Best Gilt Fund with 10 year Constant duration
About Gilt Mutual Fund with 10-Year Constant Duration
Central and state governments often reach out to the RBI (Reserve Bank of India) seeking to borrow public funds in exchange for government securities with a fixed interest rate.
Such government securities are called Gilts. A Gilt fund is a fund that mainly invests in Gilts and constitutes at least 80% of the fund’s portfolio allocation towards gilts. The fund’s asset allocation comprises a mixture of government bonds and debentures that have varying maturity periods.
A Gilt Fund, characterised by a consistent 10-year duration, offers a steady maturity period of a decade. It serves as an ideal choice for individuals seeking long-term investment opportunities, especially those who prefer a lower exposure to market fluctuations.
How Do Gilt Funds With 10-Year Constant Duration Work?
A 10-year constant-duration Gilt fund invests in gilts and government securities that have a constant maturity of 10 years. Investors would receive their initial investment once the maturity period is completed, which is at the end of 10 years.
Such a fund does not have active rebalancing on the maturity duration. While with the help of gilt mutual funds, the fund managers aim to benefit from movements in interest rates, the same does not apply to 10-year constant gilt funds.
Features of Gilt Fund With 10-Year Constant Duration
A Gilt Fund with a 10-year constant duration has several features that make it attractive to investors. A few of these unique features of the fund include:
Fixed Term: While other mutual funds allow the investor to invest and hold the fund for as long as they want, a gilt fund with a 10-year constant duration has a fixed duration of 10 years. After the maturity date, the investor would receive the principal amount and the interest earned during the fund duration at maturity. Hence, these types of gilt funds require a sense of patience from the investor to yield a significant return at the end of 10 years.
Government Securities: The unique thing about a Gilt Fund with a 10-year constant duration is that it generates returns by investing in government securities, and all such securities have a 10-year fixed period and are managed by respective governments or any authorised body as appointed by the government. The government aims to provide steady and reliable returns for the investors with their return on investments and tax revenues.
Advantages of Investing in Gilt Fund with 10-Year Constant Duration
Let us now discuss some of the advantages of investing in a Gilt Fund with a 10-year constant duration.
Safe investments: Gilt funds with a 10-year constant duration are extremely safe as these are issued by the Government of India along with the Reserve Bank of India. It involves the government’s commitment to safeguarding all interest payments and their timely disbursement to the investors. The government guarantees the payment of the principal capital invested along with interest.
Long duration: With the help of a Gilt Fund with a 10-year constant duration, investors get to earn slightly higher returns than a fund which invests mostly in short-term instruments. This is because long duration usually represents higher risk and hence, higher returns. Therefore, they are an ideal investment vehicle for investors aiming for steady returns over a long time.
Risks Involved in Gilt Fund with 10-Year Constant Duration
Now, let us understand some of the limitations of investing in a Gilt Fund with a 10-year Constant Duration:
- When compared with medium and low-duration funds, Gilt funds with a 10-year constant duration have a higher interest rate risk.
- Gilt funds are responsive to interest rate fluctuations as it invests mainly in government bonds.
- Gilt funds with a 10-year constant duration are affected by the rise in interest rates when bond prices fall. As these are fixed-rated instruments whose rates will be constant for 10 years, the chances of facing adverse interest rates during their lifetime are higher.
- Negative returns are a problem in a Gilt fund with a 10-year constant duration as it is vulnerable to interest rate risk.
- These funds are comparatively riskier than low and medium-duration funds.
Factors To Consider Before Investing in Gilt Funds with 10-Year Constant Duration
- Interest Rate Outlook: Monitor the prevailing interest rate scenario as it directly impacts gilt funds. Lower interest rates may lead to capital appreciation, while rising rates can result in capital erosion.
- Inflation Trends: Consider inflation rates, as they affect the real returns on gilt funds. Higher inflation can erode purchasing power and reduce the attractiveness of fixed-income investments.
- Credit Quality: Gilt funds primarily invest in government securities, which are considered low-risk. Ensure that the fund maintains a high credit quality portfolio to minimise default risk.
- Fund Manager Expertise: Evaluate the track record and expertise of the fund manager. An experienced manager can make prudent decisions in response to changing market conditions.
- Investment Horizon: Gilt funds with a 10-year constant duration are best suited for investors with a long-term investment horizon. Ensure your investment aligns with your financial goals and time frame.
Who Should Invest in a Gilt Fund with 10-Year Constant Duration?
Investors who are looking for minimal risk in their investments can consider investing in gilt funds with a 10-year constant duration for the long term. These funds invest in government securities for a fixed duration of 10 years and may offer a higher return during a falling interest rate scenario. Government securities here usually come with a sovereign rating and do not default on principal capital and interest payments on government bonds.
These funds are ideal if you are a conservative investor and suit those who are looking to diversify their portfolio through gilt funds with a 10-year constant duration. It is also suitable for investors who may want a higher return than bank fixed deposits and tax-efficiency benefits to suit their higher income brackets.
However, given that these are fixed-income securities with a long duration, it is important that the investor does not get too worried by short-term volatilities in market interest rates.
Taxability of Gilt Fund with 10-Year Constant Duration
When considering investing in gilt mutual funds with a 10-year constant duration, it becomes pivotal for investors to understand the taxability of these funds. Gilt Funds with a 10-year constant duration are part of the debt mutual funds category; hence, their taxation is like that of debt funds. Depending on the duration of fund holding, these funds are subject to capital gains tax. The taxability structure of these funds is tabled as below.
| Type of capital gain | Period of holding | Tax rate |
| Short-term capital gains | Less than 36 months | Income tax slab rate of the investor as applicable for that financial year. |
| Long-term capital gains | 36 months and more. | – Funds bought before April 1, 2023, are taxed at 20% along with indexation benefit.
