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Is it a time for Gilt Funds? |
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Saurabh
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| 06 September 2008, 12:56:18 |
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In the current interest rate scenario, gilt funds may turn out to be outperformers over a 1-2 year holding period? Any comment from the community? |
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Re: Is it a time for Gilt Funds? |
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Peter
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| 10 September 2008, 12:57:03 |
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Saurabh,
Why exactly do you think gilt funds would perform. Can you explain more in detail?
-Peter |
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Re: Is it a time for Gilt Funds? |
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Saurabh
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| 12 September 2008, 12:22:39 |
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Gilt funds invest in government securities and thus carry no credit risk. However for an investor they still become volatile instruments because these funds react sharply to interest rate movements. Now if we assume that interest rates are near their peak or have peaked out, then any fall in interest rates makes securities that carry a high interest rate (coupon rate) more attractive and thus their price goes up. This in turn reflects in the NAV of the fund and returns to investors.
We saw a similar situation in 2001 when returns on Gilt funds was as much as 24% and in a case even 32%. |
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Re: Is it a time for Gilt Funds? |
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Rajiv
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| 24 September 2008, 18:05:28 |
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I share Saurabh's views. Gilt funds could be good instruments for investment over the next 8-12 months |
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Re: Is it a time for Gilt Funds? |
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Peter
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| 12 November 2008, 13:04:57 |
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I just looked up some gilts funds. The performance seems to be varying greatly. The good ones are doing very well. What is the reason for this disparity and what funds would you recommend today? |
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Re: Is it a time for Gilt Funds? |
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So the returns on Gilt Funds is as high as 15% absolute over 3 months, however we may still have some upside. New investors however need to be cautious. |
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Re: Is it a time for Gilt Funds? |
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Kalsi
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| 18 December 2008, 19:18:57 |
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Hi Saurabh,
with the recent FED action of taking rates to zero percentage - we are entering a new world order.
The extremely low interst interst rate scenario globally may keep the rally on in G-Secs.
The ylds on 10 yrs G-sec may go below 4.94% (which we saw towards end of 2003)
You are right in suggesting that new investor should be cautious - cautious in terms of his expectations.
The un-expected return which investor got in last four months(Fidelity Flexi GILT fund giving approx 20% absolute returns in last 4 mnths),he may have to keep investment horizon of 12 to 18 months for the same |
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