Sky-high Stock Market! What should investors do?

Markets are on fire in the uncharted territory, it continues to remain high. It is hard to anticipate when it is going to reach the saturation point! At the same time, the question on everyone’s mind - Should we just watch the market go sky-high without participating? Is this a good time to enter into the market? Clearly, it’s a debatable question! Market never stops surprising, it provides opportunity to investors in all sorts of time in some way or the other. It paves way for knowledgeable investors and provides various entry points. One such entry point for investment is through Equity Savings Fund (ESF) which is best suited for the current senario. So, what is ESF? What is the speciality of ESF? Let’s find out.

Hybrid fund

ESF is a Hybrid fund. Hybrid fund is an investment fund that is characterized by diversification among two or more asset classes. These funds typically invest in a mix of stocks and bonds.

Different type of hybrid funds:

• Conservative Hybrid
• Equity Savings Fund
• Dynamic asset allocation
• Aggressive Hybrid

 Conservative hybrid is a low risk, low return product which is not tax efficient Aggressive hybrid will invest more in equity (65% to 80%). It is high risk but at the same time, it is highly tax efficient. Naturally investors look for low risk, high return products which are also tax efficient. In that case don’t search any further, the answer is Equity Savings Fund!

Equity Savings Fund (ESF)

What is the specialty of Hybrid ESF? Here, the investment is made in three categories. First category is unhedged equity 35%, second one is arbitrage opportunity 32% and third one is Debt 33%. Out of these 3 categories, the energy equity and debt equity adds to 67% which is higher than the requirement of equity classification (60%). In these funds, equity and debt portions are comparatively low risk categories.

Return potential of ESF

We can expect moderate returns from ESF. See the table below, they give return in the range of 8 – 12%. When markets are better positioned, our return will be better, when the markets are in downhill, ESF returns will be low, but the risk and volatility will be lower. In the following table, best case is when equity return is 20% and debt return is 9% , investor in esf will get 12.8% return, on the other hand when market falls at -10% and debt also doing bad and gives 7%, esf investor will get around 1% return

Key features of ESF:

• ·         Low risk
• ·         Tax efficient
• ·         Potential for Growth

Increase in ESF Investment

In the last 3 years, from 2015 to 2018 these types of funds have been very popular. Those who want slightly better return with risk and to overcome the mortality expected in near term, can consider investing in UTI Equity Savings Fund.

This fund is best suited for those who are planning to move their Bank Deposits to Mutual Funds. It is also suitable for first time investors because there is low risk and low volatility. In the long run, these funds can generate better returns which are tax efficient.

Existing ESF funds in the market

New Equity Savings fund in the Market ( NFO)

Currently UTI is offering Equity Savings Fund Investment which is open from August 10^th to August 24^th. To make an investment in this fund, Mailto: radhaconsultancy2014@gmail.com