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Equity Savings Funds are a type of mutual fund that offers a diversified approach to investing by combining equity, debt, and arbitrage strategies. These funds aim to provide capital appreciation while managing risk, Read more..making them suitable for investors seeking moderate growth with lower volatility. By investing in multiple asset classes, equity savings funds attempt to balance market fluctuations and generate returns across different economic conditions.
These funds allocate their assets across equities for growth, debt instruments for stability, and arbitrage strategies to take advantage of price differences in different markets. The combination of these three components helps in reducing overall portfolio risk while still offering the potential for reasonable returns. Equity Savings Funds are generally considered to be a middle-ground investment, appealing to investors who do not want to take high equity exposure but still want to benefit from market movements. Read less
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Name
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AUM
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1Y Returns
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|
|---|---|---|---|
ICICI Pru Equity Savings Fund - Reg (IDCW-Q) - Reinvestment Hybrid|Equity Savings Buy |
₹13046.46 cr. | 8.99% | |
|
ICICI Pru Equity Savings Fund - Reg (G) Hybrid|Equity Savings Buy |
₹13046.46 cr. | 8.99% | |
|
ICICI Pru Equity Savings Fund - Reg (IDCW-Q) Hybrid|Equity Savings Buy |
₹13046.46 cr. | 8.99% | |
|
Tata Equity Saving Fund - (IDCW-M) - Reinvestment Hybrid|Equity Savings Buy |
₹261.73 cr. | 7.79% | |
|
Aditya Birla SL Equity Savings Fund (IDCW) - Payout Hybrid|Equity Savings Buy |
₹629.34 cr. | 7.98% | |
|
Aditya Birla SL Equity Savings Fund (G) Hybrid|Equity Savings Buy |
₹629.34 cr. | 8.00% | |
|
Tata Equity Saving Fund - (IDCW-Periodic) - Reinvestment Hybrid|Equity Savings Buy |
₹261.73 cr. | 8.14% | |
|
Aditya Birla SL Equity Savings Fund (IDCW) - Reinvestment Hybrid|Equity Savings Buy |
₹629.34 cr. | 7.98% | |
|
SBI Equity Savings Fund (G) Hybrid|Equity Savings Buy |
₹5443.35 cr. | 8.50% | |
|
Tata Equity Saving Fund - (IDCW-Periodic) Hybrid|Equity Savings Buy |
₹261.73 cr. | 8.14% |
An equity savings fund is a hybrid mutual fund that invests in a mix of equity, debt, and arbitrage opportunities. The fund aims to generate returns through equity exposure while managing volatility with debt instruments and arbitrage strategies.
As per SEBI regulations, an equity savings fund must allocate at least 65 percent of its assets to equity and equity-related instruments, ensuring the fund qualifies for tax treatment similar to equity funds. Additionally, a minimum of 10 percent of the assets must be invested in debt instruments to provide stability. The rest of the fund’s allocation is typically adjusted between arbitrage opportunities and additional equity or debt exposure based on market conditions.
The use of arbitrage opportunities allows the fund to benefit from price differences in different markets, reducing risks associated with direct equity investments. This strategy helps stabilise returns and provides an additional income stream for the fund.
Equity savings funds function through a combination of equity investments, debt securities, and arbitrage opportunities. The proportion of each asset class varies depending on market conditions and the fund manager’s strategy.
Equity Investments - A significant portion of the fund is allocated to equities, which helps in capital appreciation. Depending on the market outlook, the fund manager may invest in large-cap, mid-cap, or small-cap stocks to generate returns.
Debt Instruments - The debt component provides stability to the fund by reducing volatility. Investments in government bonds, corporate bonds, and other fixed-income securities ensure that there is a steady income source while protecting the capital.
Arbitrage Opportunities - Arbitrage trading involves buying a stock in one market and selling it in another to take advantage of price differences. This strategy helps in reducing risk and adding consistent returns, especially in volatile market conditions.
The mix of these three components allows equity savings funds to maintain a balanced risk profile, making them more stable compared to pure equity funds while still offering potential returns higher than traditional debt funds.
Diversified Asset Allocation - Equity savings funds invest across multiple asset classes, reducing reliance on a single investment type. This diversification helps in managing risk while optimising returns.
Hybrid Nature - These funds maintain a mix of equity and debt, ensuring they can offer potential capital growth while keeping volatility in check. The arbitrage component further enhances risk management.
