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Fixed maturity plans are quite popular in mutual funds these days. So far this year, about 50 Fixed Maturity Plans (FMP) have been launched. This is a fixed-term scheme. In this scheme, investment is usually made in fixed-term debt instruments. This period can be from a few months to several years. These plans invest in debt, so the risk in them is low. Investors also get good returns in these plans. Investors who do not want to take much risk are liking these plans a lot.
How is it different from FD?
A fixed maturity plan is a type of FD. In FD, your money is deposited in banks, whereas here your money is invested in debt instruments through fund houses. Fixed maturity plans are not affected by fluctuations in interest rates. Whereas bank FDs are affected by the repo rate.
Why is it becoming popular?
The changing market conditions are the reason behind the popularity of fixed maturity plans. Due to inflation being under control, the Reserve Bank of India has not been increasing the repo rate for a long time. Rather, now a decrease in the repo rate is expected. When the repo rate increased, banks also started increasing the interest rates on FDs. Now that the repo rate is stable, its effect is also visible on the interest rates of FDs. Some banks have also started reducing the interest rates on FDs. This means that the interest in FDs may decrease in the coming time. In such a situation, fixed maturity plans are a great option for people who prefer low-risk investment options.
