Thread by @TradeBrainsGrp

Are you looking to invest in the medium term in low-risk securities? Then you must consider investing in GILT funds. But what are GILT Funds and how do they work? Let's discuss! (1/10)

What are GILT funds?
Gilt funds are debt funds that invest in government(state and central) securities like bonds and fixed interest-bearing securities issued. The investments here are directed towards government expenses like infrastructure projects. (2/10)

These investments are considered low risk as they are invested with the government. The name Gilt comes from gilded edge certificates that referred to government bonds issued in golden-edged certificates. (3/10)

How do GILT funds work?
The working of GILT funds involves three parties i.e. the government( state or central), the GILT fund(investor), and the central bank(RBI) which acts as the intermediary between the government and the fund. (4/10)

Whenever the government needs funds, it sources them by acquiring a loan from the RBI, which acts as a banker to the government. The RBi collects these funds from banks and insurance organizations and lends them to the government. (5/10)

In exchange for the loan, the RBI issues government securities with a fixed tenure. The fund manager of a gilt fund subscribes to these securities. (6/10)

Although GILT funds primarily invest in government-issued debt securities they also may invest in high-quality, low-risk bonds issued by companies known as gilt-edged securities. In India, SEBI mandates GILT funds to invest at least 80% of their assets in govt. securities. (7/10)

Factors to consider before investing in GILT funds
1. Risk Factor
2. Returns
3. Cost
4. Investment Horizon
5. Type of GILT fund (8/10)

Some of GILT funds in India
1) ICICI Prudential Constant Maturity Gilt Fund
2) UTI Gilt Fund Regular Plan-Growth
3) SBI Magnum Gilt Fund-Growth
4) Nippon India Gilt Securities Fund
5)Aditya Birla Sun Life Government Securities Funds
6) Canara Robeco Gilt Fund (9/10)

Before investing, individuals must ensure securities like GILT funds offer value addition to the portfolio. They are best suited for investors who are looking to invest in the medium term in low-risk securities. (10/10)