What is Equity Saving mutual Funds

The equity-saving fund is a new entry to the hybrid fund category.

They allocate their corpus using traditional investment strategy and opt for a low-risk portfolio for their investors.


If you are a conservative mutual fund investor, add equity-savings schemes in your portfolio as it helps you to handle the uncertainty and volatility in the stock market. Many fund managers prefer a mixture of debt, equity, and arbitrage funds for their customer’s investment portfolio in order to secure the downside risk. People prefer equity-savings mutual funds to invest their money to fulfill their financial goals. The reason is that this type of mutual fund invests in equity, debt, and arbitrage funds ensure consistent returns. Read this article to know more about Equity-saving mutual funds.

Equity-saving mutual funds

Using hybrid funds can be a great way of diversification as this type of fund invests in both equity and debt funds. Two types of hybrid funds are available for investors to invest their money traditionally. One is equity-oriented balanced funds, and the other is the debt-oriented monthly income plans. The equity-saving fund is a new entry to the hybrid fund category. It is a type of equity fund which invests more than 65% of its assets in equity. For this reason, equity-savings funds are treated as equity funds at par for taxation purposes. This mutual fund scheme has the potential for striking the perfect balance between returns and risk.

Features of Equity-savings mutual funds

It is an open-ended mutual fund scheme to invest its corpus in debt, equity, derivatives, and arbitrage funds. As per the norms of SEBI, a minimum of 65% of the assets of this fund need to invest in equities. Many investors prefer this fund as it can generate returns without much risk factor. Equity-savings fund is a relatively new mutual fund category that recently introduced under the category of Hybrid mutual funds.

Equity-saving funds are a good alternative to fixed deposits as it has the equity exposure of more than 65%. It allocates more than 65% of its assets in equities and derivatives, and the rest of the assets are invested in fixed-income securities.

How does this fund works

As said above, the equity-saving fund is classified under hybrid funds. Like hybrid mutual funds, this fund type also invests in a mix of both debt and equity securities. They allocate their corpus using traditional investment strategy and opt for a low-risk portfolio for their investors. The fund managers of equity-savings fund use derivative strategies in order to protect the assets from any market risks or volatility.

Why invest in equity-savings funds

In equity-savings funds, its equity component provides better return potential for the investors, while its debt portion offers stability. The fund managers use derivatives for managing net exposure to equities, which helps the fund to make better returns even from the volatile markets. Investors can expect a balancing act between returns and risk by investing in equity-savings mutual funds.

People prefer investing in equity-saving funds because these funds can give consistent returns with less uncertainty. This mutual fund type can generate better returns by using arbitrage as a powerful strategy. Since its investment portfolio consists of both debt and equity securities, it relatively offers only moderate risks to investors. Another advantage of an equity-saving mutual fund is its tax-efficiency. Equity-taxation rules apply to this type of mutual fund. Tax is levied at 15% if the holding period of this fund is less than a year while the rate is at 10% if the holding period of the fund is more than one year.

If you are looking for an excellent mutual fund scheme to park your money for a short duration, then the equity-saving fund can be a good suggestion for you. Its potential to generate consistent returns in the short term with minimum risk makes it a popular investment choice.

That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”,  so let me do Nivesh