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Equity Savings Mutual Funds

Equity savings funds are open-ended mutual fund schemes that fall under the Hybrid category introduced by the SEBI. These funds generate returns by investing in equity, debt, derivatives, and arbitrage. It is a relatively newer financial instrument in the Indian market and is considered safer than pure equity funds and more tax-efficient than pure debt funds. View More

The investment pattern these funds use sets them apart from traditional schemes. With equity savings schemes, about 30-35% of the assets are invested in equity while the remaining is put in debt funds and arbitrages. As they are a mix of segments, they help maximize returns while maintaining an efficient risk-reward ratio.

Diversification of investments helps neutralize market volatility to an extent. These funds are an excellent option for investors who generate high returns with minimum risk. They are also perfect for individuals seeking capital generation to meet their short-term goals.

Best Equity Savings Mutual Funds

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Who Should Invest in Equity Savings Mutual Funds?

Equity savings are low-risk mutual fund schemes that offer good returns over the short to medium term. Moreover, some of these even provide investors dividend incomes regularly. View More

Let us see what type of investors should consider these funds.

  • The ESS scheme has always remained popular among investors who look for low-risk equity funds. Equity savings funds are a more secure investment option with returns similar to equity schemes.
  • Investors with a short investment horizon looking for great returns to grow their capital should choose these funds. As they are low-risk, they also suit conservative investors in search of an alternative to conservative saving methods.
  • If you want to invest for less than two years for your investment, this type of fund can help you fulfill your investment goals. However, the ideal investment horizon is over one year to realize gains from these funds. It should also be noted that these funds are not an ideal substitute for equity funds as the latter gives better returns over the long term.

Features of Equity Savings Mutual Funds

Here are the key features of equity savings funds.

  • Asset allocation – As per the SEBI regulations, an equity savings fund can use hedging strategies to invest in equity and debt securities and arbitrage opportunities. A minimum of 65% of the assets goes to equity, while 10% or more can be allocated to debt securities.

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  • Risk-reward ratio – As these funds invest in equity and debt, they involve a lower risk than pure equity funds. However, the performance of underlying instruments influences the funds’ NAV which means returns can fluctuate with market movements. They are known to deliver consistent returns over the short term.

Factors to consider while investing in Equity Savings Funds

Here is a list of factors you can consider before investing in equity savings funds

Credit quality

It is essential to look at this indicator for the fund to get an idea of the default risk for its debt part. The scheme should not invest in many low-rated instruments or unrated debt securities. You must see that the fund you pick has a good credit quality. View More

Diversification

An equity savings fund should provide good diversification to investors. A concentrated portfolio has a risk of reacting to market movements. A diversified portfolio with top holdings under 50% would ensure the risk is spread across the investments.

Expense ratio

A higher expense ratio can lower the returns from the investment, so it is a good idea to pick funds with moderate or low turnover ratios.

Performance and risk analysis

To gauge the fund’s performance in varying market cycles, you must analyze the risk factors. You can use specific indicators to calculate the potential returns and risks and choose accordingly.

Taxability of Equity Savings Funds

When taxing the returns, equity savings funds are treated much like any other equity or hybrid scheme. This means investors are liable for some taxes depending on their investment horizon. View More

Long-term capital gains from these funds are tax-free if you make less than INR 1 lakh in a year. Any additional gain is taxed at a rate of 10%. However, short-term gains made from funds held for less than a year are taxed at 15%.

Risk Involved With Equity Savings Funds

  • Equity savings funds are not as safe as debt-focused funds but are comparatively safer than equity schemes.
  • These mutual funds use a hedged strategy for up to 60-75 percent of the portfolio.

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  • The unhedged equity exposure is about 15-25 percent, while the rest is held in debt securities. As they are equity-focused, these funds are quite a tax efficient.
  • Equity savings funds don’t pose high risks because of the arbitrage portion. It is an excellent way of investing in mutual funds if you can hold it for a minimum of 3-4 years and you are a risk-averse investor looking for a tax-efficient way to optimize your returns. You can also invest in lumpsum because this is where only a tiny part of your money gets exposed to equity.

Advantages of Equity Savings Funds

Equity savings funds expose debt and equity securities, allowing you to diversify your investments and spread the risk across multiple asset classes.

Moreover, as these funds consider leveraging the arbitrage opportunities, fund managers can easily adjust the strategies based on market emotions, thereby managing the risks efficiently. View More

Here are some of the impressive benefits of investing in equity savings funds.

