Why does investment in G-Secs make sense?

Last Updated: 13 Jun 2024

You can now invest and trade in government securities (G-secs) through IIFL Capital Services OneUp platform (oneup.indiainfoline.com). Government securities are bonds issued by the government. The government issues these bonds to raise debt money from the general public. It raises this money to meet its various expenditure requirements. Often the revenues of the government are not enough to meet all its expenditure requirements. To meet this shortfall, the government issues bonds or securities to raise money from the general public. Like any other type of bonds, the government too pays interest to those who buy the bonds from it. At the time of maturity of the bond, the government pays back the principal to the bond holders. Government securities can have different maturities such as 3 months, 1 year, 5 years, 10 years etc. T- bill are government securities with a maturity of less than 1 year.

Credit risk of G-Secs is very low

Credit risk of government securities is very low because of the guarantee given by the central government & central bank. Credit risk is the risk of the bond issuer defaulting on the interest and principal payments due on the bonds.

Investment in G-Secs can be a stable source of income

Investment in G-Secs can reduce the overall risk of your investment portfolio; they have high credit rating. They are a stable source of income in the form of interest payments that are made on them. You can reduce the cash holdings in your portfolio and invest part of them in almost risk-free G- Secs and T-bills.