Benefiting the clients through differential pricing - Arbitrage Mutual Fund

There was a person named Vikrant. He owned a garment shop in a small city. He used to make his bulk purchase from Mumbai at lower costs and resell it in his city at relatively higher cost. For example, if a regular T-shirt would cost him Rs. 300/- then, he would sell it at a rate not less than Rs. 600/-. Hence making a double profit. This is called arbitrage opportunity. Taking the advantage of the difference in the prices of two markets is the strategy followed by many business firms. However, it lasts for a short-term.

Arbitrage Mutual Fund is a unique scheme of the mutual fund industry. Unique because the investment and disinvestment take place simultaneously. In simple terms, the Arbitrage Mutual Fund deals in two different markets viz, the stock market and derivative market. In the stock market, the dealings are done in cash. The derivative market also called as futures market is a place where the dealings are done on the contractual basis, and no cash is involved. Hence, you buy in cash, but your sell is not in cash.

Initially, for some time, Vikrant got a huge success and was able to earn profits that kept on rising. But, as people knew the secret of his business it became difficult for him to continue with the same strategy. He had to either bring down his profit margin or had to lose its customers to the competitors. Thus, zeroing the scope of further profits.

In the same way, the profits from arbitrage fund are also short-lived, and as more and more investors start investing, the gain narrows down. Hence, it is suitable only for short term investing. People tend to believe that Arbitrage MF performs ably in the bullish and bearish market. But, they are mistaken here. When the market is bullish, then it is a clear fact that the price of shares in the futures market will be more. And in contrast to this, when the market follows a bearish trend then the price of shares in the stock market will be more than that of the derivative market. Hence, the clients can make a profit only when the markets follow an upward trend.

There is another variant of Arbitrage Mutual Fund known as the Arbitrage Plus Fund. Practically there is a thin line separating both the funds. In Arbitrage Plus Fund there is a portion of shares that are not sold in the derivative market. Both funds are embedded in one single scheme because of the minute difference in their working.

Attributes of Arbitrage Mutual Fund

From the viewpoint of a client the Arbitrage Mutual Fund is the best fund due to the following reasons:

• It is a risk averse scheme because the buying and selling of the stock are done simultaneously. Thus, the risk of market fluctuations is negligible. For example, the share of a company is priced at Rs. 50 on the stock exchange and Rs. 52 in the derivative market. If the fund manager buys from the stock market and sells in the futures market at this moment making a profit of Rs. 2 on each stock. 
• Also, to capital gains clients are able to get a scheme which is tax-efficient. In other equity-oriented schemes, the capital gains are taxable according to the tax slab of the client. But, the profit from Arbitrage fund is taxed at the rate of 15%. 
• A notable return percentage of 9% is obtained by the clients. Hence, making it more suitable than debt funds. At the same time, it is less risky than other equity-oriented funds. 
• The Arbitrage mutual fund can make a profit only when there is a price differential in the market. As soon as the market at equipoise, the arbitrage opportunities die out. But, practically it is not possible for the stock and futures market to strike equilibrium. 

Therefore, Arbitrage Fund gives an OK signal to the clients who aspire for capital appreciation through equity investment that too for short-term. The clients will undoubtedly earn higher profits with much lower risks involved. 

Inside out of the ELSS mutual fund

Are you interested in saving through investing? Then, here is the perfect scheme suiting to your needs. ELSS (Equity Linked Saving Scheme) facilitates to save your taxes via investment. ELSS is a scheme which provides tax-rebate up to INR 1,50,000. The scheme falls under the Section 80C of the Income Tax Act. According to the budget declared for FY 2016-17, Mr. Arun Jaitley, the Finance Minister has not altered the income tax slab, which means that the individuals having an income above INR 2,50,000 are the ones who can opt for ELSS.

The income tax saving is a crucial part of the revenue-expenditure cycle. When you invest your revenue in addition to becoming eligible for a tax rebate, you will get growth of your money also. There is capital appreciation in ELSS fund because it is a type of diversified equity. Another factor that shows a green signal to ELSS scheme is the non-taxation policy on the long-term gains from the plan. Owing to its short lock-in period, ELSS mutual fund has gained popularity like no other tax-saving scheme.

There are many restrictions on the lock-in period as well as the maximum investment limit annually in other tax-free schemes. But, in ELSS scheme, there is restriction only in the lock-in period and that too for a short period. The targeted beneficiaries of the scheme are the investors with towering income. The investors having income above INR 2,50,000 are always on a quest for the schemes which can perform extraordinarily. The search for the investors will now end on one single name ELSS mutual fund.

Options under ELSS Scheme

ELSS scheme invests around 65% of the total fund in the equity instruments which are tax-free. Hence, there is a little risk factor involved in it. But, the capital gains are tax-free under the scheme which is the highlighting feature of the plan. The client has the twin option of growth and dividend. Under the growth function, the client will receive a lump sum amount after the lock-in period of three years. On the contrary to it, the dividend option allows the investor to enjoy a payback during three years whenever the dividend is declared.

Why ELSS?