Risk Management - Since the investments are spread across different asset classes, the fund is designed to handle market fluctuations more effectively. The presence of debt and arbitrage components ensures that risks associated with direct equity exposure are minimised.
Tax Efficiency - Equity savings funds qualify for equity taxation benefits if their equity allocation remains above 65 percent. This makes them more tax-efficient than pure debt funds.
Professional Fund Management - The fund is actively managed by professional fund managers who make strategic investment decisions to optimise asset allocation based on prevailing market conditions.
Conservative Equity Savings Funds - These funds focus more on debt instruments and arbitrage opportunities, reducing direct equity exposure. They are suited for investors looking for moderate growth with lower volatility.
Aggressive Equity Savings Funds - These funds allocate a higher proportion to equities, increasing the potential for capital appreciation. They may be suited for investors willing to take on slightly higher risk for better long-term returns.
Balanced Equity Savings Funds - These funds maintain an equal proportion of equity and debt, ensuring a well-rounded approach to risk and returns. They are designed for investors who want stable returns with moderate equity exposure.
Investors with a Moderate Risk Appetite - Equity savings funds are ideal for investors who want to participate in equity markets but with a lower level of risk. The presence of debt and arbitrage instruments helps in managing volatility.
Investors Seeking Tax-Efficient Returns - Since these funds qualify for equity taxation, they are more tax-efficient than debt funds, making them attractive for investors who want to optimise post-tax returns.
Medium-Term Investors - Investors with an investment horizon of three to five years can consider these funds as they offer a balanced approach to market exposure while providing potential growth opportunities.
Conservative Equity Investors - Individuals who prefer a less volatile approach to equity investments can benefit from these funds, as the arbitrage and debt components provide stability during market downturns.
Equity savings funds offer a structured way to invest in the market while balancing growth potential and risk management. Their combination of equity, debt, and arbitrage investments makes them a suitable option for investors seeking diversification and tax efficiency without taking on excessive risk.
Investing in Equity Savings Funds follows a structured process that ensures investors make informed decisions. These funds provide a balance of equity, debt, and arbitrage strategies, making them an attractive choice for those seeking moderate returns with lower risk. Here’s a step-by-step guide to investing in these funds:
Step 1: Select a Suitable Equity Savings Fund - Before investing, investors should compare various Equity Savings Funds based on factors such as past performance, expense ratio, fund manager expertise, and portfolio composition. Reviewing historical returns and risk metrics can help in selecting the most appropriate fund.
Step 2: Open an Investment Account - Investors need to have a Demat account or mutual fund investment account with a SEBI-registered brokerage platform or fund house. Completing the Know Your Customer (KYC) process, including identity verification, is mandatory.
Step 3: Decide the Mode of Investment - Investors can opt for one of the following modes based on their financial preferences:
Step 4: Make the Investment - Once the fund and mode of investment are selected, the investment can be made through net banking, UPI, or direct bank transfers via the chosen platform.
Step 5: Monitor and Rebalance as Needed - After investing, it is essential to regularly monitor fund performance and rebalance the portfolio if necessary. Reviewing market trends and fund allocations ensures the investment remains aligned with financial goals.
Equity Savings Funds offer several benefits due to their unique investment strategy, combining equity, debt, and arbitrage components.
1. Diversified Asset Allocation - These funds allocate investments across equity, debt, and arbitrage opportunities, helping in risk management while offering the potential for capital appreciation.
2. Lower Volatility Compared to Equity Funds - Since these funds include debt instruments and arbitrage strategies, they tend to be less volatile than pure equity funds, making them suitable for investors looking for stability.
3. Potential for Regular Income - The debt and arbitrage components of these funds generate periodic returns, which can be beneficial for investors seeking consistent income alongside equity exposure.
4. Risk Management Through Arbitrage - Arbitrage opportunities reduce market risk by profiting from price differences in various stock exchanges. This helps in stabilising returns and mitigating equity market volatility.
5. Tax Efficiency - Since these funds invest at least 65 percent in equities, they qualify for equity taxation, making them more tax-efficient compared to traditional debt funds.
While Equity Savings Funds are structured to reduce risk, they are still subject to certain financial and market risks.
Before investing, investors should assess key factors to determine if Equity Savings Funds align with their financial goals.
