Best Performing Arbitrage Mutual Funds to Invest in November 2024
Arbitrage Mutual Funds are hybrid mutual funds that make a profit from price differences between the market. If you want to invest your money for more than one year and seek the best post-tax returns, in this situation you should consider investing in arbitrage mutual funds.
Arbitrage mutual funds utilize differences in prices between cash and derivatives markets. The fund managers actively seek arbitrage opportunities by exploiting the price variation to generate returns. If there are no arbitrage opportunities available in the market, they may invest in equities and debt securities.
Arbitrage Opportunities in Volatile Markets
However, it needs to be considered here that there can also be times when the number of available arbitrage opportunities within the market is relatively low. It takes place when the market leads in a single direction. In this case, a volatile market helps arbitrage funds because it gives the investor more arbitrage opportunities.
2 Best Arbitrage Mutual Funds
- Kotak Equity Arbitrage Fund
- Nippon India Arbitrage Fund
Long Term Capital Gain (LTCG) Tax
Arbitrage funds are taxed under the same rules as equity mutual funds. This implies that the tax rate for a capital gain/loss after holding investments over a period of more than one year is 12.5%. If investments are held for less than one year, then the rate will be short-term capital gains of 20%.
Conclusion
Stock market volatility can benefit arbitrage funds because it will provide better arbitrage opportunities. Additionally, returns from arbitrage funds are not sensitive to the interest rate regime. They simply go for arbitrage opportunities, and thus they can be perfect for those investors who prefer not to decide their investments on interest rate movements.
