astha swamy

A retirement plan can help you accumulate enough funds throughout your working years to meet your needs during your post-retirement period. As you keep investing in the plan, the funds accumulated in it grow. Thus, your retirement savings grows, thereby, providing you with a major corpus after you retire. Over the years, the importance of retirement planning has continued to increase. So, here are the reasons why you should consider a pension plan in India in 2023.  You Can't Work Always Practically, it's not possible to work till the day of your life. As we age, poor health reduces our ability to work. When you can't work anymore, you can benefit from the regular source of income ensured by a pension plan. The investments that you make in the plan over your working years will pay off in your golden years.  Rising Inflation The rate of inflation in India is 4.95% in 2023 and is expected to be around 4% by 2028. Inflation leads to a rise in all sorts of expenses that you can think of. Now consider the number of years after which you expect to retire. Imagine by that time, prices would go up by how much extent, being subject to constantly rising inflation. Therefore, you need to start building a significant corpus from now on so that by the time you retire, you have enough savings to maintain the same quality of your lifestyle despite the increase in living costs. Consider using a pension calculator to know how much you should save based on the number of years after which you plan to retire.  You Need to Save for Medical Emergencies With age, we become increasingly prone to contracting or developing health problems. Age does not just impact your health but your money too. Medical expenses are among the most recurring costs after retirement. In case you don't have a senior plan, it would be more important for you to buy a pension plan. A medical emergency can cost a lot, mainly in your later years. A retirement scheme can help you manage such emergencies without financial constraints.   You May Have Things to Tick Off Your Bucket List You may have made several compromises since you were a child. These could be not making the most desired travel plans or following all your dreams. But you can fulfil them after retirement if you have planned for this phase in advance by investing in a good retirement plan.  You'd Like to Stay Financially Independent As long as you are financially independent, you won't be a burden or big responsibility for your children after you retire. Thus, you'll have mental peace and your children will be satisfied to see you financially secure.  You Can Help Your Loved Ones Too A retirement plan can even allow you to support your loved ones during their times of financial crisis if you build quite a significant corpus.  Go ahead and use a pension calculator to estimate how much you should invest in a retirement scheme to sign off gracefully and start saving for your golden years.

Mutual fund schemes come in various shapes and sizes. While some MF schemes invest in equity, others invest in debt. Generally, equity funds are riskier than debt funds. However, arbitrage funds are perhaps the only type of equity-focused mutual funds that provide debt-like stability. Read on to know the meaning of arbitrage mutual funds, typical returns, the importance of the fund manager and ways to find the best arbitrage funds.    The Meaning of Arbitrage Mutual Funds Let's understand the meaning of arbitrage mutual funds with an example. Imagine finding a stock whose spot price is INR 100 and the lot size is 500 shares. Now, you find that the futures price of the same stock is at INR 105. So, you buy the stock in the spot market and sell it at the futures price of INR 105. Here, the difference between the futures price and the spot price (also known as the Spread) of the stock you buy and sell is known as arbitrage.  The best arbitrage mutual fund managers constantly scan the market to spot such opportunities and place bets. Arbitrage mutual funds usually invest in cash and futures markets. But, the fund managers of such funds may also look beyond traditional equity stocks and trade currencies or commodities. They may also execute numerous trades every year to make considerable profits. Earlier, arbitrage mutual funds were allowed to trade in the same exchange. However, according to SEBI's latest guidelines, interoperability has been allowed. So, fund managers may buy shares at one exchange and sell them at another. Hence, if a stock's price is INR 50 at BSE (Bombay Stock Exchange) and INR 52 at NSE (National Stock Exchange), arbitrage funds may buy and sell such shares to pocket the difference. Arbitrage funds are immensely popular among investors. It allows them to invest in the equity market without being exposed to its risks.  The Importance of Choosing the Best Arbitrage Fund Manager An arbitrage fund is as good as its manager. The quality and reputation of the manager separate the best arbitrage funds from the rest. Generally, arbitrage fund managers enter the market with a medium to long term horizon. This minimizes the volatility created due to equity exposure. And, when the fund manager does not invest in equity, they park the money in fixed income instruments. The instruments chosen by arbitrage fund managers are usually the best debt securities with a high credit rating. Alternatively, they may invest the money in term deposits, debentures and zero-coupon bonds. Hence, while investing in an arbitrage mutual fund, you must check the fund manager's credentials and track record.  Who is Eligible for Arbitrage Fund Investments? Arbitrage funds generate revenue by buying and selling stocks. However, what makes them unique is that these funds carry fewer risks than conventional equity funds. As a fact, the risk level of arbitrage mutual funds is equivalent to debt funds. Most arbitrage mutual funds consider the Crisil BSE 0.23% Liquid Fund as the benchmark.  So, any investor looking to earn decent returns without the risks associated with equity mutual funds may invest in arbitrage funds. Also, if you want a safe place to park your money when the market is extremely volatile, arbitrage funds might be your best choice. However, as the risks associated with arbitrage funds are low, the returns might also be lower than pure equity funds.  Things to Consider While Investing in Arbitrage Mutual Funds Risk Arbitrage funds are good until many investors turn to them. When too many investors hunt for arbitrage opportunities, the Spread erodes, leaving fund managers with no option but to invest in debt funds. Returns Since most arbitrage funds consider the Crisil BSE 0.23% Liquid Fund as the benchmark, the returns are almost similar to liquid funds. Typically, arbitrage fund returns range between 7% and 9% per annum.  Expense Mutual fund houses levy an expense fee on arbitrage mutual funds. Also, you may have to pay an exit load if you withdraw the investment before a specific period. Hence, the actual returns might be considerably lower than what you expect.  The EndNote Arbitrage mutual funds provide many benefits for investors. It is the best option for people looking to earn higher returns than term deposits at low risk. PGIM Mutual Fund offers the best arbitrage mutual funds with a consistent performance track record. Check the factsheet before investing and reap rich dividends.