Mutual funds are highly favoring fixed maturity plans currently. Approximately 50 Fixed Maturity Plans (FMPs) have been introduced this year. This is a scheme with a predetermined duration. Typically, this plan puts its money into fixed-period debt instruments. This timeframe can vary from a handful of months to numerous years. These investments are focused on debt, making them less prone to risk. Investors can also expect to receive attractive returns from these plans. These plans are greatly favored by cautious investors who prefer not to take on high levels of risk.
What sets it apart from FD?
Fixed maturity plan is a form of fixed deposit. In FD, your funds are stored in banks, while in this case, your funds are put into debt instruments by the fund house. Fixed maturity plans remain unaffected by changes in interest rates. The repo rate has an impact on the FD of banks.
What makes them so well-liked?
The popularity of fixed maturity plans is driven by the fluctuating market conditions. The Reserve Bank of India has refrained from raising the repo rate for an extended period because inflation has been tamed. Instead, it is anticipated that the repo rate will decrease. After the repo rate hike, banks proceeded to raise interest rates on fixed deposits as well.
With the repo rate now steady, the effects can be seen on fixed deposit interest rates as well. Some banks have begun to decrease the interest rates offered on fixed deposits (FDs). Interest rates on fixed deposits may decline in the future. A fixed maturity plan is an excellent choice for individuals seeking low-risk investment options in this scenario.
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