– Funds bought after April 1, 2023, are taxed as per the investor’s income tax slab. |
Dividend taxation – Dividends earned on gilt funds with a 10-year constant duration are added to the investor’s taxable income and taxed at the rate as per the income tax slab. There is also a 10% TDS on dividend amounts exceeding ₹5,000 in a financial year.
How To Invest in Gilt Funds With 10-Year Constant Duration?
Investing in Gilt Mutual Funds through your Angel One account is a streamlined process that involves a few simple steps:
Step 1: Begin by logging in to your Angel One account using your registered mobile number. After logging in, validate the OTP (One-Time Password) for security purposes, and then enter your MPIN to access your account.
Please note that if you don’t have a Demat account with Angel One, you can open one quickly by completing the KYC (Know Your Customer) procedure and submitting the necessary documents.
Step 2: Once you’ve successfully logged in, it’s time to choose the most suitable mutual fund based on your financial needs and risk profile. You can evaluate various funds by navigating to the mutual fund section on the Angel One app. During this stage, consider the following factors:
- Search for the specific fund you wish to invest in or take recommendations from funds listed by Angel One across different categories.
- Analyse the fund’s historical performance, tax implications, constituent sectors, and the stocks it comprises.
- Utilise the provided calculator to estimate potential returns.
- Assess the level of risk associated with the fund and compare it to your risk tolerance.
- Check the fund’s ratings assigned by reputable rating agencies, typically on a scale from 1 to 5.
- Take note of the fund’s expense ratio, which provides insight into the cost of investing in it.
Step 3: After finalising the fund(s) you want to invest in, navigate to your Angel One account’s Mutual Funds section and search for your chosen fund. Since investing in mutual funds often involves a long-term commitment, exercise caution when selecting the fund(s) you intend to invest in. During this stage, consider the following:
- Decide whether you want to invest a lump sum amount or set up a monthly Systematic Investment Plan (SIPz).
- Enter the investment amount you are comfortable with and choose your preferred payment method. UPI is the recommended mode, but you can also opt for net banking.
- After placing your order, if you’ve chosen the SIP investment route, you can establish a mandate for hassle-free future instalments.
Top 5 Gilt Funds with 10-Year Constant Duration to Invest in
| Fund Name | AUM ( in ₹ crores) | CAGR 3Y (%) | Expense Ratio (%) | CAGR 5Y (%) |
| ICICI Pru Constant Maturity Gilt Fund | 2,475.31 | 6.36 | 0.23 | 7.02 |
| SBI Magnum Constant Maturity Fund | 1,881.28 | 6.46 | 0.31 | 6.68 |
| Bandhan G-Sec-Constant Maturity Plan | 359.61 | 6.27 | 0.15 | 6.66 |
| DSP 10Y G-Sec Fund | 56.55 | 5.92 | 0.31 | 5.96 |
| UTI Gilt Fund with 10 year Constant Duration(H-IDCW) | 167.82 | – | 0.22 | – |
Note: The above-mentioned top funds are for informational purposes only and are not recommendations. The funds are based on a 5-yr CAGR as of January 9, 2025, which is subject to change frequently. Check out real-time data on Angel One.
ICICI Pru Constant Maturity Gilt Fund
The ICICI Pru Constant Maturity Gilt Fund is a low-cost investment option with an expense ratio of 0.23%, making it an efficient choice for investors seeking consistent returns. It offers a Yield to Maturity (YTM) of 6.91%, reflecting competitive returns for a gilt fund. The Sharpe ratio of 2.53 highlights its superior risk-adjusted performance. This fund invests predominantly in government securities, ensuring safety and stability.
SBI Magnum Constant Maturity Fund
The SBI Magnum Constant Maturity Fund combines safety and strong performance with an expense ratio of 0.31%. It offers a Yield to Maturity of 6.93%, in line with category standards, and a Sharpe ratio of 2.61, reflecting exceptional risk-adjusted returns. This fund focuses on government securities, providing stability for conservative investors. Backed by the expertise of SBI Funds Management Ltd., this fund can be suitable for those seeking secure, long-term returns with no lock-in period or exit load.
Bandhan G-Sec-Constant Maturity Plan
The Bandhan G-Sec-Constant Maturity Plan stands out with a low expense ratio of 0.15%, ensuring cost-effective returns for investors. It offers a Yield to Maturity of 6.95%, the highest among its peers, and a Sharpe ratio of 2.74, signifying excellent risk-adjusted performance. This fund primarily invests in government securities, making it a safe and reliable choice for investors seeking long-term stability. With no lock-in or exit load, it caters to those looking for flexibility and consistent performance.
DSP 10Y G-Sec Fund
The DSP 10Y G-Sec Fund offers a balanced approach to secure investing with an expense ratio of 0.31%. It provides a Yield to Maturity of 6.86%, supported by a Sharpe ratio of 2.49, highlighting solid risk-adjusted returns. By focusing on government securities with a 10-year maturity, the fund can be ideal for conservative investors aiming for predictable returns.
UTI Gilt Fund With 10-Year Constant Duration
The UTI Gilt Fund With 10-Year Constant Duration offers a low expense ratio of 0.22% and a Yield to Maturity of 6.92%, ensuring efficient performance. While its Sharpe ratio of 1.66 is below the category average, the fund remains a reliable choice for risk-averse investors. Backed by the expertise of UTI AMC, this fund invests in long-term government securities, providing safety and stability.
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Gilt Fund with 10 year Constant duration FAQs
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