All you need to know about gilt funds

India Infoline News Service | Mumbai | December 02, 2017 11:18 IST

This makes them extremely less risky than all the other types of investments. If you are a new investor or are someone who wants to invest in the market without wanting to deal with the risks, gilt funds are your best investment option available.

Gilt funds, in simpler terms, are mutual funds that allow you to invest in various government bonds and securities. This makes them extremely less risky than all the other types of investments. If you are a new investor or are someone who wants to invest in the market without wanting to deal with the risks, gilt funds are your best investment option available.
 
Why Gilt Funds?
 
Gilt funds tend to offer you double benefit of security and returns. Your investments are in government bonds and hence, there is very little to no risk to your invested amount. And it also gives you satisfactorily good returns when compared to your savings bank account. This is made possible by investing in the high-quality debt instruments like government bonds. Some even use gift funds in their portfolio as a backup for capital invested in gilt funds are rarely lost.
 
When to invest in Gilt Funds?
 
The returns you earn from Gilt funds are interlinked to the repo rate set by the Reserve Bank of India. Every time when the RBI does not change the interest rate, it is an opportunity for you to invest in the gilt funds. It proves to be a viable option for good returns even when your returns on investment in equity are low. This is because equity funds and debt funds are inversely related. Hence, every time the equity funds’ return hit rock bottom, returns from debt funds offer better returns.
 
How are Gilt Funds safe?
 
Gilt funds usually don’t throw any major credit risk to investors in their entire tenure. It, therefore, acts as a reliable backup when there is a significant crisis in the market. Since the government and the central provision directly influence these funds, you can be sure of no sudden surprises almost always. It even helps you with capital appreciation and reduces your tax liability significantly.
 
What should you do?
 
For investors, it all depends on your investment objective, existing portfolio, and also your risk appetite among other factors. So, before investing in gilt funds, it would be best if you could consult your investment advisor as well to check how suitable it is for your portfolio and needs.
 
To sum it up
 
As an investor, gilt funds provide you with a perfect combination of security and earning good returns. But in most cases, for gilt funds to payout well, you need to wish for interest rates to come down. So if you foresee a drop in the interest rate in near future, invest in gilt funds right way. 


Disclaimer: The contents herein is specifically prepared by ‘Dalal Street Investment Journal’, and is for your information & personal consumption only. India Infoline Limited or Dalal Street Investment Journal do not guarantee the accuracy, correctness, completeness or reliability of information contained herein and shall not be held responsible.

 

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