Here you go – https://zerodha.com/varsity/chapter/exchange-traded-funds-etf/

The key with emergency funds is –

1) It should avaialble as and when you need it. Remember you can use your credit card to pay for the emergency and then repay it using the emergency fund. CC, becuase its avaialble immediately.

2) It should not be volatile.

3) Risk profile should be lower. Think of reward or return later.

From this perspective, I find liquid fund quite convenient. But that said, I also have a soft corner for the AF 🙂

Thanks for this wonderful chapter!

I have sorted out the mutual funds for long term. After going through this chapter, I did some study to where to park my emergency fund (FD vs Liquid fund vs Ultra short term fund vs Arbitrage fund).
– I have easily removed FD from the list because of the lockin period (liquidity issue) and also the preclosure results in 1% reduced returns. after tax, this amount seemed less when compared to other entities.

The problem I have is, I’m so confused between the rest three.

1. In terms of returns, AF>USTF & LF
2. In terms of liquidity, LF&USTF > AF
3. In terms of risk, LF > USTF > AF
4. In terms of taxation, AF (taxed as equity) > LF & USTF (taxed as debt)

With the above cases, I feel arbitrage funds have upper edge considering the returns after tax. Also, i can compromise on the slightly higher risk in AF and that extra days taken for liquidity.

5. Please let me know whether my understanding is correct!

6. Also, when it comes to emergency fund, the situation may arise any time. May it be 6 months or 5 years. Is it advisable to park debt fund for 5 years time considering lower returns?

Once again thanks for leading us in right path with the help of these modules!

You can if you spot opportunities 🙂

This is a correct understanding of an arbitrage trade, Nikita.

NSE (xyz stock buy on 100rs and sell on 115 = +5rs )
BSE ( xyz stock sell on 100rs and buy on 90 = -10rs)
total = 5rs IS ARBITRAGE

CORRECT ME SIR WHICH ONE IS CORRECT AND ARBITRAGE IS IN DERVITATVE MARKET WITH POSSIBLE , ONLY EQUITY IN NOT POSSIBLE LIKE MY EXAMPLE

Noted, Prashanth. Thanks.

suggesting a simple correction :

“Gain from debt funds held for more than 36 months is treated as long term capital gains, attracts a 20% tax post indexation.” This sentence in the above content needs to be modified as taxation with respect to the debt funds has changed

There are many ways to arbitrage, we have discussed a few here – https://zerodha.com/varsity/module/trading-systems/

We have discussed it here – https://zerodha.com/varsity/module/trading-systems/

i also badly need to know the process and procedur to initiat the arbitrage trading in Future

Concentrated bets = Here the fund manager will invest heavily in one or two papers. If the bet goes wrong, the chances of losing entire capital is high.
Papers below investible grade = These are bonds that are very risky and carry high amount of credit risk
Unheadhed equity = Basically, ensures the equity positions are protected with a hedge. The hedge will be a counter position in the derivative segment.