Invest in Best Top Gilt Mutual Funds in India 2024
Explore the best gilt mutual funds in India this year. Learn who should invest, key benefits, risks involved, and FAQs to make informed investment decisions.
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What is Gilt Mutual Funds?
Gilt mutual funds are a type of mutual fund that invests primarily in government securities. These funds are considered low-risk investments since they invest in government bonds, which are backed by the government. Gilt funds are ideal for conservative investors seeking stable returns and safety of principal. They offer a good option for those looking to diversify their portfolio with low-risk investments. However, the returns from gilt funds can be affected by interest rate movements, so investors should be aware of the potential for interest rate risk.
Who Should Invest in Gilt Mutual Funds?
- Conservative Investors: Individuals seeking a low-risk appetite with minimal credit risk.
- Risk-Averse Investors: Investors who prefer the safety of government-backed securities than private concerns
- Income Seekers: Those looking for a steady income through interest payments from government securities.
- People who are about to retire: People who are about to retire usually look for risk-free options, therefore gilt funds are ideal for such section
Top 5 Gilt Mutual funds
| Fund name | Category | Risk | 6 months return | 1 year returns | Rating | Fund Size in crores |
| ICICI Prudential Gilt Fund | Gilt | Moderate | 3.98% | 7.76% | 5 | 6262 |
| LICMG Gilt | Gilt | Moderate | 4.95% | 7.33% | 4 | 48.8 |
| UTI Gilt | Gilt | moderate | 4.75% | 7.89% | 4 | 621 |
| SBI Magnum Gilt | Gilt | Moderate | 4.95% | 8.04% | 4 | 8756 |
| DSP Gilt Fund | Gilt | Moderate | 6.13% | 8.97 % | 47 | 1012 |
Factors to Consider While Investing in Gilt Mutual Funds
- Interest Rate Risk: Gilt funds are sensitive to interest rate changes despite having no credit risk because of government backing. Long-term gilt funds are more affected by interest rate fluctuations.
- Maturity Profile: It is important to understand the maturity profile of the fund’s portfolio. Shorter maturities are less sensitive to interest rate changes, while longer maturities offer higher returns but with higher volatility.
- Investment Horizon: These funds come with a minimum maturity period. You will have to stay invested atleast for three years. So, it is generally preferred by people who are looking for an investment horizon of 3-5 years
- Historical Performance: Review the fund’s past performance, though it’s not a guarantee of future returns.
- Fund Manager’s Expertise: The experience and track record of the fund manager in managing government securities.
Major Benefits of Gilt Mutual Funds
- Minimal Credit Risk: Government securities are considered to have a very low credit risk as they are backed by the government.
- Safety: It acts as a safety net especially for risk-averse investors.
- Capital Protection: Because of the government backing, the chances of capital loss is very small
- Returns: Gilt funds offer a reasonable return over a mid to long term period
- Tax Benefits: Potential for indexation benefits on long-term capital gains when held for more than three years.
Risks Involved in Gilt Mutual Funds
- Interest Rate Risk: Gilt funds are highly sensitive to interest rate movements. A rise in interest rates can lead to a decline in the value of the fund’s holdings.
- Market Risk: Subject to market fluctuations, although to a lesser extent than equity funds.
- Duration risk: The maturity of gilt funds ranges from 90 days to 30 years. Longer gilt funds have higher risks
FAQ on Gilt Funds
- What are gilt mutual funds?
Gilt mutual funds are the type of funds where investment happens exclusively in government securities (G-secs) that are considered to have minimal credit risk as they are backed by the government.
- Who should invest in gilt mutual funds?
Gilt mutual funds are ideal for conservative investors, long-term investors, risk-averse individuals, and investors looking for portfolio diversification with low-risk securities.
- What are the benefits of investing in gilt mutual funds?
Compared to other funds, investing in gilt funds would Benefits include minimal credit risk, safety, regular income, diversification, and also potential tax benefits?
- What are the risks associated with gilt mutual funds?
Risks include interest rate risk, market risk, inflation risk, and reinvestment risk.
- How do I choose the right gilt mutual fund?
Consider factors such as interest rate risk, maturity profile, expense ratio, historical performance, and the fund manager’s expertise. Always align the fund’s characteristics with your financial goals and risk tolerance
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- PPFAS Mutual Fund
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- HSBC Mutual Fund
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- Edelweiss Mutual Fund
- PGIM India Mutual Fund
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- Bandhan Mutual Fund
- Quantum Mutual Fund
- HDFC Mutual Fund
- Axis Mutual Fund
- ITI Mutual Fund
- Kotak Mutual Fund
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- DSP Mutual Funds
- Mirae Asset Mutual Fund
- Motilal Oswal Mutual Fund
- Sundaram Mutual Fund
- Invesco Mutual Fund
- Taurus Mutual Fund
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- Quant Mutual Fund
- JM Financial MF
- UTI Mutual Fund
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