Is It a Good Idea to Invest in Arbitrage Funds?

Arbitrage mutual funds works on the principle of price mismatching. The difference in the price of share in the spot and derivative market is the profit earned by such funds. These funds are low risk investment therefore, if you don’t want to loose your money in the financial market, then you may opt for arbitrage fund. Also, according to the experts, arbitrage funds yield better returns during market volatility thus, if you are sensing some sort of fluctuation in the market then you may park your cash in the top performing arbitrage funds.

Being a low risk investment, arbitrage funds are always a good choice for portfolio diversification. These funds can also prove to be tax efficient as the taxes imposed are similar to the equities. In my view, there is no harm in parking some amount of money in the arbitrage fund, rest is up to you.