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CAUTIOUS AGGRESSION WITH EQUITY SAVINGS FUNDS
The Morning Standard
|September 16, 2024
AN equity savings fund, as per SEBI's definition, is one of the lower (not to be mistaken with Low) risk investment instruments categorized as Equity for taxation purposes.
However, it can invest in equity and debt instruments as well as arbitrage opportunities using hedging positions. Whereas, the equity component offers growth and appreciation of capital, the upside can be constrained but resultantly, risk is also limited due to the inbuilt arbitrage component.
The arbitrage portion of these funds allows the biggest advantage as far as stable returns are concerned.
Essentially, it seeks to capitalize on pricing inefficiencies in the equities market's cash and derivative components. As a result, the fund's overall stock exposure is partially hedged, lowering volatility as compared to an aggressive hybrid fund with wholly unhedged equity exposure.
This story is from the September 16, 2024 edition of The Morning Standard.
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