Advantages of Gilt Mutual Funds
1. Safety and Reliability: Investing in government securities is widely regarded as one of the options thanks to the backing, from the governments sovereign guarantee. This assurance means that the likelihood of defaulting on interest payments or the principal amount is incredibly low. For conservative investors aiming to preserve their capital gilt funds offer a choice.
2. Consistent Returns: Gilt funds are renowned for providing predictable returns. They are less susceptible to market volatility compared to equity funds. Investors seeking an income stream or those who want to protect their principal while earning a return often find gilt funds quite appealing.
3. Easy Access to Funds: Gilt funds offer liquidity allowing investors to buy or sell units on any business day. This flexibility ensures access to invested money when required, making them suitable for term financial goals or emergency funds.
4. Risk Diversification: Gilt funds typically maintain diversified portfolios consisting of government bonds with maturities and varying levels of interest rate risk. This diversification strategy helps spread risk and mitigates the impact of a default, on any security. Experienced fund managers skillfully manage this diversification approach further enhancing the safety of these investments.
5. Tax Advantages: Certain gilt funds, those that invest in government bonds such, as tax exempt bonds provide tax benefits in accordance with Section 80C of the Income Tax Act. These funds can serve as an instrument, for tax planning enabling investors to lower their tax burden while also benefiting from the reliability of government securities.