Investors often find themselves torn between short-term gilt funds and floating rate funds when it comes to safer investment options. While gilt funds invest in government securities with a fixed interest rate, floating rate funds invest in instruments with variable interest rates. #1 Understanding short-term gilt funds Short-term gilt funds invest in government securities with maturities of up to three years. #2 Exploring floating rate funds Floating rate funds invest in debt instruments with variable interest rates that reset periodically. Floating rate funds, on the other hand, are less affected by interest rate changes as their yields adjust with market rates.