HSBC Gilt Fund Latest NAV: 63 18, Performance & Returns

guilt funds
guilt funds

You need to pay an annual fee to compensate the fund managers. You must check a gilt fund’s operating cost before investing in it. However, it might change depending on the investment strategy deployed by the fund manager. Returns are another factor that you must consider before picking a gilt fund for investment. However, the interest income is not guaranteed, and the rate keeps fluctuating. Therefore, you should try to invest in gilt funds when the interest rates are coming down.

In India, the government of India is liable to pay the interest on the G-sec. Gilt funds charge an annual fee known as expense ratio, which takes care of the fund manager’s fee and other related expenses. This is a percentage of fund’s average asset under management. As per SEBI specifications, the upper limit of expense ratio for debt funds is 2.25%. However, the operating cost of a particular fund may depend on the fund manager’s investment strategy.

  • The 3-year and 5-year annualized return rates are 6.5% and 7.4%, respectively.
  • This could be due to investors buying in at the peak of the market and selling during downturns, or due to high fees that eat into returns.
  • When the Reserve Bank of India starts reducing rates, the demand for government securities issued earlier goes up because they carry a higher interest rate.
  • Investor returns can differ significantly from fund returns due to factors such as market timing, investment behavior, and fees.
  • You should be well-informed about interest rate changes in the economy.
  • But it needs reminding that not all debt funds are high-risk.

The name comes from the gilded-edge certificates that used to be issued for government bonds. According to Sebi’s regulations, gilt funds are supposed to make an investment of at least 80% of their total assets in fixed-interest generating government securities. These investments go towards funding infrastructure projects introduced by the Central and State government or other such expenses. Read on to find out what the gilt fund meaning is as well as the basics of gilt funds in India.

In gilt funds, the higher the maturity of G-Secs, the higher is the vulnerability to an interest rate change. Well, in such case, long-term gilt funds respond actively to interest rate changes than short-term gilt funds. The times where interest rates are expected to come down, long term gilt funds have the capability to deliver good returns. On the other side, gilt funds are considered to be a high-risk investment depending upon their maturity. Gilt debt funds can invest in a short-term, mid-term and/or long-term G-secs, due to which their returns are sensitive to interest rate movements. These funds usually benefit when interest rates are moving down as falling returns results in an appreciation in G-Sec price.

Edelweiss Government Securities Fund Direct-Growth

If you keep investing in the fund for five years, your investments will yield a return of 18.48%. The performance has remained good in the debt funds category. In the past few years, top gilt funds have been able to consistently deliver annual returns in the range of 10%-15% and above.

Gilt funds also charge a managing fee namely expense ratio. The expense ratio for all debt funds is capped at 2.25% on NAV by SEBI. The fund manager cannot charge more than this from investors. Now that we’ve answered the question ‘what is a gilt mutual fund? Did you know that gilt mutual funds offer plenty of advantages to an investor. Top gilt funds have recently demonstrated a consistent ability to provide yearly returns between 10% and 15% and above.

This makes them an ideal investment option for risk-averse investors who are looking for a predictable income stream. Gilt funds are one of the oldest investment options in India; these existed even during the pre- independence period. Essentially, gilt funds invest your money in debt securities issued by the government. As securities offered by the government are known to be a safe investment avenue, gilt funds are an excellent choice for risk-averse investors. Government-backed securities are known to be one of the safest investments options. By investing in such securities, gilt mutual funds offer a dynamic blend of decent returns and low risk.

This will protect them from upward interest rates movements. If you are looking for a secure investment option with minimal credit risk then Gilt fund is the way to go. These are a type of mutual fund that invest in government securities, specifically bonds issued by the government of India. These bonds are considered to be very low risk investments because they are issued by the government, which has a strong ability to repay its debts.


A capital gain made during less than three years is known as the short-term capital gain . A capital gain made over three years or more is known as the long-term capital gains . Investors will receive the STCG from gilt funds, and he should pay the income tax accordingly. LTCG tax, on the other hand, is a flat 20% with indexation benefits. Unlike bond funds which may invest in corporate bonds, Gilt Funds solely invest in g-secs or government securities.

Unlike other Debt fund that invest in debt instruments across the board, gilt debt funds invest only in government Bonds. Being sovereign papers, they do not expose investors to credit risk (unless the government goes bankrupt!). Also, as the G-sec market is largely dominated by institutional investors, gilt Mutual Funds offer a convenient way for retail investors to invest in government securities. Short term plans invest in short-term government bonds, which are of a shorter duration and usually mature in the next months. A change in interest rates usually has a limited impact on their market price, which in turn means that there is little effect on the NAV of the short-term funds. One should look at the maturity or duration of the funds and investors should ensure that they are in a fund which is low on both of these parameters.

Are gilt funds safe?

