Chartered Accountant

Gilt funds is an investment method. This is the prime reason most investors prefer to invest in gilt funds. We can easily invest in the gilt fund following either paperless procedures or papers at financial institutions and banks. In India, gilt funds mainly invest in the securities and bonds issued by the government of India. There are many online sites and offline offices which give information about the terms and conditions of the investment. The investment in gilt funds is risk-free, apart from the up and down of the interest rates.

What is a Gilt Fund?

Gilt funds are one of the oldest methods for investment in the United Kingdom. The Britishers introduced gilt funds in India. As India was part of the British colony, gilt funds were introduced before independence.Gilt funds are a reliable source to invest as they invest money in debt securities by the government. As securities offered by the government are reliable thus, the risk is comparatively low. They are the perfect choice for risk-averse investors. The performance of the gilt funds depends on the move of the interest rates. If the interest rates fall, the prices start to rise, leading to an increase in NAV or net asset value. This is the prime reason most investors prefer to invest in gilt funds. We can easily invest in the gilt fund following either paperless procedures or papers at financial institutions and banks. The step to invest in gilt funds are:

• Online registration 
• Get KYC done
• Invest in your gilt funds’’

Things we should consider before investing in gilt funds:

• There is a sharp fall of NAV or net value asset if the interest rates increase
• The returns from the gilt fund are variable as the interest rates change throughout the year. Thus the returns are not guaranteed.
• Gilt fund charges for an extra expense ratio, which will cover the expenses to fund like the manager’s fees.
• The investment horizon should be at least 3 to 5 years to yield profit.
• Capitals gained from investment in gilt funds are taxable.

Before investing, an investor should know the terms and conditions of their investment and know the advantages and disadvantages of the gilt funds. 

SBI Magnum Gilt Fund

The top gilt funds to invest in India are UTI gilt funds, ICICI prudential constant maturity gilt funds, SBI magnum gilt funds, ICICI prudential gilt funds and Canara Robeco gilt funds.

SBI magnum gilt fund mainly invests in the securities and bonds issued by the government of India. These funds do not risk the repayment of the investor’s money backed up by the government, but they are prone to sharp up and down. SBI magnum gilt fund is a gilt mutual fund scheme from SBI mutual fund. These gilt funds have been in existence for nine years. 

The returns from the above-gilt funds in the three years are:

SBI magnum gilt fund direct growth has three thousand six hundred two crores worth assets under the management.  Last year’s returns of the SBI magnum gilt fund was 4.45%.

Why should we invest in the SBI magnum gilt fund?

• Government of India, RBI is the top fund holding body
• The risk of default is less as most borrowers are better.
• SBI magnum gilt fund gives consistent returns.
• The minimum investment required is 5000 rupees.

The benefit of Investing in Gilt Fund

Some of the major benefits of gilt funds are:

• There is no credit risk as the investments are in bonds and governments are likely to fulfill their obligations. 
• There is 100% capital protection. Mutual funds do not offer 100% capital protection, but government-backed securities provide 100% capital protection.
• Government securities are not available to retail investors, so investing in gilt funds indirectly gives us access to government securities.
• If an investor wants to invest for the short term or medium term, then gilt funds are the best option as the returns are reasonable.

Conclusion

Sometimes, investing in gilt funds might be a tense affair. If we are not tracking markets is not our thing, or if you are finding it too difficult to understand, then we should not invest in gilt funds. But there are no worries about default as the gilt funds usually invest for the government sectors; thus, the risk in gilt funds are relatively very low. The major benefit of investing in gilt funds is 100% capital protection and government-backed securities. Thus investing in gilt funds is a hassle, but we must know about its investment and the process.