Should you invest in G-Sec: In view of the danger of the second wave of Corona, Reserve Bank of India (RBI) Governor Shaktikanta Das has announced that the second phase of the purchase of Rs 35000 crore government securities (GSAP) will be started on May 20. In view of the negative impact of Corona on the economy, the Central Bank has announced this. It is believed that the purchase of government bonds will accelerate the bond market and will help in reducing the bond yield. Earlier, in April, under the first phase of GSAP, government bonds worth 25000 crores were purchased. It got a great response from the market. To revive the economy from the second wave of Corona, Shaktikanta has made some big announcements.
What is G-sec?
A government bond is a debt instrument that is traded and traded. The Central and State authorities issue these. Central or state governments often require funds. Sometimes liquidity causes a crisis. In such a situation, they issue such bonds to raise money from the market. These are issued for both short and long term. If the security is issued for a period of more than one year, it is called a government bond.
Explain that there is an inverse relationship between the yield of the bond and the price of the bond. As the price of a bond increases, its yield decreases. The yield increases as the bond price decreases. Bond yields were continuously increasing for some time. An increase in bond yield is not a good sign for the economy.
People are looking for safe options
Here people should invest money, who want safe and stable returns on their investment. Due to COVID, in the present time, the focus of investors is increasing on such options, where their money is safe and guaranteed returns can be made. These options include FD, RD, tax free bonds as well as government securities (G-sec). Government securities are debt instruments issued by the central or state governments. These are considered safe options due to the government’s issuance. Debt mutual funds also invest their money in government G-sec. Interest rates are still at lower levels. In such a situation, it can be a better option for investment right now.
Is Small Savings a Good Option?
There are many such government bonds, in which the returns for the last 5 years range from 7 to 8 per cent annually. At the same time, there are some 10-year maturity bonds, in which returns of up to 10 per cent per annum have been received. If you choose the right scheme, it can be better than FD in terms of returns. At the same time, there is also a scheme with maturity of 10 years. If you invest in G-Sec and keep investing for more than three years, you can avail income tax by investing through mutual funds.
During the last 5 years, IDFC Government Securities Content Maturity, ABSL Government Securities, DSP Government Securities, DSP 10Y G-Sec and LIC MF Government Securities have given 8 to 9 per cent returns. Whereas on 5-year FD, major banks are paying interest from 5.75 per cent to 6.25 per cent per annum.
How to invest
It can be invested with the help of a brokerage platform. You can also invest in government bonds indirectly through mutual funds. Because debt funds invest their money in it.