Who opts for Gilt funds?
Usually a conservative investor, who wants to earn stable & reasonable income without any credit risk, opts for Gilt funds.
- They are safest debt investments which protects the investor form credit risk , since whole amount is invested in government securities
- Even though they are more lucrative than FD, they provide superior long term returns, but without corresponding volatility.
Ideal investment scenarios
There is an inverse relationship between bond prices & interest rates. This means that whenever there is fall in interest rates, the bond prices increase & whenever there is increase in interest rates, bond prices decline.
An investor should probably invest in these mutual funds when inflation rate has reached its peak & interest rates on government securities are not expected to rise in near future. This situation will be best option as Gilt funds are available at low prices in expectation of lower or stable interest rates in coming years.
Benefit for retail investors
G-sec market (government securities) is mainly dominated by the institutional investors (who earn preferential treatment due to large volume of trading).However these funds allow the retail investor to avail the benefits of G-sec, in the form of Gilt funds.
Recommended Read :
- Methods to Select the Best Mutual Funds
- What are Mutual Funds?
- Types of Mutual Funds in India
- 5 Types of Popular Mutual Funds in India
- Understanding Mutual Funds Returns?
- Fixed Deposit Vs Mutual Fund
- Real Estate Vs Mutual Fund
- SIP Vs Mutual Fund
- Mutual Fund Investment Strategy
- Mutual Funds in India
- What is Net Asset Value (NAV)?
- Open Ended Mutual Fund Scheme
- Close Ended Mutual Fund Scheme