I am 70 years old and have been investing in four funds through SIP. Should I invest in equity savings fund to reduce the risk?
- A.K. Jain
Transcript: It depends on the reason why you want to reduce the risk and whether your regular income is dependant on that money. If you are worried of the volatility, then you should definitely do it. Equity savings fund is a scheme with conservative allocation to reduce risks. It invests one third of the corpus in equity, one third in arbitrage opportunities and one third in fixed income. It will help you to get stable returns and beat inflation. Also, the volatility in comparison to an equity fund would be much less. But you won't be able to derive anything more than that because only one third of the money is invested in equity.
If you are not deriving income from this money, you should reconsider whether you should do this or not. And if you are deriving an income out of this money, invest it in equity savings fund. Some of the conservative equity savings funds are HDFC Equity Savings Fund, SBI Regular Savings Fund and Reliance Equity Savings fund. However, long term track records of these kinds of funds are not available.
I would like to add one more thing. Tax treatment of returns from equity savings fund is at par with equity funds because of the arbitrage exposure. Earlier, long term gains from such funds were tax free. But now as per the Budget 2018, the long term capital gains in excess of Rs 1 lakh will be taxable at 10 per cent. But it will be still more beneficial. Also, if you mount a systematic withdrawal plan you can defer the tax liability for many years.