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krithika Saxena made post

Which is better for investment for the long term such as Government bonds or Mutual funds?

Answer
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Sadaf Khan answered.
9 months ago


Let me begin by explaining how these two works:

Government bonds:

It is a debt instrument issued by government companies in order to raise capital for the company. When an investor purchases bonds, they are lending their money to the government. In return for the money lent, the issuer of the bond will pay a certain amount of interest on the money that will be repaid to the investor in a fixed time span. This interest is payable on the face value of the bond, so it is not affected by the change in the market price of these bonds.
It has the following characteristics:
Fixed interest is payable on these bonds.
Risk is very less or NIL.
These bonds are generally long-term in nature, say 5 years or more.
Maturity value is fixed, sometimes you might get premium as well.

Mutual Funds:

It is an investment tool that invests in stocks, bonds, or cash equivalents. Under mutual funds, a large sum of money is consolidated and then diversified in different investments. Returns are based on the composition of the portfolio such as one can get the dividend, interest proportionately on the amount stands so invested. The best part about mutual funds is that they are managed by experts and these experts lookout for the best options for their investors.
It has the following characteristics:

Returns are not fixed but are generally higher.
Risk is very minimal, however not zero.
Maturity can be from one day to any year.
Diversified funds, the maturity value is not fixed.

Keeping in view all the above characteristics, it is your discretion that which type of investment suits your needs. If you are looking for something that is long-term and does not involve risk then you can opt for bonds. However, if you have some long-term target for your retirement and you want more return then you can opt for mutual funds. Or you can consider other factors as well.