If you’re looking for a low-risk investment option backed by government securities, Gilt Funds are worth considering. These funds invest primarily in government bonds and securities, which means they carry minimal credit risk. Since the government rarely defaults, gilt funds are considered one of the safest mutual fund categories for conservative investors.
Gilt funds are ideal for those who want stability and predictable returns without venturing into high-risk assets. They work best for medium to long-term goals, especially when interest rates are expected to fall, as bond prices rise in such scenarios.
Gilt Fund vs Growth Fund
While gilt funds focus on safety and capital preservation, a growth fund operates with a completely different objective—wealth creation through equity investments. Growth funds invest in stocks of companies with strong potential for expansion, offering higher returns but also exposing investors to market volatility.
If your priority is security and steady returns, gilt funds are the way to go. However, if you’re aiming for aggressive growth and can tolerate risk, growth funds might suit you better. A balanced portfolio often includes both—gilt funds for stability and growth funds for long-term wealth creation.
Returns and Taxation
Gilt funds typically offer returns in the range of 6–7% annually, depending on interest rate movements. Taxation follows debt mutual fund rules: short-term capital gains (holding period less than three years) are taxed as per your income slab, while long-term gains enjoy indexation benefits.
Gilt funds are a smart choice for risk-averse investors seeking safety and moderate returns. While they can’t match the growth potential of equity-based funds, they play a crucial role in reducing portfolio risk. Pairing them with growth funds ensures a healthy balance between stability and wealth creation.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.