How Much Return To Expect From Arbitrage Mutual Funds?

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Mutual funds, of which Arbitrage mutual funds are a type, are investment funds that pool the money from many investors to purchase securities. These investors are mostly individuals investing in small amounts. Mutual funds have their advantages like diversification, liquidity and professional management. However, they also have disadvantages like mutual fund fees and expenses. The first modern investment fund was established in the Dutch Republic. It was made to control the financial crisis by Abraham. The United States has $21 trillion worth of mutual funds as per the surveys of 2018. 

Mutual Funds

Mutual funds are essential tools of investment as they help people with less income to invest and get long term benefits. They are very beneficial as using these ordinary people can invest small amounts of regular basis and get good returns. Mutual funds give excellent results if the investments are made on a daily basis with consistency. In the long term, mutual funds offer good returns; people who regularly invest along with consistency get good returns in a long time. People often ignore the long term benefits, and because of the short term market fluctuations withdraw their investments. This is a huge mistake as these funds perform optimally in the long run; the short term market fluctuations affect them adversely. If proper consistency is maintained, then these funds give very high returns. 

Arbitrage Mutual Funds

Arbitrage mutual funds are hybrid funds as they have an option of investing in small fractions in debt markets. These mutual funds generate returns by leveraging money in cash and derivatives market. Arbitrage mutual funds are suitable for investors who want less risk; these mutual funds are volatile and safe. The return on Arbitrage mutual funds is higher as they perform more efficiently as compared to other equity funds. Arbitrage mutual funds have an unpredictable return, but they are more suitable for investors who want less risk and better returns. Arbitrage mutual funds work by buying shares from the cash market and selling them at a higher price in the future derivative market.

Arbitrage mutual funds

The difference between the purchase and the sale price is the return. The taxation policy on Arbitrage mutual funds is the same as equity mutual funds; if they are sold before one year, then 15% tax is levied. However, if Arbitrage mutual funds are sold after one year, later 10% is levied on capital gains. 

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Reasons For Investing In Arbitrage Mutual Funds

1. Negligible Risk

All investment tools have some volume of risk; Arbitrage mutual funds have meagre chances of risk. Even during market volatility, Arbitrage mutual funds give better and more consistent returns than other short term mutual funds.

2. Returns

Arbitrage mutual funds give higher and more consistent returns as compared to other short term funds. Even in a low rate, environment these are more lucrative options to invest. 

3. Taxation

The investor has to pay tax on capital gains only when they make higher gains than 1 lakh rupees in one financial year. If the benefits are less than 1 lakh rupees, then they are counted as tax-free.

Arbitrage Mutual Funds

Seven Best Performing Arbitrage Mutual Funds

BNP Paribas Arbitrage Fund, Edelweiss Arbitrage mutual fund, L&T Arbitrage opportunities funds, Aditya Birla Sun Life Arbitrage mutual funds, Kotak Equity Arbitrage mutual funds, ICICI Prudential Equity Arbitrage mutual funds and Invesco India Arbitrage mutual funds are the best mutual fund performers. These funds are highly reliable and give good returns. These funds require regular long term investment and consistency. Arbitrage mutual funds provide better results if the stakes continue for longer durations. These funds are excellent performers in the longer run.

How Much Return Can We Expect From Arbitrage Mutual Funds

Arbitrage mutual funds perform very efficiently, and they give good returns even during market fluctuations. These funds are termed as the best market performers as they provide very consistent returns with negligible risk. The low-risk factor, along with consistent returns, makes Arbitrage mutual funds one of the most suitable investment options. 

BNP Paribas Arbitrage Fund

It has a NAV of rupees 12.402 and net assets of rupees 663 crores. BNP Paribas Arbitrage Fund gives 1.8% interest in just three months. If the investments stay consistently for more than one year, then the investor gets around 6.4% interest on their investments.

Arbitrage Mutual Funds

Edelweiss Arbitrage Mutual Fund

It is a very consistent fund with a NAV of 14.8000 and net assets of almost 3000 crore rupees. These investments give an average of 2% interest in 3 months. If investments continue consistently for more than one year, then the investors can get an average of 6.7% interest.

L&T Arbitrage Opportunities Funds

These have minimal risk and give an interest of 1.8% in 3 months. If regular and consistent investments are made in L&T Arbitrage opportunities funds, then the investors can get an interest of 6.4% in 1 year.

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Aditya Birla Sun Life Arbitrage Mutual Funds

It is a very consistent Arbitrage mutual fund with net assets of 3,254 crore rupees. Aditya Birla Sun Life Arbitrage mutual funds give an interest of 1.6% in 3 months. If one invests in Aditya Birla Sun Life Arbitrage mutual funds consistently for more than one year than the investors can get an interest of 6.4% on their investments.

Kotak Equity Arbitrage Mutual Funds

These are very reliable and consistent Arbitrage mutual funds. Kotak Equity Arbitrage mutual funds give an interest of 1.7% in just three months and an interest of 6.4% if one maintains the investments for more than one year.

ICICI Prudential Equity Arbitrage Mutual Funds

These mutual funds by ICICI are a very consistent Arbitrage mutual funds with net assets of 8000 crore rupees. ICICI Prudential Equity Arbitrage mutual funds give an interest of 1.8% in just three months, and if one maintains the investments for more than one year, then the investor would earn 6.3% interest on their investments. 

Arbitrage Mutual Funds

Invesco India Arbitrage Mutual Funds

These have a NAV of 24.2000 and net assets of 350 crore rupees. Invesco India Arbitrage mutual funds give an interest of 1.6% in just three months, and if these investments continue for more than one year, then they can earn an interest of 6.3% and even more. 

Conclusion

Arbitrage mutual funds are very efficient and consistent mutual funds. These mutual funds have minimal risk as compared to other equity mutual funds, and they earn higher returns. Investors who are looking for low-risk funds should prefer Arbitrage mutual funds as they have minimal risk and still give high returns. We advise the investors maintaining their funds consistently as, without patience, money cannot grow. If one consistently invests for long durations in Arbitrage mutual funds, then they can earn very high returns. So, the low-risk factor, easy taxation policy, and high consistent returns make Arbitrage mutual funds the ideal investment option for people who want consistent returns with negligible risk.

These funds can easily earn a 1.5% interest in 3 to 6 months. But, it is preferable if one maintains the investments for at least one year. So, these funds can earn 6% interest and even more. These mutual funds require consistent investments and patience to get good results. All investments take time to grow. As a result, patience is the key to growth. 

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