Equity Savings Fund Compare

Additional Useful Information

• An investor can buy “Units” of these mutual funds. These units can be purchased at a price which is called the “Net Asset Value or NAV”. The NAV of these funds keeps changing daily depending upon the changes in the stock prices of the companies that are held by them.

• The investor can sell these units anytime at the NAV price prevailing on the day of the sale.

• Total Purchase Amount	=	Number of Units X NAV as on the day of purchase
  Total Sale Amount	=	Number of Units X NAV as on the day of sale
  Total Gain	=	Total Sale Amount – Total Purchase Amount

• The fund house which issues an Equity Savings Mutual Fund may offer two options to select from –
• IDCW Option – In this option, growth in the mutual fund value is distributed back to the investor’s bank account in the form of periodic payouts called “Dividends”. This payout could be monthly or quarterly.
• Growth Option – In this option, growth in the mutual fund value is invested back in the fund for further growth. The investor’s gains are in the form of higher NAV price of the units of the fund.

• If an investor buys units in an Equity Savings Mutual Fund and sells them within a certain short period of time, then the fund house may charge the investor, certain nominal fees, at the time of the sale. These charges are the “Exit Load”. This period is typically less than 1 year but varies from fund to fund. Typical exit loads can vary from 0 to 1% of the sale amount.

• Equity Savings Mutual Funds are considered a good investment option for investors looking for capital appreciation as well as some regular income.

Returns *

• Equity Savings Mutual Funds do not guarantee any returns. They are subject to market risks.

• If Equity Savings Mutual Funds are held over a 5-year period, they could generate returns ranging from 9% to 15.5% per year.

Risk Level

• Equity Savings Mutual Funds are categorized as medium to high-risk investments since they invest in the equity stock market.

• However, they are less risky as compared to equity mutual funds and riskier as compared to most hybrid mutual funds since they have a large tilt towards equity instruments.

Liquidity

• When an investor sells (or redeems) units of these funds, the fund house will pay the sale amount to the investor in 2 working days. (T+2)

Interesting Facts

• As per SEBI norms, if a mutual fund has an equity exposure of less than 65%, they are not considered as an equity focused fund. In this case, these mutual funds would be taxed as a typical debt mutual fund.

• However, if the equity exposure is more than 65%, it is considered as an equity focused mutual fund and is taxed just like a typical equity mutual fund.

• There is flexibility for rebalancing to make the most of market conditions. This means that if the equity markets become overvalued, the manager can remove some exposure out of equity into debt.

• Equity Savings Mutual Funds provide diversification benefits. This helps reduce the risk of investment.  

Tax Implications

• An Equity Savings mutual fund lies above the 65% cut off to be considered as an equity focused mutual fund. Hence, it is taxed as an equity fund.

• When investors sell their Equity Savings Mutual Fund units, the difference between the Sale Amount and Purchase Amount is typically called “Capital Gain” or “Capital Loss” (if sale amount is lesser than the purchase amount).

• The tax that the investor must pay on Capital Gain is –
• Situation 1 – If the Equity Savings Mutual Funds are sold within a period of a year from investment, the Capital Gains earned (called Short Term Capital Gains) are taxed at 20% of the gain.
• Situation 2 - If the Equity Savings Mutual Funds are sold after a period of 1 year from investment, the Capital Gains earned (called Long Term Capital Gains) are taxed at 12.5% of the gain.

• There is no tax in case of “Capital Loss”.

• For any dividends/payouts received by investors from Equity Savings Mutual Funds, these amounts are added to their total taxable income and tax is required to be paid as per the tax slab.

Where To Invest

• Equity Savings Funds: Best Equity Savings Mutual Funds (2023) (indmoney.com)

• Equity Savings Mutual Funds - Best Equity Savings Funds to Invest in 2023 | 5paisa