Arbitrage funds are gaining popularity amongst investors in India as they provide a novel combination of stability and returns. These funds make the most of the worth differences between different exchanges and markets and have emerged as a lucrative investment opportunity.
In particular, those that are on the lookout for low-risk investment opportunities and higher returns in comparison with liquid assets prefer investments in Arbitrage fundsRead on to learn why arbitrage funds have gotten increasingly popular amongst investors.
What are arbitrage funds?
Arbitrate funds exploit the worth differences between different exchanges to make profit. For example, a fund manager may buy a stock at a cheaper price on the NSE and sell it at a better price on the BSE if there may be a discrepancy within the stock value between the 2 exchanges.
Arbitrage funds may make profits by making the most of price differences between the present and future value of a stock.
Given the relatively low risk of arbitrage funds, investors are increasingly turning to this category. If you’re ready put money into mutual fundsCheck out one of the best arbitrage funds on the favored mutual fund platform Dhan.
What makes arbitrage funds so popular?
Did you realize that arbitrage funds in India recorded the very best inflows amongst hybrid funds at INR 90,846.11 crore in FY2024? Why do you’re thinking that these funds attract so many investors? In this section, you’ll learn why these mutual funds are so popular.
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Stable returns with low risk
One of the foremost benefits of arbitrage funds is their ability to generate returns with low risk. The strategy of the fund managers of those funds is to take advantage of the pricing inefficiencies available in the market. This approach is principally about hedging against potential losses, which makes these funds less volatile in comparison with equity funds.
Investors looking for a protected investment during market fluctuations often find arbitrage funds a reliable selection. Some arbitrage funds even outperform liquid mutual funds and traditional fixed-income investments.
Investors who invest their savings in arbitrage funds enjoy significant tax advantages. In India, these funds are treated like equity funds for tax purposes. This implies that investors can profit from long-term capital gains tax rates.
For Indian investors, this is a vital point to contemplate. Compared to bond funds, the long-term capital gains tax on equity funds is lower. This makes arbitrage funds a gorgeous option for those trying to maximize their after-tax returns.
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Portfolio diversification
Arbitrage funds will not be directly tied to the performance of the stock market. Their returns don’t result from market movements, but from price differences. This makes arbitrage funds an excellent solution to diversify your portfolio.
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Liquidity and suppleness
For many investors, liquidity is a very important consideration when investing their money in mutual funds. Arbitrage funds offer good liquidity, allowing investors to enter and exit positions with ease. This is especially useful for investors who might have access to their funds at short notice.
The track record of arbitrage funds speaks for itself. Over the past few years, these funds have consistently delivered stable returns, making them a reliable investment vehicle.
Amid economic uncertainties comparable to inflation and unpredictable markets, investors get a much-needed anchor through the consistent performance of arbitrage funds. Regardless of the market direction, these funds can generate consistent returns.
Diploma
Arbitrage funds are a gorgeous investment option for investors on account of their combination of low risk, stable returns and tax benefits. Both novice and experienced investors on the lookout for stable returns turn to one of the best arbitrage funds.
