Equity Savings Funds

Suitable For Lump-Sum Investments As Replacement of Longer Term Fixed Deposits (One Year and More).

In current environment, it is difficult for investors to select the right avenue for investment, particularly lump-sum investments. On one side, interest rates on fixed deposits are at all-time low, and stock markets are making new highs on the other.

Equity Savings Funds are new innovative products by mutual funds to take care of this dilemma!

What are Equity Savings Funds?

Equity Savings Funds invest in a mix of Equity, Arbitrage and Debt securities. Allocation is generally between 20% to 40% for Equity, 30% to 45% for Arbitrage and up to 35% for Debt. Arbitrage and Debt portions ensure stable returns, while Equity portion ensures overall superior returns. Fund managers also have flexibility to change allocations depending on current market conditions, i.e. higher Equity allocation in case of stock market correction.

Benefits of Equity Savings Funds

  • Less volatility: Returns from Equity Savings Funds display more stable returns due to comparatively lower allocation to Equity
  • Lower downside risk in case of a significant decline in Equity markets
  • Tax Benefits: Dividends from Equity Savings Funds are 100% tax free. Capital gains after one-year holding are also completely tax-free.

How Investors Can Use Equity Savings Funds

These funds can be used for lump-sum investments of more than one-year horizon. For shorter horizon or if regular cash flows are required, then one should choose the dividend option. Otherwise, Growth options should be selected to take benefit of compounding.

Available Equity Savings Funds

Dividend (Rs.) NAV (Rs.) 1 Yr Return (%) 3 Yr Return (%) Dividend Yield
Edelweiss Equity Savings Advantage Fund – Monthly Dividend 0.08 12.8804 16.3 8.33 7.5%
Aditya Birla SL Equity Savings – Quarterly Dividend 0.24 11.76 19.4 9.7 8.2%
Kotak Equity Savings Fund – Monthly Dividend 0.0473 11.3728 15.39 9.03 5.0%
ICICI Prudential Equity Income Fund – Monthly Dividend 0.06 11.37 12.3 8.95 6.3%
HDFC Equity Savings Fund – Quarterly Dividend 0.25 12.108 17.86 10.78 8.3%

All data as of 27 December 2017. Dividend declaration is at the discretion of mutual funds and the rate can change any time.