ELSS fund wins over the other tax saving instruments because of the following reason:

• The lock-in period for the close competitor of ELSS, i.e., PPF (Private Provident Fund) is 15 years. Though the partial withdrawal can be made after 6 years, the full amount can be withdrawn after 3 years in ELSS.
• Where the maximum investment in PPF is INR 10,00,000, there is no limit on the maximum investment under ELSS mutual fund.
• The returns are in the form of rate of interest in PPF, which fluctuates around 8.5%. In contrast, to this, the returns from ELSS termed as equity gains or dividends hovers around 12-15%. 
• In addition, to the lump sum withdrawal ELSS mutual fund provides the option of dividend earnings which are absent in PPF.
• As an equity-linked scheme, it provides an edge of capital gain to the investment which marks a prolific growth in the money.

Who should invest in ELSS?

ELSS is not a good choice for the risk averse investors. The investors who want to go in for capital appreciation, as well as tax saving, should go in for ELSS scheme. The dividend and growth options serve the basis for selection. The investors who can not afford to invest their money in the long-term schemes can choose ELSS fund. All in all ELSS mutual fund is the right choice for the investors who want tax-benefit with capital appreciation and have a short-term perspective.

ELSS mutual fund is a beneficial scheme providing a growth rate of 12-15%. The fund offers to invest in diversified equity. This will serve the benefit of growth as well as tax-saving in one go. Therefore, reducing the tautness of investing in two different schemes viz, one for capital gains and other for tax-saving. These all benefits can not be seen in any other tax saving scheme.

Tata Mutual Funds : Dispensing certitude amongst investors

Tata Group is a synonym for excellence since 1868. The foundations of the Tata Group was laid by Late Mr. J.R.D. Tata. Initially established as a steel company, later on, it diversified into various other branches viz, Information Technology, Consumer Products, Financial Services, etc. The Tata Asset Management Company was branched with a perspective of providing harmonious investment strategies. The Tata Mutual Fund is all geared up for providing an outspread range of the schemes coinciding with the wants of the business community to working professionals. The company does not target a particular segment of the society. Abiding by the foresightedness of the founder Late Mr. J.R.D. Tata, the Tata Mutual Fund is centered around connecting with the common masses. The environment and the strategies of the organization should send a positive vibe to the investors and magnetize them first to trust and then invest in the company.

At Tata Mutual Fund, it is strongly believe that confidence and the money which clients invest in the company should be reciprocated copiously. It is a trait which is illiberally adopted from the parent company. Tata Mutual Fund holds the view that the investors along with their money sow the seeds of trust in the enterprise. When the seeds of faith are not adequately nurtured;  then it will create an adverse effect on the goodwill endured for so many decades. The client is the most important asset for any business. Thus, the comfort of the clients is of utmost importance.

The lineage of Tata Mutual Fund is vehement. The foundation of the AMC holds years of expertise and profound knowledge. The business ethics are truly followed by Tata Mutual Fund to procure a lofty position. On the horizon of the mutual fund industry, Tata Mutual Fund has marked its presence as one of the leading mutual fund companies. It has become a globally renowned company which is acting as a role model for the upcoming businesses in the industry. Therefore, Tata Mutual Fund is not only a brand name, but it has genuinely plowed the much-required efforts to be able to hit the crest.

Ethics making Tata Mutual Fund stand unequivocally from the clan are stated below:

• Outlandish schemes for the investors: The clients have diverse expectations from the investment. On one hand, where a businessman may focus on capital appreciation, on the other hand, a person having a moderate income may concentrate on investing for the purpose of accumulating funds for the education of his children. Hence, if the needs are varying so should be the schemes. One single plan cannot serve as a solution to all the requirements. For instance, equity-oriented funds like Tata Equity Opportunities Fund (G), acts as an instrument of capital appreciation. In the same way, for secure investment and generating fixed income debt fund like Tata Income Fund-Regular Plan (G), can be useful. There is no stone left unturned regarding the planning of the schemes. 
• There is always a scope for improvement: The most cardinal point which is included in the strategy of Tata MF is believing in the fact that the learning process is never-ending. Hence, there is always room for improvement. The employees are taught that the need for improvement should not be taken as a shortcoming but, an opportunity for growing through learning. No individual is perfect and doesn’t need improvement. Therefore, the policies of Tata Mutual Fund motivates the employees to have a learning perspective of growth. Wisdom is not only the result of learning new concepts; it can also be achieved by embracing the mistakes. It is conceptualized at Tata Mutual Fund. The employees are careful while carrying out their duties. Hence, the chances of error are zeroed. But, then too any mistakes appear then the employees are happy to correct it and at the same time learn from it.
• Believe in yourself: When one believes that he/she can do the allotted work, half of it gets completed at that very moment. At Tata Mutual Fund, the staff take up the most challenging jobs and complete them flawlessly. This is possible only with optimism. The professionals are of Tata Mutual Fund are trained so well that every difficulty appears to be an opportunity for them to learn and grow. Hence, taking up the challenge with a positive attitude is the first step towards solving the problem. 

Therefore, Tata Mutual Fund is a rock strong company providing an environment which is suitable for the client and making it easy for the customer to converse and put forward any queries or opinion quickly.