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Sunday, March 9, 2014

Arbitrage Mutual Funds - Investing in Volatile Stock Markets

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Arbitrage Mutual Funds

 

Arbitage funds have many inherent benefits.

 

This is something where you can get safe return like debt but taxation of equity. Though at one instance I can say that debt is also volatile as it depends on interest rate movement, arbitrage funds are something which derives return from equity market volatility. You will agree with me that when interest rates are getting volatile, you cannot expect equity market to remain stable.

 

So when you find everything volatile arbitrage funds will support your portfolio.

 

Advantages of Arbitrage Mutual Funds Investing

The first and foremost advantage among arbitrage fund is that it gives good return when market is volatile. When you don’t find well established active equity funds giving returns, you will find arbitrage funds answering the volatility and giving returns.

 

The second advantage is that being an equity fund , the returns are tax free after 1 year as it comes under long term capital gain tax and also dividends announced are tax free.

 

What should investors do?

As I always say that investors should invest as per their risk tolerance, return expectation and goals targeted. So Investments in arbitrage funds should also be according to the same. If investors or advisers can figure out some opportunities like expectation of fall in interest rates (which we have been expecting for the 2 years), then its possible that you make good money from the same in short term. But when things are uncertain in stock market and even in debt market then arbitrage funds can be a good bet. Do keep in mind that being an equity oriented fund arbitrage funds are not devoid of risks, but yes less risky than pure equity or equity oriented hybrid instruments.

 

 

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

 

 

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