The Reserve Bank of Indian (RBI) and the government are keen on retail investors accessing the government securities market. In its latest attempt, RBI has allowed demat account holders to invest in G-Secs (Government Security) through depository participant banks. Buying G-Secs can be as simple as buying equity stocks through a broker.
Direct Investing
Direct investing is appropriate for investors, who are looking for fixed payouts in the form of interest payments. G-Secs are safe as there is a guarantee by the government, with respect to interest and principal payments. Also, there are no intermediary costs as you buy directly from the government.
Gilt Funds
Gilt Funds are mutual funds where you invest only in government securities. Usually risk averse, and conservative investors, who want to invest in the shadow of secure government bonds prefer it. Here, the investors are protected from credit risks.
If you are not interested in investing directly in the G-Secs, you can buy Gilt Funds. It is same as buying any other mutual fund scheme. You can directly approach a fund house or visit their website. Even after the recent initiatives from the government, investing through the funds route is still quite easier.
But why would a person, who already indirectly holds government papers through PPF or bank FDs, be interested in Gilts? There are two types of people who may benefit from the Gilt Funds. First, the high net worth individuals, who may want to benefit from the extra yield that listed bonds sometimes give. Secondly, working individuals, who would otherwise buy an annuity for their post retirement income.
In conclusion, you should have at least a 3 to 4 year investment horizon, and moderate risk appetite to invest in mutual funds. You should consult with your financial advisors to discuss whether these mutual funds suit your investment strategy or not.
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