Best Gilt Mutual Funds to Invest in India 2025

List of Gilt Mutual Funds in India

Here is the list of Gilt Mutual Funds in India:

Who Should Invest in Gilt Funds?

Here is the list of investors who are best suited to invest in gilt fund:

1. One about to retire: Gilt funds are reliable investment options for retired individuals as these funds do not carry any market-related credit risk and do not impose the strain of managing the funds.
2. One with zero risk tolerance: These funds are a great alternative to term deposits as these funds do not come with any market risks. They carry zero risk factors as they hold government securities as their only underlying asset.
3. Wants to invest in debt funds: These funds are one of the reliable sources of investment as they invest only in government securities and enable investors to invest in debt funds.
4. One who wants to balance their portfolio: These funds do not carry any risk and help in balancing the portfolio with other stable and risky funds.

Factors to Consider Before Investing in Gilt Mutual Funds

The following are the factors that need to be considered before investing in gilt mutual funds:

1. Expenses: Fund management services charge a fee from the fund holder, known as expense ratio. This is a percentage of the total fund assets, and it depends on the strategy of the fund manager. Investors must look for a low expense ratio to earn maximum returns.
2. Investment plan: The maturity duration of gilt funds ranges between three to five years and hence, you must plan your investment accordingly as the funds will be inaccessible during this period.
3. Taxes: The capital gain earned from guilt funds are taxable, while the tax percentage varies depending on the holding period.
4. Returns: These funds do not guarantee the returns earned as they depend on the interest rates changes and offer up to 12%, which may even increase to offer better returns as equity funds.
5. Risk: The gilt funds are risk-free funds as they invest in government bonds and securities, but they do carry interest rate risk as the NAV (Net Asset Value) of the funds changes drastically with respect to the changes in interest rates.

Benefits of Investing in Gilt Fund

The following are some of the significant benefits of investing in gilt fund:

1. High return: Offers high returns over a mid to long period that makes these funds attractive in terms of returns.
2. Flexibility in investment: Gilt funds enable investors to opt for flexible payment modes, such as SIP (Systematic Investment Plan) and Lump sum. In SIP, investors need to deposit a fixed sum at every interval, while for lump sum deposit is made only once.
3. Low credit risk: Unlike mutual funds that invest in corporate bonds, these gilt funds that invest in government securities carry minimal risk, thereby ensuring high returns.
4. Minimum capital loss: Gilt funds ensure capital protection by investing in government backed securities thereby ensuring reduced chances of capital loss.

Risks Involved in Gilt Mutual Funds Investment

The following is the list of risk involved in gilt mutual fund investments:

1. Duration risk: Maturity of gilt funds ranges between 90 days to more than 30 years and generally holds high duration risk which gets mitigated if the bond is held till maturity.
2. Interest rate risk: The bond price is inversely proportional to the interest rate, which means the bond price is sensitive to interest rate fluctuations, known as interest rate risk.