Things To Know About An Equity Savings Fund

By Author: Anand Srinivasan
Total Articles: 9
Comment this article

Equity Savings Funds are Hybrid Mutual Fund schemes. They are mainly suitable for investors with moderate to high-risk appetites. However, the risk involved in such funds is lower than in other Aggressive Mutual Funds. The primary benefit of investing in an Equity Savings Fund is that it offers low volatility. It also delivers good returns, provided you stick with it. But before opting for this scheme, it is wise to understand its different aspects. This guide should help.

Allocation strategy

This Mutual Fund allocates about 40% to 70% of the portfolio of Equity savings to hedge Equity positions. The objective is to generate arbitrage or risk-free profits. About 10% to 35% of the portfolio invests in fixed income and money market instruments. Here, the goal is to generate significant revenue.

Following this, about 70% to 80% of the portfolio offers low volatility and yields regular income. With time, the active equity allocation garners sufficient capital appreciation for investors.

Suitability

Such a Mutual Fund Investment is suitable for investors who want to invest in Equities but do ...
... not want high risks. It also appeals to those who dislike Equities volatility but want to venture out from investing in traditional savings options. However, note that these funds cannot be considered a substitute for Equity Fund.

Also, the investor’s investment horizon should be more than 12 months, preferably two to three years. Only then can they enjoy significant gains.

Advantages

1. Low volatility and income

The primary benefits are low income and volatility. The risks and returns are directly proportional, which makes it easier for the investor to predict outcomes. For instance, the higher the risk, the higher the investor can earn gains. This guides the investor in making better and more sound investment decisions.

2. Stable and low-risk returns

The arbitrage portion of the portfolio works in favour of the investor. Over time, it provides stable and low-risk returns. It also offers high liquidity and inflation-beating returns through limited equity exposure.

3. Diversification

Unlike a Regular Savings Fund, this type diversifies your portfolio efficiently. It invests in Equity, Debt, and Arbitrage opportunities. This enables you to balance out your market risks strategically. It allows you to dive into equities without bearing the actual risks.

4. Tax efficiency

Equity Savings Funds enjoy equity taxation like Balanced or Hybrid Funds. Long-term capital gains with more than 12 months of holding are tax-free up to Rs. 1 lakh in a financial year. On the other hand, short-term capital gains with less than 12 months of holding are taxed at 15%. Also, dividends paid by these funds are taxable for the investor. The percentage, however, is not too high. Hence, it is a viable investment option for those looking for tax efficiency.

https://invest.dspim.com/mutual-fund-products/hybrid-schemes/mip-fund/dspag-regular-growth

https://invest.dspim.com/mutual-fund-products/equity-schemes

https://www.dspim.com/