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Gilt Mutual Funds

Gilt funds invest in government securities, offering low credit risk and long-term stability. Suitable for risk-averse investors

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Avg Returns

8%

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Risk Level

Low to Moderate.

Why Invest in Gilt Mutual Funds

High Liquidity for Short-term Needs

Government-backed securities ensure safety.

Low-risk Profile

Offers low-risk income with predictable returns.

Ideal for Parking Idle Funds

Ideal for conservative investors seeking stability.

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All About Gilt Mutual Funds

Table of Contents

Gilt Mutual FundsWhat is the Gilt Mutual Fund?Features of Gilt Mutual FundsHow to Invest in Gilt Mutual Funds?List of Top Performing Gilt Mutual FundsWhy Should You Invest in Gilt Mutual Funds?Benefits of Gilt Mutual FundsRisks Associated with Gilt Mutual Fund InvestmentTaxation on Gilt Funds

Gilt Mutual Funds

Gilt Mutual Funds are a safe and reliable investment option for those looking to invest in government-backed securities with minimal credit risk. These funds invest in government bonds and are ideal for conservative investors seeking stable returns with lower risk. Understanding gilt funds can help you make more informed financial decisions whether you're a new or seasoned investor.

What is the Gilt Mutual Fund?

A Gilt Mutual Fund is a type of debt fund that invests primarily in government securities or bonds issued by the Reserve Bank of India. These funds are considered to be safe and secure investment options, as they carry minimal credit risk since the securities are backed by the government. Gilt funds are suitable for investors looking for stable returns with lower risk than other mutual fund types.

Features of Gilt Mutual Funds

  1. Government-Backed Securities: Gilt funds only invest in securities issued by the government, providing high security to your investments.
  2. Interest Rate Sensitivity: These funds are sensitive to interest rates, which can affect their returns. When interest rates fall, the value of the securities increases, leading to higher returns for investors.
  3. No Credit Risk: Since the government backs the investments, there is no risk of default.
  4. Varied Maturity Periods: Gilt funds come with different maturity periods, ranging from short-term to long-term, offering flexibility based on your investment horizon.

How to Invest in Gilt Mutual Funds?

Investing in Gilt Mutual Funds is a straightforward process. You can invest through:

  1. Mutual Fund Platforms: Online mutual fund platforms allow you to compare different gilt funds and invest easily.
  2. Fund Houses: Directly invest through the website or offices of mutual fund houses.
  3. Financial Advisors: You can ask your financial advisor to select the best-gilt fund based on your financial goals.

List of Top Performing Gilt Mutual Funds

Gilt Mutual Fund Schemes

Fund Size (Crs)

5Y Returns

DSP Gilt Fund

1418 Crs

7.80%

SBI Magnum Gilt Fund

10422 Crs

7.67%

Edelweiss Government Securities Fund

171 Crs

7.64%

Kotak Gilt Investment Fund

3979 Crs

7.64%

Bandhan GSF Investment Fund

3079 Crs

7.62%

ICICI Prudential Gilt Fund

6633 Crs

7.52%

Axis Gilt Fund

613 Crs

7.40%

Aditya Birla Sun Life Government Securities Fund

2182 Crs

7.31%

PGIM India Gilt Fund

117 Crs

7.26%

Invesco India Gilt Fund

1196 Crs

7.15%

Why Should You Invest in Gilt Mutual Funds?

Investing in Gilt Mutual Funds is ideal for those who want:

  1. Safety of Capital: The risk of losing your capital is high since the securities are government-backed.
  2. Diversification in Debt Portfolio: Gilt funds add stability to your portfolio by providing a steady income stream without exposing you to high market risks.
  3. Better Returns in Falling Interest Rate Scenarios: Gilt funds can perform well when interest rates decline, making them a good option in such environments.

Benefits of Gilt Mutual Funds

  1. Low Risk: Gilt funds are considered safe as they invest in government securities, eliminating credit risk.
  2. Consistent Returns: While returns are not guaranteed, they are more stable than equity funds.
  3. Hedge Against Inflation: Gilt funds can provide inflation-adjusted returns, particularly during falling interest rates.
  4. Liquidity: These funds are highly liquid, allowing investors to redeem their units when needed.

Risks Associated with Gilt Mutual Fund Investment

Although Gilt Mutual Funds are considered safe, they are not entirely free of risk:

  1. Interest Rate Risk: The value of gilt funds is highly sensitive to interest rate movements. If interest rates rise, the value of the securities may fall, leading to lower returns.
  2. Market Volatility: Though safer than equity funds, gilt funds can still be subject to market fluctuations that may affect their returns in the short term.
  3. Lower Returns in Rising Rate Scenarios: If interest rates are expected to rise, gilt funds can underperform, as the bond prices tend to fall in such an environment.

Taxation on Gilt Funds

Gilt Mutual Funds are taxed similarly to other debt mutual funds:

  • Short-Term Capital Gains (STCG): If the investment is held for less than three years, the gains are added to your income and taxed as per your tax slab.

Long-Term Capital Gains (LTCG): Investments held for more than three years attract a 20% tax rate, complemented by indexation, which helps reduce the tax burden by adjusting for inflation.

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Disclaimer: XIRR values are based on individual client investment horizons and returns over a few months. These values are not indicative of future returns. Investments are subject to market risks

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FAQs

What is the minimum amount of investing in a gilt mutual fund?

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The minimum amount to invest in a gilt mutual fund usually starts as low as ₹500 to ₹1,000 through a Systematic Investment Plan (SIP), making it accessible for investors with smaller budgets.

Is it safe to invest in a gilt mutual fund?

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Investing in gilt mutual funds is generally safe as they invest in government securities. Since the government backs these bonds, there is minimal credit risk involved.

How do gilt funds work?

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Gilt funds work by investing in government bonds or securities. The fund generates returns based on changes in bond prices and interest rates, with their value rising when interest rates fall.

Are gilt funds suitable for conservative investors?

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Yes, gilt funds are suitable for conservative investors. They offer safety and stable returns by investing in government-backed securities, making them ideal for those seeking lower risk.

Is there any exit load on gilt mutual funds?

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Some gilt mutual funds may charge an exit load if you redeem your investment amount before a specific period, usually a few months. However, many gilt funds come with no exit load.

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