Key Points
The auto choice option, which I like to refer to as the fill it, shut it, forget it option, is ideally suited for a large number of investors in India who do not want to get involved in the asset allocation decision..
Under the active choice option, as the name suggests, the investor has the option to actively manage their asset allocation across the three asset classes that are available under this scheme, which is equity, which is signified as E, corporate bonds, which is signified by C and government security, which is referred to as G. So, under E, C and G, as an active choice investor, you can have whatever combination that you choose, irrespective of the age at which you are..
There are three types of auto choice options, that is the moderate, conservative, where 25% equity allocation happens to equity and 75% to corporate bonds and government securities, moderate where 50% gets allocated to equity and 50% to corporate bonds and government securities and aggressive where 75% gets allocated to equities and the remaining 25% gets allocated to corporate bonds and government securities...
Now, the beauty of that is this is the allocation at the time of getting in from the age of 35 till the age of 55, which means for those 20 year period, what this product does for you, what the auto choice option does for you, if you take the aggressive auto choice option, where 75% allocation is in equity, on every birth date after 35 years, the allocation to equity will get pared down..
So, it is a reducing allocation to equity as you progress from the age of 35 to 55, which means that the risk of the investor is being automatically managed by the product without any intervention from the investor, which means that it automatically rebalances your portfolio in such a manner that at the age of 55, under the aggressive option, 15% allocation is what is left in equity at the age of 50, which means that as you get closer to your retirement age, your allocation to a riskier product, which is in this case equity, is pared down significantly...
