Top Gilt Mutual Funds You can Consider Investing in Feb 2025
Gilt funds are debt mutual funds that invest in government securities and bonds. As these schemes invest in government securities, they do not have any credit risk. However, they are influenced by interest rate fluctuations. According to SEBI, these schemes must invest 80% of their corpus in government securities.
Mutual fund advisors are recommending gilt funds to aggressive debt investors, as when the RBI may cut interest rates, gilt funds are expected to give high returns. Gilt funds benefit from interest rates when interest rates fall because bond prices and interest rates have an inverse relationship. Gilt funds have the capability of delivering superior returns in a falling interest rate scenario.
If you are someone who wants to gain benefit from the falling interest rate scenario, you may consider gilt mutual funds. However, gilt funds carry risk with them as they are very sensitive to changes in interest rates. Gilt funds are not recommended to regular debt investors. It is only suitable for informed investors who are willing to take risk and have a long investment horizon.
Top Recommended Gilt Fund
- SBI Magnum Gilt Fund
- ICICI Prudential Gilt Fund
- Bandhan G-Sec Fund
- Aditya Birla Sun Life Government Securities Fund
- Nippon India Gilt Securities Fund
Benefits of Gilt Funds
- Secured Option: The fund is backed by the government, which lowers the risk of losing your investment.
- Good Returns: Gilt funds offer stable and higher returns as compared to other mutual fund schemes.
Factors to Consider before Investing in Gilt Fund
- Expense Ratio: The expense ratio is the fee charged for the management of your investment. This includes the fund manager’s fees and other costs. The maximum expense ratio for the gilt fund is 2.25% as per SEBI norms.
- Interest Rate Fluctuations: The returns on gilt funds depend on the changes in interest rates. Therefore, it is important to take a look at the interest rate movement.
- Investment Horizon: Gilt funds are suitable for long-term investment horizons with at least 3 to 5 years.
- Tax Liability: The capital gains from gilt funds are subject to taxation. The tax rate depends on the holding period of the investment.
- Fund Manager’s Experience: The performance of the gilt funds also depends on the experience of the fund manager.
Conclusion
Before investing in a gilt mutual fund, make sure you do your own research carefully and consult a mutual fund expert if needed. Determine how much risk you can take after considering your financial situation.
