Uncertainty is a factor that constantly dictates its presence in the field of investments. In this space, Gilt mutual funds bring stability and predictability to the investment. Along with that, Gilt funds also provide modest returns on investments. In this blog, we will explain why it is important to have Gilt mutual Funds with a fixed time period in your portfolio.
What are Gilt Mutual Funds?
Fixed maturity plans (FMPs) or fixed period gilt mutual funds are a category of debt funds that invest mainly in government securities and corporate bonds of companies that have a specific time of maturity.
While there are debt funds that do not have any specific maturity time, gilt mutual funds with fixed maturity periods allow investors to get a certain amount of returns at a particular time.
The investment period could vary from a few months to several years. The gilt mutual funds offer the added advantage of sticking to a fixed period, hence offering investors clear timelines within which they may invest their money and the returns they will get after the completion of the period.
Benefits of Investing in Fixed-Period Gilt Funds
Here are the benefits of investing for a fixed period in gilt funds, i.e. 10-year gilt funds.
Certainty of Returns
The major benefit of investing in 10 year gilt mutual funds is that they offer a fixed rate of return for a fixed period. Gilt mutual funds with specific periods give the investor a clear idea about how long their money is invested and what they can expect on the maturity of their gilt mutual funds.
Interest Rate Risk
Fixed period gilt mutual funds also help in the mitigation of interest risk on the investment. By investing their money in fixed-period mutual funds, investors can protect their money from fluctuations in the interest rate.
Enhanced Portfolio Stability
Introducing 10-year gilt funds to the portfolio helps in diversifying the risk and decreasing the portfolio volatility. The predictable nature of returns offered by these funds counterbalances the volatility due to equity investments, making the portfolio more balanced.
Facilitation of Long-Term Financial Planning
Investing in fixed period gilt mutual funds allows investors to build their investment plan with long-term objectives. Right from a child’s education to retirement planning and saving for large expenses, gilt mutual funds with fixed periods are ideal for long-term financial goals.
Income Generation
Gilt mutual funds with fixed periods are popular for generating regular returns and are especially suitable for individuals seeking regular and steady income especially post-retirement.
This makes it easier for investors to manage their cash flows to meet their needs while maintaining a comfortable living.
Capital Preservation
Being specifically linked to government securities, gilt mutual funds are one of the safest investment options available in the financial market. Fixed-period mutual funds help protect the capital and also generate returns through it.
This makes them an attractive investment for those who wish to protect the principal amount of their investments while having a regular and steady flow of income.
The Bottom Line
It is important to have gilt mutual funds with fixed time periods in your investment portfolio as they provide safety, predictable returns, and growth to the investor’s capital. They also help in building a diversified investment portfolio.
In this unpredictable world of financial markets, gilt mutual funds with a fixed time period offer investors a source of steady income with low risk. Like any other investment, it is advisable to do your research about investment schemes before investing to ensure that they meet your financial goals and risk profile.