Here is How One can Invest in Government Bonds

Read to know in what ways people can invest in government bonds.


Government bonds, also known as government securities, are debt instruments that are issued by the central or state government to collect funds from the public at regular intervals at an agreed rate of interest to finance their various projects. The money raised from the issued securities is utilised in spending on new projects such as infrastructure, flyover, roads, schools, water canals, etc.

Investing in government bonds is considered one of the most preferred low-risk investment options for investors. It creates a well-diversified portfolio and cushions the risk of the overall portfolio.

Investment in government bonds can happen in various ways. Below are some of the methods by which we can invest in government bonds

5 Ways to invest in government bonds

  • Gilt funds

Gilt funds are a type of debt mutual fund that invests only in government bonds issued by the RBI on their behalf. These debt securities are being issued from both state and central government and are heavily invested by institutional investors. It is also a retail investor-friendly investment option. Investing in the Gilt fund has no credit risk since the chances of the government going out of business are nil, thereby safeguarding the capital. Gilt funds generate good returns as well and anticipate interest rate movement in the market. An investor is taxed on a short-term capital gain basis and can be held for less than 36 months. If the funds are held for more than 3 yrs then the investor is liable to pay 20%.

  • Sovereign gold bonds

Investors can invest in gold at a minimum price with a guarantee of safety from the government. The sovereign gold bonds go in a lock-in period of 8 years and have the option to redeem the same from the 5th year into the investment. It carries an interest rate of 2.5 % per annum. Investors can start investing from as low as 1 g to 4kg of gold. These bonds can be used as security while applying for loans.

  • Conservative mutual funds

These are mutual funds that require an investor to invest in securities issued by a state or central government along with other debt, money market instruments, and equity and equity-related securities. The feature of low risk makes conservative mutual funds to be an ideal option for low-risk appetite investors. Its taxation resembles the gilt mutual funds. 

Conservative mutual funds predominantly invest in securities that are state or central. 

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Government bonds are debt instruments that are issued by the central or state government to collect funds from the public at regular intervals at an agreed rate of interest to finance their various projects.

  • Liquid funds 

Investors can invest in liquid funds which is another category of debt mutual funds. The funds collected in the mutual funds are invested in government securities like treasury bills that have a maturity of 91 days. The biggest benefit of investing in this mutual fund is that it does not have any lock-in period and an investor can withdraw any amount without any charges of entry or exit loads. They offer returns between 7% to 9%.

  • NSE goBID (Government Bond Investment Destination)

This investment option is available to the resident investor. Resident investor for India is that individual who has spent 182 days or more of the financial year in India or stayed in 60 days or more in the year and for 365 days or more in the 4 years preceding the relevant financial year. The investor can directly log in to  NSE goBID’s website or mobile application and can invest in government bonds of their choice by bidding for the same. 

Advice for the investors 

Government bonds or securities were considered an investment option suitable for banks, financial institutions, and corporate, but now they are opening up for retail investors as well. Its features being a risk-proof investment, delivering good long-term returns, high liquidity, and making the portfolio diversified makes it to be an ideal investment plan for retail investors. 

Shalmoli Sarkar
Shalmoli Sarkar
An MBA in marketing and a BTech in chemical engineering, Shalmoli writes on marketing strategies and business technology for new and aspiring entrepreneurs.

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