To be a successful investor, is not to lose hard-earned money
What is the right time to buy a Gilt Fund?
In my opinion, the right time to buy a gilt fund is, when the interest rate above to fall, in other words, When the interest rate is high,
Let’s find a logical reason, Gilt fund generally does investments in Govt secured bonds with different terms. like a deposit on different terms. But it’s secured than any of the Banks.
Let’s took an example that If I deposited Rs. 1,00,000 in 2012 ( 9% ) in any public sector bank for 10 years, will get more interest than 2015 ( 7% ) or 2018 ( 6% ) which is highly profitable when compared with 2015 or 2018.
Now, it’s impossible to buy a bank deposit which is done in 2012 for 10 years, But, Interestingly, you can do that in Govt Bonds.
Govt used to introduce different bonds with different yields ( Years ) which will have different interest rates based on the market.
Ex: Fund A bought a two Govt Bond in different intervals,
– Govt 10 Yr Bond in 2013 at 9% for 100 Cr.
– Govt 10 Yrs Bond in 2015 at 7% for 100 Cr.
The Fund investors used to get an 8% return during the last 7 years whereas in any public sector banks used to give ~6%.
Investors are interested to buy with premium which is additional profits in the market.
The nature of growth is wave alike flat trend. Let’s try to find a find an answer to “What time we can buy a gilt fund” with the below trends,
Interest Rates in India during last 10 Years:
Govt Bond Yields ( Percentage ) during last 10 Years:
Seems like the interest rate is at the bottom now ( Nov 2020 ), it may fly up sooner or later, which is a negative sign for Gilt funds.
Finally, What is Gilt fund?
It is a fund which will invest the people’s money in govt security bonds, It is highly secured than Bank FDs.