funds won't lose money. If interest rates go up, the NAVs of gilt funds holding long term bonds will slip. Long-term bonds will induce volatility in the portfolio. This will matter when an investor wants to exit