If you are looking to secure your investments and earn a fixed income, there is nothing better than government-backed avenues. One such investment option is government securities in India.
These are debt instruments issued by the Central and State Governments to raise funds for short-term expenditure. The Reserve Bank of India issues these instruments on behalf of the Central Government.
They generally come with a maturity period ranging from less than 91 days to 40 years. Read on to learn more about how to invest in G-Secs to ensure higher stability and attractive returns.
Whether you’re looking for short-term stability or long-term growth, understanding the different types of government securities can help you make an informed investment decision. Here are the types of government securities in India:
These are money market instruments that the Government of India issues in three tenures: 91, 182, and 364 days. Since they are zero-coupon securities, they do not pay any interest.
Introduced in 2010 by the Government of India to meet mismatches in its cash flow, these are issued for less than 91 days.
They generally come with a fixed or floating coupon (interest), which is paid on the face value twice every year. Its tenure generally ranges between 5 years and 40 years.
There are various channels, both online and offline, where you can purchase G-Secs. Check out the step-by-step guide below on how to invest in G-Secs:
1. Register by opening an account by providing your Aadhaar card, PAN, bank, and other details.
2. Choose from various options, including T-Bills, government bonds in India, or sovereign gold bonds (SGBs).
3. Place your order through period auctions conducted by the Reserve Bank of India.
This bond trading platform provides you with direct access to government securities without any brokerage charges.
Various banks also allow you to invest in G-secs through their internet trading platforms or mobile applications.
Various brokers with online portals also enable you to invest in G-Secs easily through a simple online process.
When investing in G-Secs, ensure that your investments remain secure while delivering steady returns. For this, follow these safe investment tips:
While they carry negligible risk, there is still a very small possibility that they may run into a cash-flow problem. Therefore, check the possibility of payment default before investing in a G-Sec.
The maturity duration for G-Secs ranges from less than 91 days to 40 years. Consider your immediate and long-term needs before investing in these securities.
G-Sec yield rates refer to the returns you can make by investing in these debt instruments. You can calculate it by dividing the annual coupon rate by the current market rate of the bond.
While these securities are considered low-risk, putting all your money into one type of investment may not be the most effective strategy.
To safeguard against unforeseen market fluctuations, consider spreading your investments across different maturities, interest rates, and types of government securities.
While G-Secs are low-risk, they are still subject to market conditions, including interest rate changes and economic factors. Keep a close eye on these market movements to make informed decisions.
Yes, the minimum amount required for investment in G-Secs is ₹10,000.
You can determine the G-Sec yield by dividing the annual coupon rates by the current market rate of the bond.
Yes, you can sell G-Secs in the secondary market before completing the maturity period, which means that they can be traded like stocks.
Yes, since G-Secs come with a sovereign guarantee, they carry less risk than corporate bonds.
A treasury bill is a type of government security that comes with three tenures: 91, 182, and 364 days.
