What are Fixed Maturity plans?
A Fixed Maturity Plan (FMP) is a fixed income scheme and generally is 100% equity free. FMPs have a fixed life and a definite maturity date i.e. they are closed ended schemes and hence the name Fixed Maturity. Post the maturity date the fund ceases to exist and your investment along with the appreciation is automatically returned back to you. • Q. FMPs do not guarantee returns but their returns are fairly predictable Though Fixed Maturity plans do not guarantee returns they are relatively more predictable in their returns. Here’s how. As investments generally do not flow in or out during the tenure of the scheme it allows the Fund manager of the FMP to lock into a pre-decided fixed instrument (could be debentures, Commercial Paper, Certificate of Deposit, Gilts i.e. securities issued by the Government of India.) and hold on to it till the expiry of the instrument. Quite naturally the maturity profile of this fixed income instrument would be similar to the maturity profile of the scheme
