What is a Fixed Maturity Plan?
A Fixed Maturity Plan (FMP) is a close-ended debt fund option provided by mutual funds. Distinct from your regular mutual funds, the FMP in a mutual fund operates with a certain predetermined maturity period. This investment tool offers both the security of your capital amount and the chance for growth, making it ideal for those who prefer stable investments.
Features of Fixed Maturity Plan
Debt-oriented instruments
Indexation benefits
Defined portfolio
Benefits of Investing ina Fixed Maturity Plan
Hedging Against Interest Rate Fluctuations
Enhanced Predictability
Less Exposure to Credit Risks
Optimal for Short to Medium Term
Who Should Invest ina Fixed Maturity Plan
Conservative InvestorsIf safety and capital preservation are your utmost priorities, FMPs tailored with a higher proportion of government securities and top-rated corporate bonds are your best bet. These instruments offer stability and relatively assured returns, albeit slightly lower.
Moderate InvestorsBalancing risk and return is the mantra for moderate investors. FMPs that blend a mix of government securities, corporate bonds, and a small portion of higher-yielding instruments can serve you well. This approach aims for a bit more yield while still ensuring a considerable layer of safety.
Aggressive InvestorsFor those willing to take on more risk for potentially higher returns, FMPs invested in lower-rated bonds or corporate papers might be a consideration. While these come with higher yield prospects, they also carry increased credit risks. However, in the grand scheme of investment portfolios, even aggressive investors can benefit from the stability that such a Fixed Maturity Plan can add amidst other high-risk instruments.
Top Performing mutual funds
| Scheme Name | 5 Y | Value Research | ||||
|---|---|---|---|---|---|---|
 Bandhan FTP - Sr.179 - Direct (G) | 42.48% | Invest Now | ||||
 ICICI Pru FMP - Sr.85-10Years Plan I-Dir (G) | 42.41% | Invest Now | ||||
 SBI FMP - Series 1 (3668 Days) - Direct (IDCW) | 42.22% | Invest Now | ||||
SBI FMP - Series 1 (3668 Days) - Direct (G) | 42.11% | Invest Now | ||||
FAQs
How do FMPs differ from regular mutual funds?
Fixed Maturity Plans have a predetermined maturity date, meaning you know when your investment will mature. Regular mutual funds, especially open-ended ones, do not have this feature. This makes FMPs a predictable choice for those who want to know exactly when they'll get their investment back along with the returns.
How do we determine Fixed Maturity Plan returns?
The returns on FMPs largely depend on two factors: the prevailing interest rates when you commence your investment and the overall performance of the securities chosen within the FMP portfolio. While the rates give a preliminary idea, the securities' performance provides the final picture of potential earnings.
Can I withdraw from an FMP before maturity?
Technically, yes, you can. However, doing so might attract certain charges, known as exit loads. Moreover, the returns you would get might not be as attractive as they would be if you remained invested till maturity. It's always recommended to stay put unless there's a pressing need.
How are FMPs taxed?
When you hold onto your FMP investment for over three years, they qualify for long-term capital gains tax, which can come with indexation benefits. This often leads to a reduced effective tax rate, making it a tax-efficient choice compared to some other investment vehicles.
Which FMP is the best?
Determining the best Fixed Maturity Plan is subjective and depends on individual financial goals, risk appetite, and the prevailing market scenario. However, platforms like m.Stock evaluate the market continuously to offer their users top recommendations.