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Equity Savings Funds invest in a mix of equity, arbitrage and bonds, and are structured to return slightly higher returns than fixed income. In equities, these schemes largely invest in large-cap stocks.
What attracts investors to this product is that it is taxed as an equity product. If held for more than a year, gains from these schemes are taxed as long-term capital gains (LTCG) at 12.5%.
Another product outside the equity savings funds category that wealth advisors are suggesting is PPFAS Dynamic Asset Allocation Fund, which is managed much more conservatively compared to other schemes in its category.
The flipside of this product is that investors must hold them for a longer period to be eligible for lower taxation. Here are some schemes that wealth managers are recommending for investors with a 1-3 year time frame:
Bandhan Equity Savings Fund
AUM: Rs 287 crore 1-year return: 7.67% Expense Ratio: 0.19% Net Equity Allocation: 10-12% Top 3 holdings: Bharti Airtel, ICICI Bank and Reliance The scheme has one of the lowest net equity allocation of 10-12%, with the fund house looking to generate alpha largely by replicating the Nifty 100 Low Volatility 30 Index. The scheme invests 30-35% of the portfolio in fixed income and endeavours to capture opportunities by investing across the yield curve, with a focus on high-quality AAA/SOV bonds.
ICICI Equity Savings Fund
AUM: Rs 13,046 crore 1-year return : 9.57% Expense ratio: 0.50% Net Equity Allocation : 15-20%
Top 3 holdings: Reliance, TCS, Hindustan Unilever
The fund manager takes measured equity exposure by selecting stocks with low beta. Portfolio provides capital appreciation through equity component, and stable yield through arbitrage, dent and covered call options
Franklin India Equity Savings Fund
AUM: Rs 672 crore 1-year return : 7.46% Expense ratio : 0.30% Net Equity Allocation : 15-18%
Top 3 holdings: Axis Bank, HDFC Bank, NTPC
The fund manager builds the equity component of the portfolio with a focus on higher large-cap allocation, lower portfolio beta, and targets quality compounders at reasonable valuations. The fixed income portion is conservatively managed with a mix of accrual and duration strategies.
PPFAS Dynamic Asset Allocation Fund
AUM: Rs 1,920 crore 1-year return : 9.14% Expense ratio : 0.33% Net Equity Allocation : 12-15%
Top 3 holdings: Reliance Ind, Coal India, Petronet LNG
The fund manager looks at offering modest returns with minimal volatility. Stocks selected have a margin of safety and strong cash flows. The fixed income portion of the portfolio will combine accrual and duration, and will largely invest in AAA papers, highquality PSU securities. Units of this scheme need to be held for two years to qualify for LTCG 12.5%.
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https://economictimes.indiatimes.com/mf/analysis/maximize-your-returns-the-best-equity-savings-funds-for-conservative-investors/articleshow/121635254.cms
