| Fixed Maturity Plans |
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| Written by Kavita Desai |
| Tuesday, 14 September 2010 11:27 |
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FMP means fixed maturity plans are in fact investment programs focused on the debt. In this scheme investments are recorded in a portfolio of debt securities whose maturity coincides with the maturity of the FMP. The main objective of FMP is to provide income while preserving capital by investing in a portfolio of debt mentioned earlier.
FMP means fixed maturity plans are in fact investment programs focused on the debt. In this scheme investments are recorded in a portfolio of debt securities whose maturity coincides with the maturity of the FMP. The main objective of FMP is to provide income while preserving capital by investing in a portfolio of debt mentioned earlier. Fixed Maturity Plans are a common form of debt investment which is also offered by mutual funds. These are usually tax-efficient and normally offer favorable returns. FMPs are closed-ended debt schemes with a fixed maturity date before which investors can not withdraw their investments. All kinds of FMPs are exchange-related, so investors can easily conduct trade. The trading of units of FMPs is limited. This may cause difficulties for early exit. Only investors who are comfortable waiting until maturity should opt for these. If the FMP is for a period of one year, the investments related to it are made upto one year of maturity. This is done so that the investments mature on or before the maturity date of the FMP. By doing this the investor can reasonably assess the income from the FMP during maturity. Out of the main aspects of FMP, the main types are; they are tax efficient, are subject to capital gains tax or dividend tax. FMPs are passively managed funds; the turnover is low resulting in lower costs of transaction. This in turn enhances the returns for the investor. As the interest rate keeps rising fixed maturity plans can offer good returns, as during this time investors seek options that will give them good returns. FMP includes schemes which have pre specified tenure. The main objective is to generate steady returns over a fixed period. The investors are assured of returns if they stick to this for the entire period. As these services have different maturities investors have the option of buying according to their needs and requirements. FMPs are beneficial for both short term and long term investment plans. The investments of more than a year enjoy what is known as the 'indexation benefit'. It is a technique which adjusts income payments by using a price index. If one stay with an investment for over a year there are good chances of indexation benefits getting doubled. In case of a short term investment plan, the returns are added to the income of the investor and are taxed accordingly. Reliance Mutual Funds is one of those companies which offer such FMPs which are widely being accepted. FMPs offered are often closed ended and offer favorable returns. FMPs can be an excellent investment for those investors who clearly understand the importance of investments. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. The Net Asset Value for the leading funds is available at mutual funds nav. All the information you need about the nav of mutual funds is right here. |