mutual fund Fixed maturity plans have become quite popular these days. So far this year, around 50 Fixed Maturity Plans (FMP) have been launched. This is a fixed term scheme. In this scheme, investments are usually made in fixed tenure debt instruments. This period can range from a few months to several years. These plans invest in debt, hence the risk is less. Investors also get good returns in these plans. Investors who do not want to take much risk are liking these plans very much.
How is it different from FD
Fixed maturity plan is a kind of FD. In FD, your money is deposited in banks, whereas here your money is invested in debt instruments through the fund house. Fixed maturity plans are not affected by fluctuations in interest rates. Whereas FDs of banks are affected by the repo rate.
Why are they 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 fall in the repo rate is expected. When the repo rate increased, banks also started increasing interest rates on FD. Now that the repo rate is stable, its effect is also visible on FD interest rates. Some banks have also started reducing interest rates on FD. This means that the interest on FD may decrease in the coming time. In such a situation, fixed maturity plan is a great option for people who like low-risk investment options.
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