  • Low volatility – As more than 50% of these funds are divided between debt instruments and arbitrage holdings, you can expect more stable returns than equity investments. Fund managers prefer using different derivatives strategies to minimize volatility. The arbitrage portion of the fund further capitalizes on the inconsistency in prices across different market segments.
  • Arbitrage benefit – The biggest advantage of these funds is the arbitrage portion in terms of stable returns. Most fund houses know how to handle arbitrage to facilitate low-risk returns. Equity savings funds are, therefore, an ideal option for those who want stable gains from their investment.
  • Tax savings – As these funds are treated like equity schemes for taxation, the liability reduces considerably. On holding the funds for more than a year, investors can benefit from tax exemption for returns less than INR 1 lakh.
  • Diversification – The best equity savings funds offer investors a diversified portfolio through one channel. This means you don’t need to analyze the performances of various funds and choose the one that best suits your requirements. You can invest in one mutual fund of this category, and the fund managers take care of the rest.

Popular Equity Savings Mutual Funds

  • Fund Name
  • Min SIP Investment Amt
  • AUM (Cr.)
  • 3Y Return

SBI Equity Savings Fund – Direct Growth is an Equity Savings scheme that was launched on 27-05-15 and is currently under the management of our experienced fund manager Neeraj Kumar. With an impressive AUM of ₹3,072 Crores, this scheme's latest NAV is ₹22.3306 as of 01-12-23.

SBI Equity Savings Fund – Direct Growth scheme has delivered a return performance of 15% in the last 1 year, 12% in the last 3 years, and an 9.9% since its launch. With a minimum SIP investment of just ₹1,000, this scheme offers a great investment opportunity for those looking to invest in Equity Savings funds.

  • Min SIP Investment Amt
  • ₹1,000
  • AUM (Cr.)
  • ₹3,072
  • 3Y Return
  • 15%

HDFC Equity Savings Fund – Direct Growth is an Equity Savings scheme that was launched on 01-01-13 and is currently under the management of our experienced fund manager Anil Bamboli. With an impressive AUM of ₹3,166 Crores, this scheme's latest NAV is ₹61.698 as of 01-12-23.

HDFC Equity Savings Fund – Direct Growth scheme has delivered a return performance of 10.4% in the last 1 year, 13.4% in the last 3 years, and an 10.3% since its launch. With a minimum SIP investment of just ₹100, this scheme offers a great investment opportunity for those looking to invest in Equity Savings funds.

  • Min SIP Investment Amt
  • ₹100
  • AUM (Cr.)
  • ₹3,166
  • 3Y Return
  • 10.4%

ICICI Pru Equity Savings Fund – Dir Growth is an Equity Savings scheme that was launched on 05-12-14 and is currently under the management of our experienced fund manager Kayzad Eghlim. With an impressive AUM of ₹7,324 Crores, this scheme's latest NAV is ₹20.91 as of 01-12-23.

ICICI Pru Equity Savings Fund – Dir Growth scheme has delivered a return performance of 9.2% in the last 1 year, 9.9% in the last 3 years, and an 8.5% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Equity Savings funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹7,324
  • 3Y Return
  • 9.2%

Mirae Asset Equity Savings Fund – Direct Growth is an Equity Savings scheme that was launched on 17-12-18 and is currently under the management of our experienced fund manager Harshad Borawake. With an impressive AUM of ₹723 Crores, this scheme's latest NAV is ₹17.765 as of 01-12-23.

Mirae Asset Equity Savings Fund – Direct Growth scheme has delivered a return performance of 11.1% in the last 1 year, 12.3% in the last 3 years, and an 12.3% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Equity Savings funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹723
  • 3Y Return
  • 11.1%

Kotak Equity Savings Fund – Direct Growth is an Equity Savings scheme that was launched on 13-10-14 and is currently under the management of our experienced fund manager Devender Singhal. With an impressive AUM of ₹3,292 Crores, this scheme's latest NAV is ₹23.7342 as of 01-12-23.

Kotak Equity Savings Fund – Direct Growth scheme has delivered a return performance of 12.9% in the last 1 year, 11.9% in the last 3 years, and an 9.9% since its launch. With a minimum SIP investment of just ₹100, this scheme offers a great investment opportunity for those looking to invest in Equity Savings funds.

