Liquid funds are low-risk debt instruments offering quick redemption (T+1) and are taxed as per income slab.
Arbitrage funds are equity-oriented hybrid funds using hedged strategies, with moderate returns and 2–3 day redemption.
Liquid funds invest in short-term money market instruments maturing within 91 days.
Arbitrage funds exploit price differences in cash and futures markets, with LTCG tax benefits after one year.
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