Why arbitrage mutual funds are becoming attractive?
Arbitrage funds also invest part of their capital into debt securities, which are typically considered highly stable. If there is a shortage of profitable arbitrage trades, funds invest more heavily in debt. That makes this type of fund very appealing to investors with a low tolerance for risk.
Is it a good time to invest in arbitrage funds?
Industry experts say arbitrage funds are a good choice for cautious investors who want to benefit from a volatile market without taking on too much risk. Hence as an investor, if you hold your shares in an arbitrage fund for more than a year, then any gains that are received are taxed at the capital gains rate.
Can arbitrage funds give negative returns?
Arbitrage funds have an exit load of 1-6 months. Remember, widening of the spread differential can lead to arbit-rage funds delivering negative returns for very short periods. Also, assess fixed-income portion of such funds in respect of underlying credit and duration risk.
Are arbitrage funds better than liquid funds?
Liquid funds are much safer in comparison to arbitrage funds, as it invests mainly in debt-related instruments. While arbitrage funds are riskier as the investment returns are dependent on the market volatility. The fund managers get ample arbitrage opportunities during a bullish market.
Is arbitrage fund a debt fund?
Except, arbitrage funds aren’t debt funds! While liquid funds, ultra short term funds and overnight funds are debt funds, arbitrage funds are hybrid funds that only invest a part of their capital in debt instruments.
Are arbitrage funds tax free?
Arbitrage funds are treated as equity funds for taxation. Investors holding for less than a year pay 15\% capital gains tax, while if they sell after a year, they pay only 10\% long-term capital gains tax.
Which arbitrage Fund is good?
Top 10 Best Performing Arbitrage Funds
| Mutual fund | 5 Yr. Returns | Min. Investment |
|---|---|---|
| ICICI Prudential Smallcap Fund – Direct Plan – Growth | 20.57\% | ₹5000 |
| ICICI Prudential Smallcap Fund | 19.32\% | ₹5000 |
| Mahindra Manulife Multi Cap Badhat Yojana Regular Plan Growth | — | — |
| SBI Contra Fund – Direct Plan – Growth | 18.55\% | ₹5000 |
Which is the best arbitrage Fund?
List of Arbitrage Mutual Funds in India
| Fund Name | Category | 1Y Returns |
|---|---|---|
| BNP Paribas Arbitrage Fund | Hybrid | 4.5\% |
| L Arbitrage Opportunities Fund | Hybrid | 4.5\% |
| UTI Arbitrage Fund | Hybrid | 4.6\% |
| Aditya Birla Sun Life Arbitrage Fund | Hybrid | 4.7\% |
What is better than liquid funds?
SEBI limits every overnight fund’s investments to low-risk debt securities. Thus, overnight funds are considered to be safer than liquid funds and other debt funds. An overnight fund generates returns through the interest it earns from its overnight portfolio of investments.