Prajna Capital - An Investment Guide

Here’s an insight into the world of arbitrage funds — what you must know before taking exposure in such funds. HOW IT WORKS For starters, an arbitrage fund tries to take advantage of price discrepancies for the same asset in different markets. For example, if the stock price of ABC Ltd is quoting at Rs 100 and its future price is Rs 110 in the derivatives market, then the arbitrage fund can buy the stock in the spot market and sell it in the futures market and gain Rs 10. Put simply, arbitrage funds are fixed income products that are free from equity risk. They are affected by the stock market trend (bullish or bearish) to the extent that the demand for stocks and liquidity in the markets is impacted, which in turn affects the arbitrage opportunities. Another factor that affects the arbitrage funds is interest rates. Fund managers believe that when interest rates are high, people instead of buying stocks upfront prefer to deal in the futures market as it requires only a fractio...

There are some fund houses that offer a life insurance benefit if you opt for a systematic investment plan in their schemes. It was initiated by DSPML Mutual Fund in 2005 with the name of Super SIP. Some other players like Birla Sun Life Mutual Fund, Kotak Mutual Fund and Reliance Mutual Fund have come out with the same concept. You will have to look into the details to see which one suits you. For instance, here are some questions you can ask as a guideline. Is there a minimum amount that has to be invested in the SIP? Must the SIP be of a certain tenure? Are all equity schemes of AMC, eligible or is it offered only on certain schemes? Will the insured amount be given to the nominee or be used to continue with the SIP so that the investment plan continues? Will all the insurance expenses be borne by the AMC? Is there any age limit to avail of this scheme? Now coming to your second question; yes, if you switch your units from one scheme to Equity Linked Saving Scheme ( ELSS ) of the sa...