Fixed Maturity Plan: In FMP, investors’ money is invested in fixed-term debt instruments. This period can range from a few months to a few years. The amount can be withdrawn only after the lock-in period is over. Know its benefits and other important things.
Fixed Maturity Plan: Nowadays, investment in mutual funds is increasing rapidly. There are many types of plans in it. One of these is FMP i.e. Fixed Maturity Plan. FMP is also called Closed-Ended Debt Scheme because the amount invested in it is locked for a fixed period. In FMP, investors’ money is invested in fixed-period debt instruments. This period can be from a few months to a few years. The amount can be withdrawn only after the lock-in period is over. Here know the specialty of FMP, its benefits and for whom it is a profitable deal.
Features of Fixed Maturity Plan
FMPs invest in debt instruments like 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 return is not guaranteed like FD. Being a market linked scheme, the return is 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 Usually the amount invested in FMP cannot be withdrawn before maturity, but the investor has the option to sell his FMP from his demat account on the stock exchange before maturity. Long-term capital gain tax and indexation benefit are available on FMP, which makes it tax-efficient.
Benefits of Fixed Maturity Plan
Those who do not want to take too much risk by investing money in the market can invest in this scheme. Returns in FMP are generally not affected by market volatility.
There is a possibility of paying less tax by investing in FMP, especially on long term investments.
FMP encourages you to stay invested for a fixed period, thereby maintaining financial discipline.
For whom is a Fixed Maturity Plan suitable?
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, people who want to avoid market volatility. However, before investing, you must consult your financial advisor so that you know whether FMP is suitable for your needs or not.
How can you invest
You can never invest in FMP as per your wish. The opportunity to invest in FMP opens with the 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 be from 30 days to 5 years.
Keep these things in mind before investing in FMP
- Before investing in an FMP, keep in mind its tenure and your financial goals.
- Always choose a trusted mutual fund company.
- Get complete information about tax benefits and risks.
