The Mutual Fund Show: Here Are Benefits Of Investing In Equity Saving Funds
Equity savings schemes are ideal for an investment horizon of two–three years, says Prableen Bajpai of FinFix Research.
It is important to look out for investment options with lesser risk as the stock markets are subject to fluctuations. Equity savings funds are one such option, according to experts.
Equity savings funds offer secure returns with one-third of it invested in debt instruments, while arbitrage funds provide largely predictable returns, according to Swarup Mohanty, chief executive officer of Mirae Asset Investment Managers (India) Pvt.
A small equity exposure aids in generating alpha for low-to-medium-risk investors, he said on The Mutual Fund Show.
According to Mohanty, the key highlights of equity savings funds are:
Invest approximately 33% of corpus in equity, debt, arbitrage.
Provide moderate equity exposure with equity taxation.
Equity savings schemes are a great category for those investors who can have some exposure to equity and understand that there will be downsides to it as well, according to Prableen Bajpai, founder of wealth management platform FinFix Research and Analytics.
Bajpai listed the key highlights of such schemes:
A sub-category within the hybrid funds.
Invest in a combination of equity, arbitrage and debt.
Equity savings schemes are ideal for an investment horizon of two–three years, Bajpai said. "Equity taxation makes them tax efficient."
Mohanty also listed the highlights of Mirae Asset's equity savings funds:
Average net equity allocation to be between 20% and 45%.
Remaining is allocated to arbitrage and debt.
Arbitrage and debt provide relatively better visibility of returns.
Bajpai's top choices for equity savings fund are SBI, Mirae and HDFC.
I have invested Rs 15,000 through SIP in ICICI Prudential Nifty 50 Index fund and Rs 5,000 in Quant PSU Thematic fund as lump sum. I want to retire by the time I am 40 years old and accumulate a retirement corpus of Rs 5 crore. So, what funds should I invest in?
Name: Rahul, Age: 21 years
Bajpai: To create a corpus of Rs 1.6 crore in next 19 years, assuming 12% XIRR (extended internal rate of return), reduce allocation to Nifty from Rs 15,000 per month to Rs 5,000 per month. Allocate the remaining Rs 10,000 in a mid- and small-cap fund.
Overall, you have to put Rs 60,000 per month to achieve the corpus of about Rs 5 crore.
My wife and I buy 1 gramme of gold every month as an investment. I deposit Rs 3,000 per month at an annual interest of 9.85% in a co-operative bank and would like to invest Rs 5,000 per month in mutual funds. What funds would you recommend to us? For children's education?
Name: Prasanna, Age: 29 years
Bajpai: SIP of Rs 5,000, assuming 12% XIRR, can generate a corpus of around Rs 24 lakh in 15 years. If the SIP is increased to Rs 8,000, then around Rs 38 lakh can be generated assuming 12% XIRR over 15 years.