  • Min SIP Investment Amt
  • ₹100
  • AUM (Cr.)
  • ₹3,292
  • 3Y Return
  • 12.9%

Aditya Birla SL Equity Savings Fund – Direct Growth is an Equity Savings scheme that was launched on 28-11-14 and is currently under the management of our experienced fund manager Dhaval Shah. With an impressive AUM of ₹504 Crores, this scheme's latest NAV is ₹20.89 as of 01-12-23.

Aditya Birla SL Equity Savings Fund – Direct Growth scheme has delivered a return performance of 9.1% in the last 1 year, 8.9% in the last 3 years, and an 8.5% since its launch. With a minimum SIP investment of just ₹1,000, this scheme offers a great investment opportunity for those looking to invest in Equity Savings funds.

  • Min SIP Investment Amt
  • ₹1,000
  • AUM (Cr.)
  • ₹504
  • 3Y Return
  • 9.1%

AXIS Equity Saver Fund – Direct Growth is an Equity Savings scheme that was launched on 14-08-15 and is currently under the management of our experienced fund manager R Sivakumar. With an impressive AUM of ₹893 Crores, this scheme's latest NAV is ₹20.87 as of 01-12-23.

AXIS Equity Saver Fund – Direct Growth scheme has delivered a return performance of 10.5% in the last 1 year, 10.5% in the last 3 years, and an 9.3% since its launch. With a minimum SIP investment of just ₹500, this scheme offers a great investment opportunity for those looking to invest in Equity Savings funds.

  • Min SIP Investment Amt
  • ₹500
  • AUM (Cr.)
  • ₹893
  • 3Y Return
  • 10.5%

Tata Equity Saving Fund-Dir (App) is an Equity Savings scheme that was launched on 08-01-13 and is currently under the management of our experienced fund manager Sailesh Jain. With an impressive AUM of ₹124 Crores, this scheme's latest NAV is ₹51.5072 as of 30-11-23.

Tata Equity Saving Fund-Dir (App) scheme has delivered a return performance of 8.4% in the last 1 year, 9.6% in the last 3 years, and an 8.2% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Equity Savings funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹124
  • 3Y Return
  • 8.4%

Bandhan Equity Savings Fund – Direct Growth is an Equity Savings scheme that was launched on 03-01-14 and is currently under the management of our experienced fund manager Nemish Sheth. With an impressive AUM of ₹88 Crores, this scheme's latest NAV is ₹30.025 as of 01-12-23.

Bandhan Equity Savings Fund – Direct Growth scheme has delivered a return performance of 8.2% in the last 1 year, 8.5% in the last 3 years, and an 7.5% since its launch. With a minimum SIP investment of just ₹1,000, this scheme offers a great investment opportunity for those looking to invest in Equity Savings funds.

  • Min SIP Investment Amt
  • ₹1,000
  • AUM (Cr.)
  • ₹88
  • 3Y Return
  • 8.2%

Frequently Asked Questions

How to invest in equity savings mutual funds?

Investing in equity savings funds is relatively easy with 5Paisa. You can simply register online on the website or app of any online trading service and select the mutual fund you want to invest in. Next, you can select between lumpsum or SIP and complete your payment.

Where do equity savings mutual funds invest?

Equity savings funds invest money into three areas. The first is the equities that focus on portfolio diversification. The other part is invested in debt, which does not have a lot of credit or interest rate risk. The third part is arbitrage, where the objective is to generate returns by leveraging the mispricing opportunities in different markets.

What are the benefits of investing in equity mutual savings?

Investing in equity savings provides a dual advantage of income distribution and capital generation through a diversified portfolio. The fund actively uses hedged and unhedged strategies to manage risk and increase returns. This approach also helps deal with volatility and uncertainty in the stock market.

How long should you hold your investment in equity savings funds?

As these funds invest in a mix of debt, equity, and arbitrage instruments, they are suitable for the medium to long term. One should consider investing them for at least one year and longer to see profits.

What is the minimum amount you should invest in equity savings funds?

Equity savings funds come from many fund houses, and the minimum investment amount varies according to the parent company and the fund. In general, the minimum amount for lumpsum investment is about INR 1000, while the minimum amount for SIP starts anywhere from INR 100. There is no upper limit for the amount you can invest in these mutual funds.

Do equity savings funds have any restrictions in terms of asset allocation?

As mandated by the SEBI, equity savings schemes should invest a minimum of 65% of the total assets in equity, including the arbitrage positions, while at least 10% should go into debt instruments. According to the regulations, a fund in this category can invest in equity and related securities, debt instruments, and arbitrage opportunities using hedging strategies.

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