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
ASK THE EXPERT
Investors India

ASK THE EXPERT

Ques. One of my friends told me that your company provides detailed Retirement plans. I want to know what is the procedure to get my Retirement plan. I will be retiring in March 2025. R.P Gupta, Noida

time-read
3 mins  |
November 2024
How to Naturally Reverse Fatty Liver Disease
Investors India

How to Naturally Reverse Fatty Liver Disease

The liver, located on the upper-right side of the abdomen, is the body’s largest internal organ and plays a critical role in detoxifying the blood and processing nutrients.

time-read
2 mins  |
November 2024
Banking sector which has underperformed in the last two years, now offers a favorable risk-reward profile
Investors India

Banking sector which has underperformed in the last two years, now offers a favorable risk-reward profile

Do you think the market is overpriced? Is yes, should investors refrain from investing in index schemes at the current valuation?

time-read
5 mins  |
November 2024
India will continue to enjoy benefits of a close US relationship and trade will continue to grow
Investors India

India will continue to enjoy benefits of a close US relationship and trade will continue to grow

Q1. The US elections are said to be one of the closest till date, what impact will the election of a Republican / Democratic party have on the US economy and how is that going to affect India in the short as well as the long term?

time-read
3 mins  |
November 2024
Understanding Momentum Funds
Investors India

Understanding Momentum Funds

Momentum funds are a type of investment fund that focuses on companies experiencing positive momentum in factors such as earnings, revenue, and stock price movement.

time-read
1 min  |
November 2024
Risks and opportunities associated with Small Caps
Investors India

Risks and opportunities associated with Small Caps

Small-caps are a stock-picker’s paradise.

time-read
2 mins  |
November 2024
How to navigate your portfolio through bull market a
Investors India

How to navigate your portfolio through bull market a

Indian equities have been in a bull run for the past four years.

time-read
4 mins  |
November 2024
Choosing mutual fund schemes depending on your age to achieve life goals
Investors India

Choosing mutual fund schemes depending on your age to achieve life goals

The choice of mutual fund (MF) scheme might be influenced by one’s risk profile or age.

time-read
3 mins  |
November 2024
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