The best part about these funds is that they are subject to equity fund taxation and at the same time are structured like MIP like funds.
DSP BlackRock Mutual Fund announced the launch of its new fund offer DSP BlackRock Equity Savings Fund which is currently open for subscription and closes on March 22. DSP BlackRock is the latest fund house to launch an equity saving scheme after the changes in tax structure of debt funds in Union Budget 2015.
This new category, equity savings funds, offer a little of everything. They allocate money to equities & equity related instruments, and fixed income. They aim to generate returns by diversification. Such funds invest in fixed income and arbitrage to protect the investors from short term volatility and equity for capital gains.
The best part of these funds is that they are subject to equity fund taxation and at the same time are structured like MIP funds. MIP funds however are subject to debt fund taxation.
Investors
Equity savings funds are suitable for the following:
- First time investors who seek partial exposure to equity with less volatility and greater stability
- Investors seeking moderate capital appreciation with relatively lower risk
- Those who are looking for potential regular income (in the form of tax-free dividends)
- Investors investing with a horizon of 2-3 years (tax efficient as compared to debt funds and banking products)
- Retirees who seek potential regular income, moderate exposure to equity and also desire stability in their portfolios
When compared with Nifty 50 index, such funds have provided a better hedge over a period of a year.
|
|
YTD |
1-month |
3-month |
1-year |
|
Category |
-4.12 |
3.71 |
-3.24 |
-5.18 |
|
Nifty 50 |
1.22 |
6.98 |
-3.06 |
-12.76 |
*data as on 3/18/2016 from Valueresearchonline.com
Conclusion
Financial advisors suggest that investors who don’t want to lock in their funds for three years in debt funds can invest in equity saving funds.
Anup Maheshwari, EVP and Head Equities & Corporate Strategy, DSP BlackRock Investment Managers said, “Many investors may appreciate a product combining the benefits of equity, debt and arbitrage opportunities which offer the potential for long term capital appreciation with lower volatility.’’
DSP BlackRock Equity Savings Fund’s equity exposure will generally be around 25%, with the option to go up to 40%. It will invest around 35% of its portfolio in debt and the balance 40% in arbitrage.
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