Arbitrage Mutual Funds are a hybrid fund that is equity-oriented, it is the scheme that offers grip over the markets. These schemes have pricing variations, the fund manager purchases the stocks at this variational pricing over two exchanges and earns profits over the selling price and buying price, respectively. Unlike the other funds where the fund manager sells the funds when the market is offering better pricing, in this scheme, the fund manager sells the funds only when there is scope e of earning definite returns.
And when it comes to inquiring about risks, the risk factor is like that of the debt funds. But the arbitrage fund is the best way of investment who wishes to invest in an equity fund or equity-related instruments but do not want any risks, for that kind of people these hybrid funds are a better opportunity to park their money to earn higher returns than the other debt funds.
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Risks:
In these schemes there is no guarantee of returns, though there is no equity exposure risk, the returns are low but if an investor holds for a period of 5 to 8 years then an investor could expect 8% returns.
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