Mutual funds are being liked a lot these days in terms of investment. There are many types of mutual funds, one of them is FMP i.e. Fixed Maturity Plan. In this, investors’ money is invested in fixed-term debt instruments. This period can range from a few months to a few years. FMP is also called a closed-ended debt scheme because the amount invested in it is locked in for a certain period. The amount can be withdrawn only after the lock-in period is over.
Features of Fixed Maturity Plan
In FMP, investment is made in debt instruments such as bonds, government securities, etc., which means that investors’ money is invested in a safe place. Due to this, it is considered low-risk. However, its returns are not as guaranteed as those of FDs. Due to being a market-linked scheme, the returns are predictable. The investment period in FMP is pre-determined.
Usually, the amount invested in FMP cannot be withdrawn before maturity, but the investor has the option to sell his FMP from his demat account on the stock exchange before maturity. FMP offers long-term capital gains tax and indexation benefits, making it tax-efficient.
Benefits of Fixed Maturity Plan
Those who do not want to take a lot of risk by investing money in the market can invest in this scheme.
Returns in FMP are generally not affected by market volatility.
Investing in FMP is likely to pay less tax, especially on long-term investments.
FMP motivates you to stay invested for a certain period of time, thereby maintaining financial discipline.
How to invest
You can never invest in FMP on your own. The opportunity to invest in FMP opens with a New Fund Offering (NFO) and ends on the closing date of the NFO. In such a situation, you have to invest in it before the NFO ends. The investment period in FMP can usually range from 30 days to 5 years.
For whom is the Fixed Maturity Plan right?
People who want stable and predictable returns on their investments. Investors who want to invest for the medium term (1-5 years) and want better returns. Apart from this, those who want to avoid market volatility. However, it is important to consult your financial advisor before investing so that you know whether the FMP is suitable for your needs or not.
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