Fixed Maturity Plan: For whom is Fixed Maturity Plan a profitable deal? What are the benefits of investing in it? Know here...

Nowadays, investment in mutual funds is increasing very fast. 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 The amount can be withdrawn only after the lock-in period is over.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

In FMP, investment is made 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 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 Usually, the amount invested in FMP cannot be withdrawn before maturity, but the investor has the option to sell his FMP from his demat account on the stock exchange before maturity. Long-term capital gains tax and indexation benefits are available on FMP, which makes it tax-efficient.

Benefits of a Fixed Maturity Plan

People who do not want to take much risk by investing money in the market can invest in this scheme. Returns in FMP are usually not affected by market volatility.

There is a possibility of paying less tax by investing in FMP, especially on long-term investments.

FMP motivates you to maintain the investment for a fixed period, which maintains financial discipline.

For whom is the Fixed Maturity Plan?

Those people who want stable and predictable returns on their investment. Those 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, before investing, you must consult your financial advisor so that you know whether FMP is according to 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 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.

Keep these things in mind before investing in FMP.

Before investing in FMP, keep its duration and your financial goals in mind.

Always choose a reliable mutual fund company.

Get complete information about tax benefits and risks.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.