Gilt Mutual Funds

Gilt funds are a type of debt mutual fund that invests in government securities issued by the central and state governments in India. These securities are essentially like bonds, where the government promises to pay you back a certain amount of money with interest over a set period.

Works well in an environment of declining interest rates.

Comparatively Low Risk

Withdraw your money anytime

Ideal for an investment horizon of at least 3-5 years

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Benefits of Investing in Gilt Mutual Fund

Gilt funds come with several advantages that make them appealing to certain investors, especially those looking for safety and stability. Here are some of the key benefits:

Minimal Credit Risk:
Unlike corporate bonds, which carry the risk of the issuer defaulting, Gilt Funds invest in government securities. Since the Indian government has a very strong credit rating, there's practically zero chance of them defaulting on their debt obligations. This makes Gilt Funds one of the safest fixed-income investment options.
Capital Protection:
While no investment guarantees complete protection, Gilt Funds come pretty close. Due to the low credit risk, your principal investment is relatively secure.
Access to Government Securities:
Gilt Funds allow retail investors to participate in the government securities market, which might not be easily accessible otherwise. These government bonds typically offer higher returns than traditional savings accounts.
Reasonable Returns:
Gilt Funds offer moderate returns that are usually lower than equity funds but higher than fixed deposits. This provides a good balance between risk and reward for investors seeking a steady income stream.
Potential for Capital Gains:
Gilt Funds are sensitive to interest rates. If interest rates fall, the price of existing Gilt Funds goes up, and investors can earn capital gains. This makes them a good option for those who anticipate a decline in interest rates.

Limitation of investing in Gilt Funds

Even with their advantages, these funds come with certain limitations to consider:

Interest Rate Swings:
Gilt Funds can be affected by changes in interest rates. If interest rates go up, the value of your investment in a Gilt Fund can go down. This is because when interest rates are higher, investors can get better returns from other options, making existing Gilt Funds less attractive.
Lower Returns than Stocks:
Gilt Funds typically offer lower returns compared to stock investments. While they are safer, the potential for growth is smaller.
Less Liquidity:
Gilt Funds might not be the best option if you need quick access to your money. Selling your investment in a Gilt Fund might take some time compared to other options.
Taxable Returns:
The profits you make from Gilt Funds are subject to taxes, reducing your overall return.

Who should invest in Gilt Funds?

Investing in top-ranked large cap mutual funds is not a cup of tea for everyone. Let us read below to know which investors could benefit the most from large cap investments:

Income Seekers
Looking for a steady flow of income? Gilt Funds offer regular interest payments, making them suitable for retirees or those planning for retirement.
Risk-Averse Investors:
If you prioritize safety over high returns and get nervous easily about market fluctuations, Gilt Funds can provide peace of mind with their low credit risk.
Long-Term Investors:
Gilt Funds are best suited for an investment horizon of at least 3-5 years. This allows you to ride out any short-term dips caused by interest rate movements and benefit from potential capital gains.
Those Anticipating Falling Interest Rates:
If you expect interest rates to decline in the future, Gilt Funds can be a good option. As interest rates fall, the value of existing Gilt Funds goes up.

How to start investing in Gilt Funds with INDmoney?

Now that you have understood what is large cap mutual fund, you need to know how easily you can start your investment with INDmoney. Just follow these simple steps given below, to start your mutual fund investment journey with us.

Step 1
Download the INDmoney app and create your free investment account by completing your KYC ( Know Your Customer).
Step 2
Once your Free investment account is ready, you can either search for a Gilt mutual fund or go to the mutual fund section and tap on Gilt mutual funds.
Step 3
Choose a Gilt Mutual Fund by looking at aspects like past returns, volatility, downside capture ratio, AUM, Expense ratios and underlying stocks and sectors.
Step 4
You can choose to set up SIP in Gilt mutual funds or even invest as lumpSum. Once you are on the individual Gilt mutual fund page click from the bottom “One-time” for lump sum investment or “SIP” for systematic investment plan.
Step 5
Choose the amount that you want to invest as SIP or LumpSum.
Step 6
Set up payments. If you choose to set up SIP in Gilt mutual funds, you can do a free automatic pay set up via bank mandate or UPI. If you choose to invest in lumpsum (one-time) then you can pay via UPI, netbanking, NEFT or RTGS.

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