Create your very own Auto Publish News/Blog Site and Earn Passive Income in Just 4 Easy Steps
Arbitrage funds are gaining popularity among investors in India as they offer a unique combination of stability and returns. These funds take advantage of the price differences between different exchanges and markets and have emerged as a lucrative investment opportunity.
In particular, those who are looking for low-risk investment opportunities and better returns compared to liquid assets prefer investments in Arbitrage fundsRead on to learn why arbitrage funds are becoming increasingly popular among investors.
What are arbitrage funds?
Arbitrate funds exploit the price differences between different exchanges to make profit. For example, a fund manager may buy a stock at a lower price on the NSE and sell it at a higher price on the BSE if there is a discrepancy in the stock value between the two exchanges.
Arbitrage funds can also make profits by taking advantage of price differences between the current and future value of a stock.
Given the relatively low risk of arbitrage funds, investors are increasingly turning to this category. If you are ready invest in mutual fundsCheck out the best arbitrage funds on the popular mutual fund platform Dhan.
What makes arbitrage funds so popular?
Did you know that arbitrage funds in India recorded the highest inflows among hybrid funds at INR 90,846.11 crore in FY2024? Why do you think these funds attract so many investors? In this section, you will learn why these mutual funds are so popular.
-
Stable returns with low risk
One of the main advantages of arbitrage funds is their ability to generate returns with low risk. The strategy of the fund managers of these funds is to exploit the pricing inefficiencies in the market. This approach is mainly about hedging against potential losses, which makes these funds less volatile compared to equity funds.
Investors seeking a safe investment during market fluctuations often find arbitrage funds a reliable choice. Some arbitrage funds even outperform liquid mutual funds and traditional fixed-income investments.
Investors who invest their savings in arbitrage funds enjoy significant tax benefits. In India, these funds are treated like equity funds for tax purposes. This means that investors can benefit from long-term capital gains tax rates.
For Indian investors, this is a crucial point to consider. Compared to bond funds, the long-term capital gains tax on equity funds is lower. This makes arbitrage funds an attractive option for those looking to maximize their after-tax returns.
-
Portfolio diversification
Arbitrage funds are not directly tied to the performance of the stock market. Their returns do not result from market movements, but from price differences. This makes arbitrage funds an ideal way to diversify your portfolio.
-
Liquidity and flexibility
For many investors, liquidity is an 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 particularly beneficial for investors who may need 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 such as 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 an attractive investment option for investors due to their combination of low risk, stable returns and tax advantages. Both novice and experienced investors looking for stable returns turn to the best arbitrage funds.
Create your very own Auto Publish News/Blog Site and Earn Passive Income in Just 4 Easy Steps
