Fixed maturity Plans for risk-averse investors

FMPs or fixed maturity plans are close-ended mutual funds that have a fixed tenure. These funds invest your money in debt products whose maturity is the same as the funds maturity. The tenure can be anywhere from one month to as long as 5 years. The main objective of these funds is to generated income by protecting your invested capital. These funds are especially suitable for investors who are risk-averse.

These products are very similar to the bank Fixed deposits , the only difference being the tax implications. The returns of these funds is very much predictable and the actual returns that you see after maturity is most likely to be the same as one which you predict before investment. The income in this case is assured, unlike the equity funds. The returns when compared to equity funds is much lesser but the major thing to notice is the risk. These are mostly risk free and your income is assured.

These products are suitable for investors who are not risk-free and it especially suits in the current market conditions. The sensex has come down by over 36% since January peak. Most of the investors will now have a soft corner to these FMPs.