Tuesday, June 28, 2011

What are Arbitrage Funds

Arbitrage funds are one type of mutual fund schemes that invest in the equity markets. These funds work differently than other equity funds as these funds buy stocks in the spot market and sell them in the derivative market and earns from the price difference. These funds generates good returns especially when the markets are volatile as there are better arbitrage opportunities.

Remember, arbitrage funds attracts short-term capital gain tax of 10% while there is no long term capital gain tax if held for more than one year.