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Fixed Maturity Plan and Its Importance to Your Investment Portfolio

Fixed Maturity Plans (FMPs) refer to close-ended debt funds that invest in debt      instruments such as certificates of deposits (Cds), corporate debt and commercial papers (CPs). The low-cost investment vehicle offer features including a pre-specified maturity date, quality debt instrument, lock-in period till the maturity date, risk adjusted returns along with indexation benefits on assets held for a term of 1 year-3 years.

Why Fixed Maturity Plans ?

Volatility Management– As FMPs purchase securities with a fixed maturity date, you will be immune from the interest rate risk upon holding the instrument till the maturity.

Tax Efficiency With FMP, you can get the advantage of indexation that adjusts the purchase price of FMPs for inflation so that you are taxed on actual returns (Maturity Value-Indexed Cost).

Diversification- FMP investment means purchasing various securities such as fixed deposits, recurring deposits. Dispersing the money across such securities cut down the risk factor.

Who can invest in FMPs?

  • FMPs are ideally suited for risk averse investors who want to churn out fixed income from the market
  • Investors whose area of investment comes at par with the tenure of FMP
  • Investors seeking enhanced return after tax by taking indexation benefit
  • Investors seeking less volatility in their returns

Things to keep in mind before choosing FMP

  • Keep an eye on the appropriate tenure of the FMP along with their liquidity needs
  • Know tax implications with a firm focus on indexation benefits
  • Check the reputation of the fund house where you are about to invest
  • Underlying investments must be made in quality debt instruments
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Personal Loan Interest Rates July 2019
Bajaj Finserv10.99% - 16.00%
Fullerton India14.00% - 33.00%
HDFC Bank11.25% - 21.50%
ICICI Bank10.99% - 18.40%
IndusInd Bank10.99% - 16.00%
Kotak Bank10.99% - 20.99%
RBL13.00% - 18.00%
Standard Chartered Bank11.50% - 18.00%
Tata Capital10.99% - 18.00%
Home Loan Interest Rates July 2019
State Bank of India/SBI8.40% - 9.20%
HDFC8.55% - 9.55%
LIC Housing8.60% - 9.15%
PNB Housing Finance9.05% - 12.00%
Piramal Capital & Housing Finance9.00% - 9.10%
Tata Capital9.20% - 9.35%
ICICI Bank9.05% - 9.30%
Bank of Baroda8.70% - 9.70%
Axis Bank8.85% - 9.10%
Citibank9.00% - 9.85%
Indiabulls Housing Finance Limited8.80% - 11.05%
Kotak Bank8.90% - 8.75%
DHFL9.05% - 9.95%
Reliance Home Finance8.75% - 14.00%