Use Of Arbitrage Mutual Funds In Asset Allocation
Investors India|February 2019

When planning our asset allocations, we usually think about equity and fixed income for our different investment needs. Equity investments are made over long investment tenures (usually 5 years or longer) and primarily for the purpose of capital appreciation.

Use Of Arbitrage Mutual Funds In Asset Allocation

Fixed income investments are made for short to medium tenors (1 to 3 years), primarily to meet our income needs. Apart from these two investments needs, we also should plan for our very short term (less than 1 year) needs e.g. creating an emergency fund to meet sudden expenses, parking one-time cash-flows or surplus funds for a short duration to meet an upcoming expense or investment. For very short term investments, we should ensure that the investment has very low risk (high degree of capital safety) and high liquidity (we can redeem the investment at any time, without incurring any cost).

Liquid funds, ultra-short duration debt funds, money market funds, low duration funds etc. are suitable for very short-term investment needs. These funds invest in money market or debt securities with very short residual maturities and have very low interest rate risk (compared to longer duration debt funds).

They are also highly liquid – liquid funds for example, have no exit loads and redemption requests are processed within one business day (subject to cut-off times). These funds are very popular with corporate and institutional investors for parking their surplus funds.

Retail investors usually keep their surplus funds lying in their savings bank account, but liquid and other very short duration funds can give much better returns than savings bank interest.

Another category of funds known as arbitrage funds can be excellent substitutes for liquid funds. Unlike liquid and other debt funds, arbitrage funds enjoy equity taxation enabling them highly tax efficient returns.

What are arbitrage funds?

Denne historien er fra February 2019-utgaven av Investors India.

Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.

Denne historien er fra February 2019-utgaven av Investors India.

Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.

FLERE HISTORIER FRA INVESTORS INDIASe alt
Thematic Fund Or Sectoral Fund, Which Fund Suits You?
Investors India

Thematic Fund Or Sectoral Fund, Which Fund Suits You?

A thematic fund is a type of mutual fund that focuses on investing in companies based on specific themes or trends.

time-read
2 mins  |
October 2024
Be Kind To Your Kidneys
Investors India

Be Kind To Your Kidneys

The kidney is a vital organ in our body which is four inches long and two and a half inches in width.

time-read
5 mins  |
October 2024
Have You Included A Passive Fund In Your Portfolio Yet?
Investors India

Have You Included A Passive Fund In Your Portfolio Yet?

The assets under management (AUM) of passive funds recently crossed the Rs. 10 lakh mark. While a significant portion of this money comes from institutional investors, such as the Employees Provident Fund Organisation (EPFO), these funds are also gaining popularity among retail investors.

time-read
1 min  |
October 2024
Mutual Fund
Investors India

Mutual Fund

1. SEBI allows mutual funds to buy and sell credit default swaps (CDS)

time-read
4 mins  |
October 2024
Insurance News
Investors India

Insurance News

1. The finance minister has launched a new NPS scheme named NPS Vatsalya

time-read
1 min  |
October 2024
ASK THE EXPERT
Investors India

ASK THE EXPERT

Dear Sir, I attended your webinar on post-retirement financial planning. As advised by your good self, I invested in NPS after retirement.

time-read
3 mins  |
October 2024
Market Mystery: Some Important Investing Lessons from Fund Managers Themselves
Investors India

Market Mystery: Some Important Investing Lessons from Fund Managers Themselves

Mr. Mahesh Patil is the Chief Investment Officer (CIO) of Aditya Birla Sun Life AMC Limited. As the CIO Mahesh oversees INR 3 lakh crore of assets under management.

time-read
6 mins  |
October 2024
How to make a cautious entry into equity funds during a bull market
Investors India

How to make a cautious entry into equity funds during a bull market

The number of mutual fund folios has been rising, with flows via the systematic investment plan (SIP) route reaching new highs.

time-read
4 mins  |
October 2024
All that you need to know to kickstart your retirement planning process
Investors India

All that you need to know to kickstart your retirement planning process

We all enjoy planning for the future. It’s a good idea to plan ahead of time for anything, from the day’s activities to a vacation.

time-read
5 mins  |
October 2024
5 Steps To Achieve Your Financial Goals
Investors India

5 Steps To Achieve Your Financial Goals

From a beach house, a Jaguar, to traveling the world – there are many things in life that we want to accomplish.

time-read
3 mins  |
September 2024