Can the value of a gilt fund erode? And when will its value go down?
- Aneesh, Mumbai
Transcript: Gilt funds are funds which invest in government bonds. Any kind of bond carries two types of risks. One is if interest rates go up and down and second if the interest or principal are not paid back in time. Gilt funds do not generally face the latter risk because governments do not generally default on a debt. However, if interest rates rise, gilt funds fall much more than others. This is because they generally hold bonds of a long maturity which are more affected by interest rate movements.
This article was originally published on September 19, 2017.
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