Mutual fund investments: Experts bet high on this scheme for short-term investment goals

Mutual fund investments: Looking for a short-term investment option? Equity saving funds can be a good option as it helps you avoid Long Term Capital Gain Tax or LTCG Tax and get returns which are higher than the debt mutual funds or bank debt schemes like bank deposit, bank FD, bank RD etc. In fact, equity saving funds are designed in such a way that outperforms Public Provident Fund or PPF also. Hence, tax and investment experts advise equity saving funds to the mutual fund investors who want to invest for short-term means, not more than 2 years.

Speaking on the equity saving funds Pankaj Mathpal, Managing Director, Optima Money Managers said, "These are debt-oriented Hybrid Schemes. These funds contain exposure in Equity, debt and arbitrage. It qualifies for equity taxation, though actual exposure in the equity is low. In equity saving schemes, equity exposure is around 25 per cent. This scheme is ideal for those investors who are looking for investment for around 1 year to 2 years. This scheme suits to the senior citizens also because senior citizens generally prefer to such investment options that have limited equity exposure."

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Elaborating upon the Hybrid Funds Kartik Jhaveri, Manager — Wealth Management at Transcend Consultants said, "Hybrid funds are a mix of debt and equity investments and mutual fund houses can invest up to 35 per cent in the hybrid funds." He said that in the equity saving funds, what an investor enjoys is returns of equities with no taxation as LTCG becomes applicable on equity mutual funds, which are invested for more than three year period.

Asked about the equity saving funds that a mutual fund investor can think of investing Pankaj Mathpal recommended ICICI Prudential Equity Saving Fund citing, "The scheme has around 35 per cent in equity as on date. The scheme has delivered 9.52 per cent return in the last one year."