Money Matters

  • Ifthikar Bashir
  • Publish Date: Apr 16 2018 1:49AM
  • |
  • Updated Date: Apr 16 2018 1:49AM
Money Matters

What are equity savings funds? What is their risk and tax profile? 

Shazia, via email


These are conservative funds and different companies configure them differently. However, the basic idea is that they invest a third of the amount in equity, a third in arbitrage and a third in fixed income. The risk profile is fixed income, but their tax profile is that of equity. Think of them as Monthly Income Plans, which are treated as equity funds from a taxation point of view. Most MIPs don’t go beyond 15-18% in equity, but equity savings funds can be 33% in equity. These are low-risk funds with a relatively low allocation to equity funds.

From a utility point of view, conservative investors trying to seek income from their investment and not wanting to assume great risk, even of the kind found in balanced funds, should look at them. These are desirable funds for conservative investors seeking reasonable returns with great stability.

I am a businessman and have been investing Rs 60,000 a year in LIC Pension Plan since 2011. Now, looking at the market trends and high expense, I am wondering if I should exit it. 

Khurshid Ahmad, Sopore


LIC Pension plan offers you an insurance cover and allows you to invest a part of your premium regularly to build a retirement fund. But the problem is that such hybrid products are inefficient by design, they neither offer you adequate insurance nor help you accumulate sizeable wealth. So, you should consider exiting the policy. You may contact your insurer and find out your options of surrendering this plan.

As a general principle, do not mix insurance and investment. You must always buy a pure-term insurance plan for securing a life cover. Also, it is always better to invest in pure investment products such as mutual funds to achieve your long-term financial goals. If you are looking for tax benefits, you may consider investing in Equity Linked Savings Schemes.


What are debt funds? I have heard they are low risk and better from a long-term perspective. I want to invest for seven years approximately.

Anjum Murtaza, Baramulla


Debt funds are mutual funds that invest in fixed income securities such as bonds and treasury bills. Compared to equity funds, they are low on risk but also generate lower returns. Depending upon the type of bonds they invest in or their investment strategy, these funds can be further classified into medium-term, long-term, short-term, ultra short-term and gilt funds, and fixed maturity plans. Given your time horizon, I would recommend trying out equity mutual funds for better returns as they would mitigate the risk factor to a very large extent.


I have two children. To save for their education, I want to invest around Rs 50,000 per month for a period of 15 years through SIP. I am ready to take risk. Can you suggest some equity funds that would serve the purpose?

Farhat Bashir, via email

Taking risk is a good thing, but when you actually face risk it’s a different situation. One should always try to reduce risk. As such, you can invest in 2-4 good multi-cap and diversified funds. I would recommended you choose from among Aditya Birla Sunlife Advantage Fund, ICICI Pru Value Discovery Fund, Aditya Birla sunlife Pure Value Fund, ICICI Pru Focused Bluechip Equity Fund, DSP BR Opportunities Fund. 

Besides, you should continue your SIP irrespective of how the market is, that’s to say stick with the SIP investment even when the market is going through a bad phase.



I want to invest Rs 1 lakh for a period of one year in such a way that I earn more than a fixed deposit and also get capital protection. How should I do it?

Kounsar, via email


You can choose short-term debt funds to invest in. They will give you better returns compared to fixed deposits and they come without any lock-in period. Although fixed deposits don’t have a lock-in either in the you can withdraw from them even before the maturity date, short-term debt funds will yield better returns. Investing in any equity fund for this short a period might turn out to be disappointing, though.


I am 25 years old and have just started working. What do you suggest for young investors who are entering the markets when they are at an all-time high? Should we stay away?

Abdul Mannan, via email


You are young and have time on your side. Just get into a conservative fund and be regular about it. Don’t invest at one go. That’s the best way to go. Lots of investors have done the waiting in 2017 and a lot have waited in 2016 for that correction. There is a possibility that the correction might happen or might not happen from a long-term perspective. Don’t be fearful and just get into it. But make sure that you do not need this money for the next five years. Be regular and start conservatively with a balanced fund. Then, in three years or so, you will be well equipped to deal with these things yourself.