What are the advantages and disadvantages of investing in gilts?
In such worrying times, UK Gilts will remain a cornerstone for any diversified portfolio. Trading is really profitable and there are a few risks, but this applies only to professionals. If you are a beginner, then you will lose a lot of money before gaining experience. Believe me, I know what I’m talking about. Information is the most important weapon of a trader. I came across cases when I lost thousands of dollars due to incorrect or irrelevant information. You should be attentive all the time to good information and to have the best knowledge in vtsax vs vti or other fields. Good luck!
Advantages: The main advantage of investing in G-secs is that there is a minimal default risk, as the instrument is issued by the GOI. G-Secs, especially dated securities, offer investors the opportunity to invest in very long term debt (at times with maturity over 20 years), which is usually not available from the private sector. Although some issues of G-secs tend to be illiquid, there is adequate liquidity in most other issues. Infact, buying and selling from/to a primary dealer can take care of the liquidity risk. Disadvantages: The main disadvantage of investing in G-secs is the same as in the case of investing in any other debt instrument i.e. possibility of higher interest rates and inflation. While higher interest rates will lead to an erosion in value of the bond, a rise in inflation will eat into the real return (though this can be taken care of by buying capital indexed bonds for example). What are the tax benefits by investing in gilts? There is no tax deducted at source an