Arbitrage funds are a type of mutual fund that makes money by taking advantage of price differences in the stock market. They buy a stock at a lower price in one market and sell it at a higher price in another market.
Key Features of Arbitrage Funds
Low Risk
Since they rely on price differences and not market trends, the risk is lower compared to equity funds.
Good for Short-Term
They are suitable for people looking to invest for a short period.
Tax Benefits
They are treated like equity funds for tax purposes, which can be beneficial for investors.
Benefits of Arbitrage Funds
Stable Returns
These funds offer steady returns, especially when markets are volatile.
Low Risk
They are less risky than regular equity funds because they focus on market inefficiencies, not stock price movements.
Tax Efficiency
Investors enjoy favorable tax treatment compared to debt funds.
Who Should Invest in Arbitrage Funds?
Investors looking for low-risk investments with better returns than a savings account.
People who want to park their money for a short time, like a few months to a year.
Those who want equity-like returns with lower market risk.
Example
If you have extra money that you don’t need right away but want to keep it safe while earning a decent return, arbitrage funds can be a good choice. They work well when the market is unstable or during times of uncertainty.
Arbitrage funds provide a safe and tax-friendly way to grow your money over a short period!