Best Fixed Maturity Plans India

The below table shows a list Of the Best Fixed Maturity Plans in India Based on AUM, NAV and minimum SIP.

What Is a Fixed Maturity Plan?

A Fixed Maturity Plan (FMP) is a close-ended debt mutual fund with a fixed tenure, typically ranging from 1 month to 5 years. These plans invest in fixed-income securities that mature in line with the fund’s maturity, aiming to provide relatively stable returns while minimizing interest rate risk.

FMPs invest in a portfolio of debt and money market instruments such as corporate bonds, government securities and commercial papers. The fund manager selects securities that mature around the same time as the FMP’s maturity date.

These plans are designed to provide returns that are indicative at the time of investment, although not guaranteed. They are suitable for investors looking for potentially higher returns than fixed deposits with a similar level of relative safety.

Features Of Fixed Maturity Plans 

The main features of Fixed Maturity Plans include fixed tenure, close-ended structure, passive management, indicative yields and potential for tax efficiency. These plans offer a unique investment option for those seeking relatively stable returns over a specific time horizon.

• Fixed tenure: FMPs have a predetermined maturity period, typically ranging from 1 month to 5 years, providing clarity on the investment duration.

• Close-ended structure: These plans are only open for subscription during their initial offer period and are listed on stock exchanges for trading.

• Passive management: FMPs follow a buy-and-hold strategy, with the portfolio largely remaining unchanged until maturity, reducing active management costs.

• Indicative yields: While not guaranteed, FMPs provide an indication of potential returns at the time of investment, based on prevailing interest rates.

Best Fixed Maturity Plans

The table below shows the Best Fixed Maturity Plans Based on the lowest to highest expense ratio.

Top Fixed Maturity Plans

The table below shows the Top Fixed Maturity Plans Based on the Highest 3Y CAGR.

Fixed Maturity Plans Funds List

The table below shows the Fixed Maturity Plans Funds List based on exit load, i.e., the fee that the AMC charges investors when they exit or redeem their fund units.

Fixed Maturity Plans Returns

The table below shows Fixed Maturity Plans Returns Based on 1Y return

Historical Performance Of Best Fixed Maturity Plans

The table below shows the Historical Performance Of Best Fixed Maturity Plans Based on 5Y return

Factors To Consider When Investing In Top Fixed Maturity Plans 

When investing in top Fixed Maturity Plans, consider the plan’s tenure, credit quality of underlying securities, indicative yield, tax implications and your investment horizon. Also, evaluate the fund house’s reputation and the plan’s alignment with your financial goals.

• Tenure: Choose an FMP with a maturity period that aligns with your investment horizon. Premature redemption can lead to lower returns and potential exit loads.

• Credit quality: Assess the credit ratings of the underlying securities. Higher-rated instruments generally offer lower risk but may provide lower yields.

• Indicative yield: Compare the indicative yields of different FMPs, but remember that these are not guaranteed returns.

• Tax implications: Understand the tax treatment of FMPs, considering your holding period and the indexation benefits for plans held for over three years.

• Liquidity: Be aware of the limited liquidity of FMPs due to their close-ended nature. Ensure you won’t need the invested funds before maturity.

How To Invest In the Best Fixed Maturity Plans in India? 

To invest in the best Fixed Maturity Plans in India, start by researching and comparing different FMPs based on their indicative yields, credit quality of underlying securities and fund house reputation. Once you’ve selected an FMP that aligns with your investment horizon and goals, you can invest through Alice Blue.

Alice Blue is a user-friendly online investment platform that provides tools and resources to help you make informed investment decisions. You can invest in FMPs during their New Fund Offer (NFO) period, which is typically open for a limited time.

Remember that FMPs are close-ended funds, so you can only invest during the NFO period. After that, units can be bought or sold on stock exchanges where they are listed. Ensure you’re comfortable with the lock-in period as premature exits may lead to lower returns.

Impact Of Market Trends On Top Fixed Maturity Plans

Market trends have a limited impact on top Fixed Maturity Plans due to their close-ended nature and buy-and-hold strategy. These plans are designed to minimize interest rate risk by holding securities until maturity, which aligns with the FMP’s maturity date.