1. Investment Objective - Understanding the purpose of investment is crucial. These funds are suited for those seeking moderate capital appreciation with risk diversification.
2. Risk Tolerance - Although these funds are relatively low-risk compared to pure equity funds, they still carry some risk. Investors with a moderate risk appetite may find them suitable.
3. Fund Manager’s Strategy - Since fund managers actively decide the proportion of equity, debt, and arbitrage, reviewing their track record and investment approach is important.
4. Expense Ratio - A lower expense ratio ensures that a greater portion of returns goes to the investor rather than management fees. Comparing funds based on cost efficiency is advisable.
5. Taxation Aspects - Equity Savings Funds qualify for equity taxation if they maintain 65 percent or more in equities, which can be advantageous compared to debt funds.
The taxation of Equity Savings Funds depends on the duration of the investment and the equity component.
1. Short-Term Capital Gains (STCG) - If units are sold within one year, the returns are subject to a 15 percent tax under the short-term capital gains tax rule.
2. Long-Term Capital Gains (LTCG) - If units are held for more than one year, gains above ₹1 lakh are taxed at 10 percent without indexation under the long-term capital gains tax rule.
3. Dividend Taxation - Dividends received from these funds are taxable as per the investor’s income tax slab. Additionally, a 10 percent tax deducted at source (TDS) applies if the dividend amount exceeds ₹5,000 in a financial year.
Since these funds are equity-oriented, they offer a tax advantage over pure debt funds, making them more tax-efficient in long-term wealth planning.
Below is a table listing some of the prominent Equity Savings Funds in India along with their key details:
Fund Name | AUM (₹ Cr.) | 3Y CAGR (%) | Expense Ratio (%) | 5Y CAGR (%) |
HSBC Equity Savings Fund | 583.31 | 14.77 | 0.61 | 14.81 |
Sundaram Equity Savings Fund | 1,004.76 | 12.09 | 0.61 | 14.70 |
Mahindra Manulife Equity Savings Fund | 580.13 | 9.78 | 0.69 | 12.87 |
Mirae Asset Equity Savings Fund | 1,374.07 | 10.39 | 0.32 | 12.80 |
Kotak Equity Savings Fund | 7,973.61 | 12.15 | 0.63 | 12.29 |
1. HSBC Equity Savings Fund
The HSBC Equity Savings Fund is designed to provide a balanced approach to investment by diversifying its portfolio across equities, debt instruments, and arbitrage opportunities. With an AUM of ₹583.31 crore, this fund focuses on generating stable returns while minimising the impact of market fluctuations.
The five-year compound annual growth rate (CAGR) of 14.81 percent reflects the fund’s ability to deliver consistent performance over the years. By incorporating arbitrage strategies, it seeks to reduce equity-related risks while taking advantage of market inefficiencies. Additionally, the debt component provides stability, making it a suitable option for investors with a moderate risk tolerance.
This fund can be an attractive choice for investors looking for tax-efficient investments as it qualifies for equity taxation due to its allocation strategy. Investors seeking long-term wealth creation with risk diversification may find this fund suitable, given its blend of growth potential and stability.
2. Sundaram Equity Savings Fund
The Sundaram Equity Savings Fund is structured to provide a well-balanced investment approach, focusing on equity growth and risk management. With an AUM of ₹1,004.76 crore, this fund actively invests in a combination of equity, debt securities, and arbitrage instruments.
The fund has delivered a five-year CAGR of 14.70 percent, indicating its ability to generate moderate to high returns over a long-term period. The equity portion of the fund is allocated across large-cap and mid-cap stocks, offering growth potential while ensuring risk diversification. The debt component helps stabilise returns during market downturns, while arbitrage opportunities further mitigate risks.
This fund may be suitable for investors with a medium to long-term investment horizon who wish to benefit from equity market participation without taking on excessive volatility. Given its hybrid nature, it provides an opportunity for investors looking to strike a balance between capital appreciation and risk mitigation.
3. Mahindra Manulife Equity Savings Fund
The Mahindra Manulife Equity Savings Fund is structured to cater to moderate-risk investors who seek a diversified investment portfolio. With an AUM of ₹580.13 crore, this fund is designed to generate returns by investing in a combination of equity, debt, and arbitrage instruments.
