Equity savings funds are open-ended schemes that invests its corpus in equity, arbitrage, debt instruments. These funds are suitable for investors who are looking for short term investment alternatives to debt funds & fixed deposits.
Till Date CAGR
|Sundaram Equity Savings Fund (G)|
|HDFC Equity Savings Fund (G)|
|Mahindra Manulife Equity Savings Dhan Sanchay Yojana fund (G)|
|SBI Equity Savings fund (G)|
|Aditya Birla Sun Life Equity Savings Fund (G)|
|Kotak Equity Savings Fund (G)|
|Axis Equity Saver Fund (G)|
|Edelweiss Equity Savings Fund (G)|
|DSP Equity Savings Fund (G)|
|PGIM India Equity Savings Fund (G)|
|L&T Equity Savings fund (G)|
|ICICI Prudential Equity Savings Fund (G)|
|IDFC Equity Savings Fund (G)|
|Nippon India Equity Savings fund (G)|
|IDBI Equity Savings fund (G)|
|Tata Equity Savings fund (G)|
|Union Equity Savings Fund (G)|
|Franklin India Equity Savings Fund (G)|
|Invesco India Equity Savings Fund (G)|
|UTI Equity Savings Fund (G)|
Equity savings fund is an open-ended mutual fund scheme that invests its assets in equity, arbitrage, debt opportunities. This is a new mutual fund category under the hybrid Mutual Funds that were introduced by SEBI in its mutual fund recategorization in 2017. According to SEBI regulations, the fund should invest a minimum of 65% of assets in equity, and a minimum of 10% in debt securities.
Equity savings funds are considered safer than regular equity mutual funds and more tax efficient than the regular debt funds. This is because of their exposure to both equity and debt securities. Moreover, this helps the fund manager to manage the fund efficiently by switching between asset classes according to the market conditions and sentiments. This will help them contain losses and maintain the risk exposure of the fund at a moderate level.
Also, since the fund invests in arbitrage opportunities, the fund capitalizes on the price fluctuations in the market. The fund’s equity exposure helps in preventing the erosion of the investor’s purchasing power. At the same time, the debt and arbitrage portion help in minimizing the downside market fluctuations.
As the fund majorly invests in equity and arbitrage opportunities, it is much more tax efficient than debt funds if held for more than one year. Hence, returns equity savings fund are taxable like any other equity fund. The short-term capital gains (STCG) are taxable at 15%, and the long term capital gains (LTCG) exceeding INR 1 lakh are taxable at 10%. There is no tax on LTCG below INR 1 lakh.
Equity savings funds are a perfect investment option for conservative investors. These funds also suit investors who are looking for short term investment alternatives to debt mutual funds and fixed deposits.
|Fund Name||5 Years Return|
|SBI Equity Savings fund (G)||7%|
|HDFC Equity Savings Fund (G)||7.2%|
|ICICI Prudential Equity Savings Fund (G)||6.9%|
|Mirae Asset Equity Savings Fund (G)||10.3%|
|Axis Equity Saver Fund (G)||7.5%|
Equity saving scheme is a hybrid mutual fund scheme that invests at least 65% of its assets in equity and 10% of its assets in debt securities. According to SEBI regulations, the fund can invest in equity and equity related instruments, debt securities, and arbitrage opportunities using hedging strategies.
The fund has exposure to equity and debt securities, making it a diversified fund and hence spreading the risk to more than one asset class. Moreover, the fund invests in arbitrage opportunities making it easier for the fund managers to switch between asset classes according to market sentiments. This will enable fund managers to manage the risk in an efficient manner.
Equity saving schemes can also invest in using hedged and unhedged strategies. The fund actively uses derivative strategies to manage the risk by investing through hedged strategies. At the same time, the fund also increases its return by investing in unhedged strategies.
The fund offers better returns than fixed deposits in the short term as it invests in arbitrage opportunities. And the fund is tax efficient as the fund majorly invests in equities and follows the equity taxation rules.
Following are certain factors that one should consider before investing in Equity Savings fund:
The quality of the fund’s portfolio plays an important role in the performance. Following are some factors that need to be considered while understanding the portfolio:
The reputation of the fund house and the fund manager’s experience also plays an important role while choosing a fund to invest. The fund manager should have good industry and fund management experience. However, experience doesn’t just mean the number of years in the work. It also means that the funds they have managed in the past have been consistently performing well.
The decisions a fund manager takes plays an important role in the fund’s ability to generate significant returns. Therefore, the decisions that the manager takes should be backed by thorough mutual fund research and analysis.
A fund house’s reputation is also important while choosing a fund to invest. The fund house should ideally be performing consistently across all the funds they offer. A fund house with schemes that perform well indicates the efficiency of their investment process and risk management techniques.
Equity savings mutual funds best suit investors looking for equity exposure for a short term investment horizon. The ideal investment horizon for these funds is around 24-30 months. These funds have exposure to debt and arbitrage opportunities as well and hence making them less risky than pure equity funds. However, they come with an advantage of better returns than pure debt funds due to their equity exposure. Hence investors with low understanding of risk who want equity exposure can also invest in these funds.
Equity Savings Mutual Funds are a perfect substitute to fixed deposits as they offer higher returns with somewhat similar risk. Moreover, these funds are tax efficient than debt funds. These funds are taxed like other equity funds where the long term is any period after one year. Hence the tax rate for these funds is lower than debt funds. Hence investors looking for lower tax liability can invest in these funds.
Investors who are worried about market volatility can invest in these funds. Additionally, investors who want to venture out from the conventional savings options like FDs and RDs can consider investing in an equity savings fund. However, it is important to note that mutual fund investments are subject to market risk. Hence, one should carefully align their investment objectives to their investment choices.