Gilt mutual funds are widely considered a safe harbour for investment because they invest in government securities. Technically, mutual funds that invest only in government securities are known as gilt funds. These government securities and/or bonds typically have very high credit rating.

In the last three years, it has generated more returns than its benchmark fund, i.e., the NIFTY All Duration G-Sec Index. 1) Gilt funds carry risks similar to that of corporate securities. These include the risk of default and interest rate risks. Gilt funds have features like those of fixed deposits and recurring deposits. However, unlike fixed deposits or recurring deposits, gilts do not pay the interest during the period between the date of subscription and maturity.

Gilt Mutual Funds

No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor’s account.”

The interest or coupon rate and maturity period of these securities vary. The Government Securities are issued by the Reserve Bank of India on behalf of the Government. Please read all scheme related documents carefully before investing.

Tax-saving mutual funds, also known as Equity Linked Saving Scheme , are… The fund’s expense ratio is 0.6%, and the returns are lower than the category average. The Government Securities Mutual Fund has a moderate risk and a high alpha.

What are gilt edged funds?

Gilt-edged securities are high-grade investment bonds offered by governments and large corporations as a method of borrowing funds. The issuing institutions typically boast strong track records of consistent earnings that can cover dividend or interest payments.

Also, if the interest rates are in a falling cycle, then you can earn good returns in the shorter term too. By focusing on your long-term investment strategy and avoiding common pitfalls, you can maximize your chances of achieving your financial goals. However, it’s important to note that gilt funds are not completely risk-free. They are subject to interest rate risk, which means that the value of the fund may fluctuate based on changes in interest rates. Therefore, investors should carefully evaluate the risks and returns of gilt funds before making investment decisions. Despite the ability to generate considerable returns, even going up to 12%, gilt fund returns are not guaranteed and may vary depending on the interest rate regime.

Most mutual fund managers do not recommend gilt funds to their regular clients. They believe that only investors with high awareness about the money market or bond market should invest in these schemes. It is extremely important to time the entry and exit in these schemes because they are extremely sensitive to interest rate movements. They do very well in a falling interest rate regime, but they suffer and start giving negative returns one the rates start hardening. A gilt fund is essentially a mutual fund that invests the money pooled from different investors into fixed income government securities. These funds invest in both central and state government issued securities.

For example, consider a hypothetical mutual fund that has an annualized return of 10% over the past five years. On the surface, this may seem like a great investment, but if you look closer, you may find that the fund’s investor returns are much lower. This could be due to investors buying in at the peak of the market and selling during downturns, or due to high fees that eat into returns. Most of the holdings are either with the Government of India or the Reserve bank of India. The investments are made in the Sovereign and the financial sector.

Scheme Info

When the demand goes up, their price goes up and yields fall. This is called the inverse relationship between the price and yield of bonds. However, when RBI pauses on rates guilt funds or starts hiking policy rates, the opposite trend happens. Since the new bonds will carry a higher interest rate, demand for older bonds drops or traders sell them.

guilt funds

But it needs reminding that not all debt funds are high-risk. And, if it is a gilt fund in question, which is a kind of debt fund, then the risks are much lower. On reaching maturity, the government securities are returned by the gilt fund in exchange for money. For investors, the appeal of gilt funds lies in the potential for decent returns and relatively low level of risk. As compared to many other investment options, gilt funds offer decent returns even if you are investing for short to medium term.

The Magnum Gilt Fund by SBI is a debt fund with a low to moderate risk. The fund’s major holdings are with the Reserve bank of India and the Government of India. The fund’s assets are invested in the financial and sovereign sectors.

Best Gilt Funds to Invest

Hence, investors are advised to invest during decreasing interest rate regimes. Moreover, the expectation is that gilt funds still deliver returns higher than those of equity funds even when the economy is in a slump. Gilt funds generally give reasonable returns at low risk and are a suitable option for investors with short-term or medium-term investment goals and plans. Retail investors typically do not get direct exposure to certain government securities; with gilt funds anyone wishing to invest can get access to government instruments. Kotak has stable gilt funds, and the Investment PF and Trust Growth fund are among them. The fund’s risk ranges from moderate to high but guarantees stable returns.

Is gilt fund short term?

Long-term gilts funds invests in long dated government bonds with maturities, typically greater than 5 years up to even 30 years, while short-term gilt funds invest in short term government bonds as well as long-term bonds with short term residual maturities.

Therefore, these funds might not be ideal if you are looking for short-term gains. You must have a horizon of 3 to 5 years to invest in these funds. The biggest risk in gilt funds is that of the fluctuating interest rates.

What is the difference between gilt and debt fund?

Special Debt Funds

Corporate funds and credit risk funds are directly linked to corporate debt instruments. These bonds offer higher return but could be prone to market volatility. On the other hand, Gilt funds invest a majority of their assets into highly rated government securities.