What is Gilt Fund?
Gilt fund is one type of Debt fund and it has a lower risk in principal investment. These type of funds are only investing in bonds and fixed interest-bearing securities issued by the state and central governments.
What is G-Sec (Government Securities)?
Central and State governments whenever require fund, asks the Reverse Bank of India. RBI collects the required funds from banks and insurance companies and lends it to the Central and State government. In the exchange for the loan, RBI issues Government Securities with a fixed tenure.
In such G-Sec to which the fund manager of Gilt funds subscribes. Once the security matures, this gilt fund returns the government securities and receives money in return.
- Gilt Debt fund with lower risk.
- Investing in Government securities.
- There is no default.
- Changes in interest rates from time to time.
- New securities come with a high-interest rate, an investor like you and me, redeem money from this fund and invest in a new fund.
Gilt funds are reasonable returns and minimal risks. One of the biggest decision that an Investors have to make determine how much risk he is willing to take with his investment. New investor or investor with lower risk of the principal investment, then invest with Debt funds.