Benefits of Gilt Funds

by Nishant Dhar Consultant

Gilt Funds are the mutual fund category that puts all the money into the securities affiliated with the government. Under this scheme, asset management companies invest solely in government securities that include securities dated by the central government, state securities, and treasury bills. Let's go through Gilt funds' benefits.

Advantages of Gilt Funds

Investment is regarded as less risky than corporate bonds under these funds and it provides better yields than direct investment. The credit risk is greatly decreased as the significant capital is parked in government securities.
Under gilt fund investment, fund executives invest in a variety of government securities with yielding variable rates of return, while retail investors invest in one or two kinds of securities indirect investment. It's also going to help you cut your tax liability.
The common man cannot have a flourishing pocket to invest directly in securities of government. So with a minimum sum of Rs. 5000, they can enjoy the investment advantage in government securities.
Your capital is in the hands of safe as Reserve Bank of India (RBI) plays an important role in Gilt Funds.
Gilt funds have been generated returns of up to 12%. However, with changes in overall interest rates, returns from a Gilt Funds are not guaranteed and highly variable. Therefore, investing in Gilt funds would be beneficial when the interest rate falls in the economy. Additionally, Gilt funds are known to deliver higher returns than even equity funds when the economy as a whole faced a slump.

Conclusion

You need to analyze the fund from different angles while selecting a fund. To determine the best, there are different quantitative and qualitative parameters. Besides, your financial goals, risk appetite, and investment horizon need to be kept in mind.