Why does Arbitrage Fund deserve a spot in your portfolio?

financialexpress.com:

The main purpose of investing is to accumulate money over time, whether for retirement, property ownership, college, or other financial objectives. Bonds, stocks, real estate, mutual funds, and other investment alternatives are available to investors these days. Investments are risky, and the return on investment is not guaranteed. It can change depending on market circumstances, investment types, and other economic factors.

Before investing, one of the most typical questions that any investor has is where to invest and the risk involved in the same. So as compared, mutual funds are typically safer than stocks since they are automatically diversified, which helps to reduce risk and volatility in your portfolio.

One such type of mutual fund is an Arbitrage Fund. It is a type of fund that is considered a valuable investing instrument that investors may utilize to save their short-term profits. And can also be a good choice for those investors who want to profit from a volatile market without taking on too much risk. Although arbitrage funds have relatively lower risk, the payoffs can be unpredictable. They are a form of mutual fund that aims to purchase and sell assets in multiple markets simultaneously to capitalize on mispricing opportunities. They are hybrid since they have the option of investing a significant portion of their holdings in debt markets.

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These funds seek to capitalize on price differentials in two marketplaces: cash markets and futures markets. They buy equities in the cash market and sell them in the futures market simultaneously, thereby “locking in” the price discrepancy, known as the spread. It also follows a market-neutral