Mutual Funds FMP: Is it possible to invest in them through SIP? know here..

Mutual funds come in many types. One such category is Mutual Funds FMP, or Fixed Maturity Plan. Many people may not be aware of it, but it's clear that, like a fixed deposit, an FMP has a fixed maturity date. For those who invest in FDs for safe investment, FMP can prove to be a better option. They have the potential to get better returns than FDs. Here's everything you need to know about Fixed Maturity Plans in mutual funds, and whether you can invest in them through SIPs. Here's all the essential information you need to know.

What is a Mutual Fund's FMP?

An FMP, or Fixed Maturity Plan, is a type of closed-ended debt mutual fund. Closed-ended means that there is a fixed time limit for investing. Once that window closes, no new investments can be made. This fund invests in safe debt instruments such as government bonds, corporate bonds, treasury bills, and debentures, instead of investing in the stock market. This is why the risk is limited.

How does an FMP work?

When an AMC (Asset Management Company) launches an FMP, it pre-determines the fund's tenure, such as 1 year, 3 years, or 5 years. Then, money is collected from investors and invested in debt instruments with a similar maturity period. This minimizes the impact of interest rate fluctuations, and the investor is likely to receive more predictable returns.

For which investors is FMP best suited?
FMPs are especially suitable for those who:

Want low risk.
Need money within a fixed time period.
Are looking for better returns than FDs.
Are you looking for tax-saving opportunities?
Major advantages of investing in FMP

Predictable Returns
Before investing in an FMP, you get an idea of ​​the range of returns you can expect. This isn't guaranteed, but being a debt fund, it remains quite stable.

Low Risk
FMPs have significantly lower risk compared to equity funds. They remain relatively safe even during market fluctuations.

Tax Benefits
If you invest in an FMP for more than 3 years, you get indexation benefits. This increases your cost basis according to inflation, resulting in lower taxes.

No Entry or Exit Charges
Most FMPs have neither an entry load nor an exit load. This means you don't have to pay any extra charges at the time of investment or maturity.

Protection from Market Volatility
When there is uncertainty in the stock market, FMPs help balance the portfolio.

Also know the disadvantages of FMPs
It is not easy to withdraw money before maturity.
The money remains locked in for the entire duration.
If a bond-issuing company defaults, you may incur losses.
There is no guarantee that you will get the same interest rate if you reinvest after maturity.

Can you invest in FMPs through SIP?
The answer is no. SIP is an investment method where a small amount of money is invested every month. FMP, on the other hand, is a product where a lump sum is invested for a fixed period. Because FMPs are closed-ended and have a limited investment window, it is not possible to invest in them through SIP.

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