Arbitrage mutual funds help reduce risk in your investment portfolio by taking advantage of price differences in the stock market. These funds buy stocks in one market and sell them in another to earn profits with low risk. They are useful for investors who want stable returns without taking high risks. Including arbitrage funds in your portfolio helps you balance your investments and protect against market ups and downs.
What is an Arbitrage Mutual Fund?
An arbitrage mutual fund is a type of mutual fund that earns profit by buying and selling the same stock in different markets at different prices. For example, if a stock is cheaper in the cash market and costlier in the futures market, the fund buys it in the cash market and sells in the futures market to make a small profit.
These small profits add up over time and provide stable returns. The best part is that the risk is very low because both buying and selling happen together.
How Does Arbitrage Help in Diversification?
Diversification means spreading your money across different types of investments so that if one goes down, others can balance it out. Arbitrage funds are good for this. They are not affected much by market ups and downs. So, when stock markets are volatile, these funds give your portfolio some safety and balance.
Adding arbitrage mutual funds reduces overall risk and helps you earn steady returns even during uncertain market times.
Who Should Invest in Arbitrage Funds?
Arbitrage mutual funds are best for people who:
- Want low-risk investments
- Are looking for better returns than fixed deposits
- Want to invest in equity but with lower risk
- Are planning to stay invested for 3 to 6 months
These funds are good for short-term goals and help protect your money during market volatility.
Are Arbitrage Funds Safe?
Yes, arbitrage funds are considered one of the safest types of mutual funds that invest in equity markets. They don’t fully depend on market movements. They earn from the difference in prices across markets, which keeps your money safe from high ups and downs.
However, returns may not be very high. They are better than savings accounts and fixed deposits in many cases, especially if held for a few months.
What Are the Tax Benefits of Arbitrage Funds?
Arbitrage funds are taxed like equity funds. If you stay invested for more than 1 year, you pay only 10% tax on gains above ₹1 lakh. If you sell before 1 year, tax is 15% on the profit.
This makes them more tax-efficient compared to many debt funds or fixed deposits, especially for short to medium-term investments.
How to Add Arbitrage Funds in Your Portfolio?
You can add arbitrage mutual funds through any mutual fund platform or demat account. Look for funds with a good track record, low expense ratio, and trusted fund managers.
You can also invest through SIP (Systematic Investment Plan) if you want to invest small amounts regularly. It is easy, flexible, and helps build a strong portfolio over time.
Contact Angel One Support at 7748000080 or 7771000860 for mutual fund investments, demat account opening, or trading queries.
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