Equity Savings Mutual Funds

Investors generally look for investment opportunities that combine the growth aspect of equities without the market risk involved. The equity savings fund has been designed with the idea of balancing both aspects, since it consists of combining equities with arbitrage opportunities and debts within the same portfolio.

What are Equity Savings Funds?

Equity Savings Fund is a mix of mutual funds that invest in 3 categories of assets:

• Equities: For capital gains in the long term.
• Arbitrage: To earn from the difference between cash market and derivative markets with less risk of the market.
• Debt Instruments: For creating stability and generating regular income.

This makes the portfolio versatile and able to navigate market volatility while remaining exposed to equities.

Features of Equity Savings Funds

• Diversified Investment Portfolio: The fund invests in stocks, arbitrage investments, and fixed income securities, reducing the risk of concentration.
• Less Market Volatility: As compared to equity funds, Equity Savings Funds have lower market volatility owing to the balance in portfolio allocations.
• Taxation According to Equities: Almost all Equity Savings Funds maintain the required equity exposure for enjoying equity-based tax advantages.
• Professional Management: Professional fund managers manage fund allocations according to prevailing market trends.

How to Invest in Equity Savings Funds?

You can invest in equity savings funds by following simple process:

Step 1: Choose investment mode. You can invest through:

• AMC websites
• Online investment platforms provided by stockbrokers
• Mutual fund distributors

Step 2: Choose a suitable equity savings funds fund.

Step 3: Choose between Systematic Investment Plan (SIP) and Lump sum based on your goal and make investment.

Step 4: Make payment through UPI, netbanking or other available methods.

Why Invest in Equity Savings Funds?

• Balanced Risk and Return: Equity savings funds are meant to give equity exposure while lowering the volatility of the portfolio as a whole.
• Prospects of Wealth Accumulation: The equity aspect will bring about prospects of wealth accumulation.
• Portfolio Stability through Debt Investments: Debt investments assist in stabilizing the portfolio during periods of market weakness.
• Tax Efficient: Taxation of the equity funds can favor the investors depending on the tax laws.
• Best for Conservative Equity Investors: The most suitable kind of equity funds for conservative investors.

Taxation Rules for Equity Savings Funds

In India, equity savings funds are taxed similar to equity mutual funds.

• Short Term Capital Gains (STCG): If you sell your units within one year, the gains will be considered short-term capital gains (STCG). These will be taxed at a flat rate of 20% plus applicable surcharge and a 4% health and education cess. It is worth noting that there is no basic exemption limit available for short-term capital gains.
• Long Term Capital Gains (LTCG): The gains will be classified as LTCG if you have sold mutual funds units for more than 12 months. These will be taxed at a flat rate of 12.5% without indexation benefit.