This week, ICICI Prudential Mutual fund has launched new scheme “ICICI Dividend Yield Equity Fund”. This is an open ended scheme launched by ICICI Prudential Mutual fund. Generally, I would not provide NFO analysis as there are several existing MF schemes which are doing good and New Fund Offers are only kids out of them. Ms. Sravya, one of the regular readers of our blog has forwarded the email of this MF Scheme, asking my view on this. She wanted to invest a lump sum amount which she got from Variable Pay from her company. In this article, I would provide my analysis about ICICI Dividend Yield Equity Mutual fund and whether this is good for investment or not?
What is the scheme objective of ICICI Dividend Yield Equity Mutual fund?
This mutual fund scheme objective is to invest in a diversified portfolio of equity and equity related instruments which offer attractive dividend yield. Attractive Dividend yield means Dividend Yield greater than Dividend Yield of CNX Nifty Index.
Details of ICICI Dividend Yield Equity Mutual fund
- It is open ended scheme
- NFO opens: 25th April, 2014
- NFO Closes: 9th May, 2014. It re-opens for subscription after 1-2 weeks after this.
- Price per unit: Rs 10
- Offers growth and dividend options. Dividend amount is paid on a regular basis and under growth option, the amounts are re-invested
- Minimum investment of Rs 5,000 and multiples thereof
- No entry load
- Like any other mutual fund, NRI’s can invest in this fund with repatriation basis.
- NFO details about ICICI Dividend Yield equity fund is available here
Where does this scheme invest?
It invests 80% to 100% in equity related instruments and 0% to 20% in debt related instruments. This scheme invests in a diversified portfolio of equity instruments which offers an attractive dividend yield.
Mr. Nimesh Shah, MD and CEO, ICICI Pru Mutual fund say “Companies with a good track record paying high dividend yield are seen as a better investment option. Investing in such options is a one of the best value investing strategies”.
Currently ICICI Prudential Mutual fund has assets under management of Rs 1.06 Crores and is the second largest mutual fund house in India after HDFC Mutual fund house.
Negative points about ICICI Dividend Yield equity fund NFO
- As I said, New Fund Offers come into the market and test themselves. Some of them would be successful and some may fail. Concept of dividend yield is good, but its execution is based on the fund manager.
- There are several dividend yield mutual fund schemes available which have already proven this concept and are successful. Why don’t you consider them?
- Stock Markets are peak now. Investing 80% to 100% in equity stocks through this mutual fund is high risk at this point of time.
- The minimum SIP amount is Rs 2,000 per month, which makes it un-attractive from the SIP point of view.
What about taxation if we sell such MF schemes after some time?
- Dividends received through such scheme are tax free in the hands of the mutual fund unit holder.
- If you are opting for growth option, since this is equity fund, any capital gains or returns earned from such scheme after 1 year are completely tax free. However, if you sell before 1 year, these are treated as short term capital gain and such capital gains are added to your taxable income and you need to pay income tax based on your income tax slab.
Also Read: Top 5 ELSS Mutual funds to save tax
Conclusion: While I would not say NO to this ICICI Dividend yield equity fund scheme, consider all these risks and invest part of your regular monthly investment into such schemes. I would personally avoid investing lump sum amounts into such schemes now.
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ICICI Pru MF launches Dividend Yield Equity Fund