Best 10-Year Gilt Funds 2025

Gilt Funds are a type of debt Mutual Funds that predominately invest in Government Securities (G-Secs) issued by the RBI (Reserve Bank of India) on behalf of the government.

Ideally, there are two kinds of gilt funds offered to the investors, one is gilt funds that invest in government securities across maturity. And the other is 10-year gilt funds that will invest in government securities with a maturity of 10 years.

Gilt Funds with 10-Year Constant Maturity

A gilt fund with 10-year constant maturity will invest 80 percent of its total assets in government securities. Gilt funds having an average maturity of 10 years are usually quite sensitive to interest rate changes. If suppose, you are holding these funds, and interest rates begin to rise, then there are extreme chances that these funds can give you negative returns.

In contrast, the times where interest rates are expected to come down, gilt funds with higher maturity has the capability to deliver good returns. But, unlike other Debt fund, these funds are not exposed to credit risk unless the government goes bankrupt.

Investors who are planning to invest in such high maturity gilt funds, it is advisable to invest when interest rates are expected to ease down because a decrease in interest rates causes a rise in the prices of long-term gilt securities. Also, it would be convenient for an investor to shift their investment from short-term gilt securities to higher maturity when the interest rates are expected to fall.

Why to Invest in Gilt Mutual Funds?

Gilt debt funds tend to offer the dual benefit of security and returns. Your investments are in government Bonds and hence, there is a very little risk to the invested amount. Moreover, it also gives better returns when compared to the savings bank account.

Though gilt funds with higher maturity can be risky at times, as they are more prone to interest rate risk, but they are not affected by the credit risk. So, investors who can tolerate little risk in investment can plan to invest in gilt funds with a 10-year constant maturity.

Best Performing 10 Year Gilt Funds to Invest in 2025

How to Invest in 10-Year Gilt Funds?

1. Open Free Investment Account for Lifetime at Fincash.com.

2. Complete your Registration and KYC Process

3. Upload Documents (PAN, Aadhaar, etc.). And, You are Ready to Invest!

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How do 10-Year Gilt Funds Generate Returns?

Gilt funds predominately generate returns by trading the Underlying instruments. Depending on the interest rate outlook, a fund manager will tend to trade in and out of gilts with varying maturities. By these means, trading returns will be generated by the fund, apart from the returns generated on the coupon (the yield).

In this manner, the fund manager takes a view on the future movement of the interest rates in the Market and invests either in short-term gilt funds or gilt funds with higher maturity. When a fund manager presumes interest rates are going to fall, a major part of the Portfolio will be shifted to longer-maturity securities. Also, in such market scenario, the price of the existing long-term bonds tends to rise more than those of shorter maturity gilts.

Since gilts are linked to the market on a day-to-day Basis, the price movement is reflected in the Net Asset Value (NAV) of the fund. An understanding of interest rate movements and their impact on the returns (as per its duration) is essential in order to understand the potential returns that can be generated by Investing in gilt funds.