Nippon India Mutual Fund has announced the launch of the Nippon India ETF 5 Year Gilt fund, the New Fund Offer (NFO), which is closing on March 26, 2021. The Nippon India ETF 5 Year Gilt is an open-ended scheme replicating and tracking the Nifty 5-year Benchmark G-Sec Index. Gilt refers to government securities and as the underlying portfolio is primarily consisting of Government of India Securities, hence there is no credit risk in the fund.
One can buy government securities directly and alternatively invest in govt. Securities through exchange-traded funds. There are Gilt funds and Gilt ETFs available with varying maturities suiting your goals. The investment objective of the scheme is to provide investment returns closely corresponding to the total returns of the securities as represented by the Nifty 5 Yr Benchmark G-Sec Index before expenses, subject to tracking errors.
The Index seeks to measure the performance of the most liquid Government of India bond in the 5-year maturity segment. The Nippon India ETF 5 Year Gilt makes you stay invested in the most liquid 5 Year Gilt at all times.
If you are looking to invest for a period of 5-years and also keeping liquidity in mind, the fund may be considered. The fund suits those who are seeking an alternative to investing in fixed income instruments such as bank fixed deposit for a 5-year duration.
Being an ETF, the units are traded on stock exchanges and one can buy, sell units during trading hours. Such funds work to the benefit of the investor only if held till maturity. One should consult their financial advisors before investing in such funds as the assurance is not available in mutual funds.