What are the advantages of investing in government securities (g-secs)?

The Zero Default Risk of the G-Secs. offer one of the best reasons for investments in G-secs so that it enjoys the greatest amount of security possible. The other advantages of investing in G- Secs are: Greater safety and lower volatility as compared to other financial instruments. Variations possible in the structure of instruments like Index linked Bonds, STRIPS Higher leverage available in case of borrowings against G-Secs. No TDS on interest payments Tax exemption for interest earned on G-Secs. up to Rs.3000/- over and above the limit of Rs.12000/- under Section 80L (as amended in the latest Budget). Greater diversification opportunities Adequate trading opportunities with continuing volatility expected in interest rates the world over read less

The sovereign debt or government securities, also known as G-Sec (in India) are the safest financial instruments for investments available. Since the chances of the Indian government defaulting on the loan or interest payment are extremely low (there is always a possibility though like in many other countries in the past), the G-Secs are better than even bank deposits and hence the return on them are the lowest. It is a trade off for having the security of the principal. Remember bank deposit are NOTHING but lending your money to the bank and you are only entitled to just INR1 Lakh in case of your bank going bust. Due to the government backing, the G-Secs also enjoy higher collateral value for loans etc. And, finally, they are the most liquid form of investments. read less