Fixed Deposit or Fixed Maturity Plan (FMP)

We find many Fixed deposit lovers in India. Who are not ready to take any risk and happy with the fixed return. However, in a recent past, it is seen that return on fixed deposits are reducing and it is likely to reduce further. So, what fixed deposit lovers should do? Well, they can explore investment option called as Fixed Maturity Plan (FMP). A Fixed Maturity Plans (FMP) are like FDs only. It can generate fixed returns and has a lock-in period. One can also use Fixed Maturity Plans to save income tax.

What is Fixed Maturity Plan?

A Fixed Maturity Plan is “closed-ended” debt based mutual funds. Closed-ended means it comes with pre-defined lock-in period. This lock-in period varies from 1 month to 3 years.

Fixed Maturity Plan do not invest anything in equity. It invests mainly in debt related investment instruments like –

  • Bonds
  • Debentures
  • Government Securities
  • Certificate of Deposits
  • Commercial Papers

FMPs are suitable for investors who love FD or in the other words for the investors with low-risk appetite.

  • The basic difference is between bank FD and FMP is return from FD is assured. However, in Fixed Maturity Plans (FMPs) returns is not assured. However, FMP generally gives better return compared to Fixed Deposits.
  • Another difference is in FMP we have an option to check rating before investing. Credit agencies give rating to FMPs based on performance A, A+, AAA etc. In FD investment is done based on the trustworthiness of bank.
  • In FMP one can go through Investment objective…

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