The best golden funds to invest in India 2021 to be a good alternative to equities
For categories of investors who are risk averse or have a moderate appetite for risk, taking an interest in stocks when they are trading at an all time high may not be an option or a good idea given certain conditions. So what may be best to take is to look for alternatives that are just as good if not so rewarding.
Here we want to discuss a similar class of mutual fund category which, given government policies, has been the winner. So if you understand that, here we will reflect on the various aspects of gilt mutual funds and which have been the top rated and performing mutual funds in this category.
Main characteristics of Gilt funds
1. Investment funds are debt funds whose mandate is to invest 80% in G securities and therefore of a highly secure and safe nature compared to equities. So, overall, your investment participates or is invested in government funded infrastructure projects as well as other expenses.
It is interesting to note that these investments are generally in securities issued to finance various
2. These G-oriented funds go into declining interest rates, that is, when interest rates are lower in the economy. As in the current case, when RBI, given the impact of Covid last year, resorted to a wave of rate cuts and the yield on G securities fell from 8% to around 6% now. Notably, a lower yield tends to benefit bonds because there is an inverse relationship between bond yields and bond prices.
3. State funds therefore offer overall the best investment alternative with low risk and higher optimal returns than other fixed income instruments such as FD bank (the tax issue remains to be discussed). .
4. In addition, investors should note that these funds have an average maturity of 3 to 5 years. They must therefore ensure that the investment horizon of their investment objective corresponds to the maturity date of the fund.
Is this the right time to invest in Gilt funds?
Yes, probably we would say that is because given the inflation rate above 6% for the CPI which entered for the month of May (reported in June), RBI had the leeway to further reduce rates. Now, in fact, we can see interest rates in the economy rising at any point in time as the growth problem is resolved, so this may be the best time to actually put in our surplus if we are. comfortable with optimal returns.
Gilt fund performance
These funds can generate returns of up to 12% and of all Gilt funds the highest 5-year return in the category was the highest at 9.5%.
Main gold funds that generated the highest return in 5 years
1. IDFC Government Securities Fund-Investment Plan-
The fund’s assets under management were well over Rs. 1968 crores. The CRISIL4 Star rated fund charges an expense ratio of 1.23% and has a net asset value of 27.94 as of July 9, 2021. The fund’s benchmark is the Gilt CRISIL 10 Year Index.
The corpus of 49% of the fund is in G-titles. Also, when talking about the fund’s returns, it exceeded 9% for a 5-year return, while the 3-year return was 11.30%.
The SIP in the fund can be started for as little as Rs. 1000 while for the lump sum payment Rs. 5000 are payable.
The main holdings of the fund are margin funds as well as GOI securities with various maturities ranging from 2026 to 2029.
2. DSP Government Securities Fund-Direct Plan-Croissance:
The fund’s direct plan is relatively old while its direct plan has been in existence for 8 years now. The fund’s benchmark index is I-Sec Li-Bex.
The fund’s assets under management are Rs. 461.95 crore and the main objective of the fund is to generate income for its investors, although its realization may or may not be assured.
The fund has managed to outperform small postal savings banks like the PPF. The fund managers managing the fund are Mr. Vikram Chopra and Mr. Saurabh Bhatia.
SIP and lump sum investments in the fund can be started for just Rs. 500.
The main holdings of the fund include TREPS / reverse repo investments, 7.26% of GOI securities dated 2029, etc.
The fund’s 5-year return was 9.48%, while the 3-year return was over 11%.
3. Nippon India Gilt Securities Fund – PF – Automatic Capital App
This is a fund rated 3 stars by CRISIL from Nippon India and for the direct plan it has an expense ratio of 0.61% as at May 31, 2021. Value Research has also assigned a 3 star rating to the fund. funds. The fund size of this GILT fund is Rs. 1373 crores.
The fund is mainly invested in G securities, ie more than 90%, and therefore belongs to the moderate risk category. Over a period of 5 years, the fund generated an annualized return of almost 10% or 9.93%, while its return over 3 years was 11.06%.
SIP in the fund can be started for just Rs. 100, while for a lump sum investment you have to shell out a minimum of Rs. 5,000. The benchmark of the fund is CRISIL Dynamic TRI.
Some of the major holdings are G securities, government development loans, margin money, and interest rate swaps. The fund was thus able to generate an above-average return over 5 years.
Taxation of the Gilt fund:
For state funds, if a capital gain is realized during a holding period of less than 3 periods, it is called a short-term capital gain and the tax will be charged according to the taxation of the investor, while for long-term capital gains, it will be a flat rate of 20% with indexation benefit.
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