However, market trends can affect the indicative yields offered during the NFO period. Changes in interest rates and credit market conditions may influence the types of securities the fund manager selects for the FMP portfolio at the time of its launch.

How Fixed Maturity Plans Perform In Volatile Markets?

Fixed Maturity Plans generally demonstrate stability during volatile markets due to their structure and investment strategy. By holding securities until maturity, FMPs aim to provide returns close to the indicative yield, regardless of interim market fluctuations.

However, the market value of the underlying securities can fluctuate, which may affect the Net Asset Value (NAV) of the FMP. This is particularly relevant if an investor needs to exit before maturity by selling units on the stock exchange, where the price may be influenced by market conditions.

Fixed Maturity Plans Benefits

The main benefits of Fixed Maturity Plans include the potential for stable returns, mitigation of interest rate risk, tax efficiency and portfolio diversification. These plans offer a unique investment option for those seeking relatively predictable returns over a specific time horizon.

• Stable returns: FMPs aim to provide returns close to the indicative yield by holding securities until maturity, offering relative predictability of returns.

• Interest rate risk mitigation: The buy-and-hold strategy helps minimize the impact of interest rate fluctuations on returns, especially when held to maturity.

• Tax efficiency: FMPs held for over three years can benefit from indexation, potentially leading to more tax-efficient returns compared to traditional fixed deposits.

• Diversification: These plans can add a layer of diversification to an investor’s portfolio, complementing other fixed-income and equity investments.

Risks Of Investing In Fixed Maturity Plans

The main risks of investing in Fixed Maturity Plans include credit risk, liquidity risk, reinvestment risk and the potential for lower returns compared to open-ended debt funds. Investors should be aware of these factors before committing to an FMP.

• Credit risk: There’s a risk that issuers of the underlying securities may default on their payments, which can impact the FMP’s returns.

• Liquidity risk: FMPs are close-ended and have limited liquidity. Selling units on the stock exchange before maturity may result in lower returns.

• Reinvestment risk: For longer-tenure FMPs, there’s a risk that interim cash flows may be reinvested at lower rates if interest rates decline.

• Opportunity cost: If interest rates rise significantly after the FMP’s launch, investors may miss out on higher returns available in the market.

Contribution Of Fixed Maturity Plans To Portfolio Diversification

Fixed Maturity Plans contribute to portfolio diversification by offering a relatively stable, fixed-income investment option with a defined maturity period. They can complement other investments in an investor’s portfolio, potentially reducing overall portfolio volatility and providing a degree of predictability to returns.

FMPs can be particularly useful for investors looking to match specific financial goals with the fund’s maturity. By including FMPs alongside other asset classes like equity funds and open-ended debt funds, investors can create a more balanced portfolio that aligns with their risk tolerance and investment objectives.

Who Should Invest In Fixed Maturity Plans?

Fixed Maturity Plans are suitable for investors seeking relatively stable returns over a specific time horizon, typically ranging from 1 month to 5 years. They are ideal for conservative investors who prioritize capital preservation and are comfortable with locking in their investment for the fund’s tenure.

FMPs can be appropriate for investors looking for potentially higher post-tax returns compared to traditional fixed deposits, especially for those in higher tax brackets. However, investors should have a clear understanding of their investment horizon and be confident they won’t need the invested funds before the FMP’s maturity date.

Impact Of Fund Manager Expertise On Fixed Maturity Plans Performance

The fund manager’s expertise has a significant impact on Fixed Maturity Plans’ performance, particularly during the portfolio construction phase. A skilled manager can select high-quality securities that align with the FMP’s maturity while potentially offering attractive yields.

The manager’s ability to assess credit risk and construct a diversified portfolio is crucial for the FMP’s success. While FMPs follow a largely passive strategy after the initial investment, the initial selection of securities by the fund manager plays a vital role in determining the plan’s overall performance and risk profile.

FAQs – Best Fixed Maturity Plans

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Disclaimer: The above article is written for educational purposes, and the companies’ data mentioned in the article may change over time.