How important is having an arbitrage fund in one's portfolio? Who should invest in these funds?
Arbitrage funds yield returns during times of extreme volatility. However, they compare unfavourably to equity and income funds, over medium to longer term. Retail investors are advised to stay away from such funds.
Are dividend paying funds and stocks a better bet right now? If yes, why?
It would be improper to base your decision to invest in a fund or a stock, purely on its dividend paying track record. Long-term performance track record and quality of management are key criteria that should be considered before an investment decision is taken. Remember that one must invest in equities, as an asset class, primarily for capital appreciation and not just for dividends.
I hold stocks of a company that is getting de-listed. They have sent letters offering to buy back shares. Should I sell off and exit the stock or hold on for long-term gain? What parameters must I base my decision on? Will I get dividend if I hold the stock? What are my exit options once the company gets delisted?
Tendering your shares to the company, can be considered if the price offered by the company is attractive. If you do not tender the shares in the buyback offer, you will continue to receive dividends, on declaration. As for exit options, once the stock gets de-listed, the only exit available, is tendering the shares to the company. However, in that case it would be at a negotiated price.
Which sectors should one stay away from at this point in time and why?
One should stay away from government-controlled companies and commodity businesses. It has been observed that government-controlled companies are fast losing out to the private sector due to inadequate nimbleness. Commodity businesses continue to be impacted by global developments. Hence, during such an unpredictable environment, it is best to stay clear of such volatile businesses.
The writer is managing director & principal portfolio manager, Capital Portfolio Advisors.
The views expressed are his own.
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