Advantages of investing in gilt funds

A gilt fund is a type of mutual fund that mainly invests in government-issued security schemes. Gilt schemes can invest in both state and central government-issued securities. Today many investors choose to invest in gilt funds in India.

And if you are also interested in investing in Gilts or want to know their benefits, keep reading. Here, we will share some essential advantages of investing in it.

• Fewer credit risks

Gilt mutual funds invest in government-issued securities. Also, investing in government-issued securities means lower credit risks. When you invest in government securities, you get guaranteed repayment. It means the default repayments or credit risk is lesser than any other mutual fund investment.

However, it can contain interest risks as the government (central or state government) can reduce or increase the interest rates anytime they want.

• Access to the government securities

Another essential advantage of investing in gilt funds is getting easy access to government securities. Gilt investment fund invests in fixed government-issued securities. Many investors want to invest in government bonds or securities as they offer lower risks and stable returns. And gilt fund investments provide an excellent opportunity to invest in government-issued securities.

So, when you invest in gilt mutual funds, you can get direct access to government securities and benefit from them.

• Generate good returns

Mutual funds aim to gain returns from investments within a particular time frame. However, every mutual fund plan has its unique investment returns. And you should select a scheme that can generate good returns.

Gilt funds are proven to offer good returns. It works more effectively in an economy of decreasing interest rates. You can get better returns from your gilt fund India than bank deposits in such cases.

• Stable returns

Another plus point of investing in gilts is the stable investment returns. Mutual fund investments in corporate, private, and other unsecured sectors like small-cap, equity, and other similar plans can offer high investment returns. But they also come with greater market volatility. On the other hand, gilt investment can provide good returns, yet it is more stable than many other mutual fund schemes.

Gilt funds are ideal for you if you have a low-risk appetite or want to invest in a less risky scheme and gain a stable return.

• Wealth protection

Wealth protection is also a crucial advantage of investing in gilts. Gilt funds invest in government-issued securities and have government protection over investments. In addition, government securities do not fail in capital redemption or default repayments. So, when you invest in gilts, your assets get secured, and you get guaranteed returns at the time of capital redemption.

• Low-cost investments

Gilt investments are low-cost investments, and the charges are less than other investments. The cost of an investment fund incorporates the fund manager’s fee, fund administration fee and additional related charges. However, many mutual fund investments require a high amount of investment in terms of getting good returns.

But as gilt predominantly invests in government securities, it has lower costs than other funds. So if you have a low budget or are new to investments and looking for low-cost investment plans, you can choose to invest in gilts.

• Tax benefits

The tax benefit is another vital benefit of investing in gilt funds. Gilt fund investment offers many taxation benefits, including reduced TDS, surcharges, 20% indexation benefit etc. However, you must remember all these tax benefits can only be accessed in long-term investments in gilt mutual funds.

Conclusion

Gilt fund investment schemes from companies like PGIM are popular among low-risk appetite investors or those who want to invest in government securities. And here, we have listed some of the essential advantages of investing in gilt funds.