“Let us get the basics right, Subra, if you want to be safe, you should invest in gilt. Equities, equity mutual funds, etc. are for the rich people who read your blog NOT FOR middle class people like me. I am a bank manager and I have all my money in bank fixed deposits. I feel safer that way”

Absolutely correct Mr. Reader ( he has not asked for his name to be withheld, but JLT).

You should be even more safe – why risk investing in India where there is a currency risk? You should be investing in the US gilt. Is that not the safest?

You will get nominal returns of 1.6% p.a.

However, Mr. Reader the persons who have invested in the US Gilt are getting a NEGATIVE 6.8% return, because inflation is rearing its head even in the US. The US government is (as usual) looting the small saver..and giving him negative returns (true in India also – LIC helps the government).

By the way Mr. Reader do you know what happens when interest rates go up, say to 5% p.a.??

Brilliant people like you who have invested in US Gilt, will lose their shirt, pant and…..

NEGATIVE RETURNS AND HUGE PORTFOLIO LOSSES ARE a sure fire guarantee for US GILT LONG TERM INVESTORS.

It is very difficult to make retail investors in Gilt funds understand ‘interest rate risk’, ‘duration’ and re-investment risk. Also most of the Central banks in the world (including RBI) are even thinking of the hurt that inflation causes among the poor people.

So if you are investing in Gilt, with a current yield of 1.5% NOMINAL interest (in a country where the Central bank says inflation is 1.9%, and the market says it is about 5% p.a.)…INFLATION will ensure that you get a negative return.

Such negative returns are called LOSSES -PORTFOLIO losses, if you may….