Investors often feel overwhelmed and confused with the selection process of the best funds for investment. Out of the different funds available for investment, arbitrage, and traditional equity funds are the two most common choices that investors go for to generate wealth as well as returns. With both types of funds catering to investors of weird risk appetite, careful selection is essential by weighing in various factors like expense ratio, investment assets, financial goals investigated, etc. The following article explores the meaning and difference between Nippon India arbitrage fund and traditional equity funds thereby helping investors to make a sound and informed investment decision:
- Arbitrage Fund:
Arbitrage mutual funds include investment into equity shares and derivatives. Helping investors generate profit from small price fluctuations in stocks and futures, cash, and derivative-based market instruments, the arbitrator mutual funds delivered a unique investment and return-generating opportunity to the investors. With stability, diversification, and low risk, the arbitrage fund serves as one of the safest investment options that investors can select.
- Equity Funds
Equity funds involve investment into stocks of different companies with varied market capitalization. The fund includes large cap, small cap, mid-cap, and even multi-cap stocks from different sectors like healthcare, financial services, banking, etc delivering diversification to the investment portfolio of an investor. With long-term capital appreciation, investors can generate wealth through systematic investments in equity mutual funds. However, equity funds are included in the high-risk category making them a riskier investment option for low-risk appetite investors.
Comparison between Nippon India Arbitrage and Traditional Equity Funds:
The following points enumerate the difference between arbitrage and traditional equity funds under the Nippon India Mutual Fund:
- Risk level
Traditional equity funds are considered to be riskier investment vehicles as compared to arbitrage funds. Offering exposure to the cash and derivative market, arbitrage funds deliver diversification, safety, and growth at the same time.
- Return generating potential
Nippon India arbitrage fund is known for generating moderate but stable returns making them perfect for low-risk appetite investors. On the other hand, equity funds are known for their high return-generating potential making them ideal for investors who are willing to take higher risk for better growth.
- Investment period
The ideal investment period for an arbitrage fund is between six months to 3 years. On the other hand, investment in equity mutual funds is required in a long-term investment horizon lasting for at least three years to generate maximum gains.
- Suitability
Arbitrage funds are perfect for low-risk appetite investors who require immediate returns with minimal risk. Equity funds on the other hand are suitable for investors who can invest a substantial capital outlay for the long term and are willing to take a higher risk for a high-growth opportunity.
Conclusion
Investors looking for stability and moderate returns in a short period can opt for investment into arbitrage funds. However, an investor looking for funds with high growth potential but at a higher risk can go for traditional equity funds. Careful comparison between the two types of funds and individual financial goals and needs can help investors with the right fund selection for investment.