Over the past five years, the fund has delivered a CAGR of 12.87 percent, reflecting a steady performance across different market conditions. The equity component aims to provide growth opportunities, while the debt allocation ensures stability. Additionally, the arbitrage portion helps reduce risk by capitalising on price differences between cash and derivatives markets.
This fund may appeal to investors seeking a structured investment strategy that allows them to participate in the stock market while benefiting from lower volatility than pure equity funds. It is particularly suitable for those with a moderate investment horizon of three to five years and a preference for tax-efficient returns.
4. Mirae Asset Equity Savings Fund
The Mirae Asset Equity Savings Fund focuses on delivering steady growth through a low-cost, well-diversified portfolio. With an AUM of ₹1,374.07 crore, this fund aims to provide a combination of capital appreciation and stability by balancing exposure to equity, debt, and arbitrage investments.
The fund has a five-year CAGR of 12.80 percent and maintains an expense ratio of 0.32 percent, making it a cost-efficient choice for investors. The equity component contributes to long-term growth, while the debt allocation provides a cushion against market downturns. The arbitrage strategy enhances returns while reducing risk, making the fund a suitable option for investors looking for a moderate-risk investment with tax benefits.
This fund may be well-suited for investors who wish to participate in the stock market but prefer lower volatility than pure equity funds. It offers a combination of equity market exposure and downside protection through debt and arbitrage components, making it a viable choice for medium-term investors.
5. Kotak Equity Savings Fund
The Kotak Equity Savings Fund is structured to maintain a well-managed asset allocation strategy while offering stable returns. With an AUM of ₹7,973.61 crore, this fund balances exposure to equities, fixed-income securities, and arbitrage investments to optimise returns while managing risk.
The fund has delivered a five-year CAGR of 12.29 percent, reflecting its ability to generate consistent returns across different market cycles. The equity portion is strategically allocated to capture growth, while the debt investments provide stability. The arbitrage component helps in reducing the impact of market fluctuations by taking advantage of price differences in the cash and futures markets.
This fund is suitable for investors who seek a mix of capital appreciation and risk management. It is an option for those who want to invest in the stock market with reduced volatility while also ensuring a steady income component through its debt investments. The fund’s tax-efficient nature makes it an attractive choice for investors looking to optimise post-tax returns.
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Yes, equity savings funds are designed for investors with a moderate to low-risk appetite. These funds allocate assets across equity, debt, and arbitrage strategies, reducing overall market risk while still offering the potential for capital appreciation.
Equity savings funds carry some risk as they invest in equities, but the presence of debt instruments and arbitrage opportunities helps in managing volatility. Compared to pure equity funds, they are less risky, but they are not entirely risk-free.
Equity savings funds are suitable for investors looking for moderate capital appreciation with lower volatility. They are ideal for individuals with a medium-term investment horizon and those who prefer a mix of equity market exposure and risk management.
An example of an equity savings fund is the HSBC Equity Savings Fund, which invests in a combination of equity, debt, and arbitrage opportunities. It aims to provide stability while taking advantage of equity market growth and arbitrage opportunities.
Equity savings funds can be a good investment choice for those who want equity exposure but with controlled risk. They offer a balance between returns and stability, making them suitable for investors who prefer a diversified portfolio with tax efficiency.
The returns of equity savings funds vary based on market conditions and asset allocation. Historically, they have delivered returns in the range of 10 to 15 percent over five years. However, past performance does not guarantee future returns.
Equity savings funds carry market risk due to their equity exposure, interest rate risk affecting debt instruments, and arbitrage risk if market inefficiencies decline. Liquidity risk may also arise if market conditions affect fund withdrawals.
Yes, equity savings funds are taxed as equity-oriented funds. Short-term capital gains (if held for less than a year) are taxed at 15 percent, while long-term capital gains above ₹1 lakh (if held for more than a year) are taxed at 10 percent.
The investment amount depends on financial goals, risk tolerance, and time horizon. Investors can start with a lump sum or a systematic investment plan (SIP) to manage risk over time. Reviewing portfolio performance periodically is recommended.
Mutual Fund Categories |
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| Debt Funds |
| Equity Funds |
| Hybrid Funds |
| Solution Oriented Funds |
Mutual Fund Sub Category |
|---|
| Large Cap |
| Mid Cap |
| Small Cap |
| Arbitrage |
| Aggressive Hybrid |
| Banking and PSU |
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