Hybrid Scheme - Arbitrage Fund
Here are some key points about Hybrid Scheme – Arbitrage Fund:
Investment Strategy: Arbitrage funds employ an arbitrage strategy to take advantage of price inefficiencies between the cash and derivatives markets. The fund manager simultaneously buys securities in the cash market and sells equivalent positions in the derivatives market to benefit from the price differentials.
Risk and Volatility: Arbitrage funds are considered to have lower risk and volatility compared to pure equity funds because they aim to capture risk-free or near risk-free returns from market inefficiencies. However, it’s important to note that arbitrage opportunities can be influenced by market conditions and liquidity, which can impact the fund’s performance.
Income Generation: Arbitrage funds generate income primarily through the price differentials between the cash and derivatives markets. The fund earns profits from the spread between the purchase and sale prices of the securities. The income generated is typically in the form of short-term capital gains.
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Inclusion of Mutual Funds in a Will: When creating a will, you have the option to include your mutual fund investments as part of your estate. You can specify how you want your mutual fund holdings to be distributed among your beneficiaries after your passing. This allows you to ensure that your investment assets are transferred according to your wishes.
Naming Beneficiaries: In addition to or instead of including mutual funds in your will, you can designate beneficiaries directly on your mutual fund accounts. This is typically done by completing a beneficiary designation form provided by the fund company. By naming beneficiaries, the assets held in the mutual funds will bypass the probate process and be transferred directly to the designated individuals upon your death.
Probate Considerations: Probate is the legal process through which a deceased person’s assets are distributed to their heirs according to their will or applicable laws. Including mutual funds in your will may subject those assets to the probate process. This can result in delays, costs, and potential complications. Designating beneficiaries directly on your mutual fund accounts helps bypass probate, allowing for a smoother transfer of the assets.
Regularly Review Beneficiary Designations: It’s essential to review and update your beneficiary designations periodically, especially after significant life events such as marriage, divorce, or the birth of a child. Failing to update beneficiary designations can result in unintended consequences or conflicts with your desired estate distribution.
5. Consider Trusts: Depending on your circumstances and estate planning goals, it may be appropriate to establish a trust to hold your mutual fund investments. Trusts can offer advantages such as asset protection, tax planning, and control over the distribution of assets. Consulting with an estate planning attorney can help determine if a trust is suitable for your specific needs.
Seek Professional Advice: Estate planning can be complex, and the interaction between wills and mutual funds can vary depending on factors like jurisdiction and individual circumstances. It’s advisable to consult with an experienced estate planning attorney or financial advisor who can provide personalized guidance based on your goals and help you navigate the legal and financial considerations of incorporating mutual funds into your estate plan.