What Makes Arbitrage Funds a Smart Investment Choice?
16 Jan 2025
What Makes Arbitrage Funds Click
An arbitrage mutual fund leverages price differences of the same asset in different markets to generate returns. It buys and sells securities simultaneously to capitalize on temporary price discrepancies, offering a low-risk investment option.
Advantages of Arbitrage Funds:
• Low Risk :
Since arbitrage funds hedge their positions, they are less affected by market fluctuations compared to pure equity funds.
• Liquidity :
These funds usually provide good liquidity, allowing investors to redeem their investments quickly.
• Diversification :
By using multiple arbitrage strategies, these funds can offer diversified returns
| Illustration |
Traditional Saving Instruments |
Arbitrage Funds |
|---|---|---|
| Invested Amount | Rs 25 Lakhs | Rs 25 Lakhs |
| Returns* | 7.16% | 7.16% |
| Tax Treatment | At slab rate | Long term capital gains |
| Effective Tax Rate^ (Including Cess) | 31.20% | 13% |
| Post Tax Return | 1,23,152 | 1,55,730 |
| Additional Return | 32,578 |
* Returns have been assumed. Past performance is not an indicator of future performance
^ Tax slabs have been assumed at the highest slab and the same can vary basis the cumulative income of the investor. Please consult a tax advisor for further details / queries.
Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. The information provided is generic in nature and is for informational purpose only. Please consult your financial advisor before taking any decision.
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