Equity mutual funds have crossed the Rs. 1 lakh crore investment inflows in the October month as seeing the gains in the stock market, investors have been lured to take the more safer mutual fund route. Nonetheless it should be remembered that the invested capital is still exposed to erosion and risk. So here are listed some ways by which you can protect your funds diverted to this investment class.

As you have the option to hedge your risk in capital markets, similarly mutual funds also offer you a similar opportunity. Know more about it in detail here.

Arbitrage Fund through which the fund managers take advantage of the price differential in the cash and futures market provide you with gains. These are deemed to be highly safe and offer you return at par with money market instruments. Also, after tax returns are far better as they are treated like equity mutual funds for the purpose of taxation.

So, this is one case where you invest in arbitrage funds but herein you are not able to gain from the higher levels in the stock market. Here in comes the dividend transfer plan into picture. These arbitrage funds declare dividends on a time to time basis and you can opt to transfer the dividend into a scheme that is equity diversified and at this instance you are exposed to the volatility in stock markets.

But, to your comfort, only the dividend portion of yours is at risks which leave no scope for the capital erosion. However there is a catch that you need to take note of transferee scheme comes with a minimum investment cap and also the dividend threshold has to be complied with else the amount goes into the source scheme.

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