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Fixed Maturity Plan (2023): Invest Wisely, Reap Rewards

Fixed Maturity Plan

Fixed Maturity Plan, or FMP, are closed-ended debt mutual funds with a defined lock-in period of one to five years. Fixed income instruments, including bonds with yield locks, commercial papers, certificates of deposit, and treasury bills, comprise the majority of the assets owned by Fixed Maturity Plan. The main objective of this plan is to eliminate interest rate fluctuations in the debt markets while providing investors with steady returns over a predetermined length of time. 

Requests for FMP subscriptions from individual investors are only accepted during the New Fund Offer (NFO) period. After the NFO period concludes, no further investments in FMP are permitted. Finally, investments made by investors are only redeemable at maturity.

10 Best Fixed Maturity Plan (FMP) 2023

The details of the best maturity plan for 2023 are given below:

  1. IDFC Government Securities Fund Investment Plan – Direct Plan-Growth

This plan makes investments in government bonds with a range of maturities. Its foundational index is the CRISIL Dynamic Gilt Index. This fixed maturity plan has produced average annualized returns of 8.89% since its launch.

Fund Size: ₹1,418.48 crore

NAV: ₹31.01

Expense Ratio: 0.62%

  1. Nippon India Gilt Securities Fund – Direct Plan-Growth 

One of the greatest FMP plans is the Nippon India Gilt Securities Fund, which makes investments in securities guaranteed by the federal and state governments. Delivering maximum credit risk-free profits is its main goal. Since its launch, the plan has produced average annualized returns of 9.26%.

Fund Size: ₹1,143.68 crore

NAV: ₹35.14

Expense Ratio: 0.63%

  1. ICICI Prudential Constant Maturity Gilt Fund – Direct Plan-Growth

The government securities in this mutual fund have a Macaulay tenure of ten years. A minimum of ₹1,000 is needed for both extra and SIP investments. Since its September 12, 2014, start, this strategy has generated 8.89% annualized returns on average.

Fund Size: ₹403.03 crore

NAV: ₹20.43

Expense Ratio: 0.23% 

  1. PGIM India Short Maturity Fund – Direct Plan-Growth 

A mix of money market and short- to medium-term debt instruments make up this short-duration FMP. It seeks to provide consistent returns with minimal to moderate market risk. The minimum necessary amount for extra and SIP investment is ₹1,000. Since the average annualized returns of the PGIM India Short Maturity Fund have produced 7.09%.

Fund Size: ₹24.9 crore

NAV: ₹41.07

Expense Ratio: 0.5% 

  1. SBI Magnum Constant Maturity Fund – Direct Plan-Growth

This gilt fund makes investments in government securities while maintaining an investment portfolio with an average maturity of roughly ten years. An average annualized return of 8.91% has been produced by the SBI Magnum Constant Maturity Fund.

Fund Size: ₹833.52 crore

NAV: ₹53.77

Expense Ratio: 0.33%

  1. UTI Fixed Term Income Fund – Series XXXV – Plan II – (1223 Days) – Direct Plan-Growth

This fixed maturity plan has generated average annualized returns of 5.73% since then. This plan, which aims to create returns by investing in fixed-income assets with a maturity date that coincides with the scheme, is among the best fixed maturity plans available. These are some more specifics:

Fund Size: ₹153.45 crore

NAV: ₹10.06

Expense Ratio: NA

  1. Nippon India Interval Fund – Quarterly – Series 3 – Direct Plan-Growth

The Nippon India Interval Fund has an average annualized return of 1.43%. The program’s objective is to provide consistent returns at a little heightened risk by investing in debt and money market assets. The minimum required for additional investment is ₹1,000, however, the initial SIP contribution is only ₹100.

Fund Size: ₹134.55 crore

NAV: ₹18.16

Expense Ratio: NA

  1. Nippon India Interval Fund – Monthly – Series 2 – Direct Plan-Growth

This mutual fund’s primary goal is to increase wealth and provide consistent returns. The plan makes investments in debt, fixed-income, and government securities that mature concurrently with the fund. On March 1, 2013, Nippon India Mutual Fund introduced this strategy. It has produced an average annualized return of 6.51% since its debut.

Fund Size: ₹4.14 crore

NAV: ₹29.25

Expense Ratio: 0.32%

  1. Nippon India Interval Fund – Monthly – Series 1 – Direct Plan-Growth

The investment portfolio of this plan consists of government securities, fixed income, and debt. In addition to capital growth, the scheme seeks to provide regular and stable returns. This investment option has produced average annualized returns of 6.5% since it was introduced.

Fund Size: ₹4.6 crore

NAV: ₹29.31

Expense Ratio: 0.03%

  1. Nippon India Interval Fund – Quarterly – Series 1 – Direct Plan-Growth

Investments under this plan are made in fixed-income and government securities that mature at the same time as the fund. This interval plan’s asset allocation is designed to maximize wealth and generate consistent returns with little risk. Since its launch, the fund has had an average annualized return of 6.34%.

Fund Size: ₹4.44 crore

NAV: ₹29.78

Expense Ratio: NA

Features of Fixed Maturity Plan

The primary characteristics of FMPs are listed below.

  • Fixed Period: Investors in these plans are locked in, meaning they cannot take their money out until the plan expires once they make an investment during the NFO period. This makes it easier for investors to estimate the possible returns on their investments. In accordance with their financial objective, they can also plan when they need cash flow.
  • Close-Ended Scheme: Investors in FMP are limited to making investments during the offer period, and redemptions are only permitted when the product matures. Therefore, further investment is not permitted after the offer period. Investors who own units in Demat form do have a choice, though. A fixed maturity plan’s units that are listed on a stock exchange may be sold by them. Investors can leave the FMP program before its term expires in this fashion.
  • Fund Strategy: Fixed maturity plans primarily invest in debt securities, which include commercial papers (CP), certificates of deposits (CD), money market instruments, corporate bonds, government bonds, and non-convertible debentures (NCD) of highly rated firms. Securities with fund maturity matching are included in the portfolio that the fund manager builds.
  • Interest Rate Sensitivity: FMPs are less vulnerable to changes in interest rates because the fund holds the instruments until maturity, assisting in the creation of a comparatively stable interest rate. Additionally, investing in FMPs is beneficial in a scenario when interest rates are dropping because their interest rates are fixed for a longer period of time.
  • Credit Risk: The portfolio’s objective is to reduce default risk by including debt and money market instruments, depending on how the FMP is structured. However, this does not guarantee safety or low credit risk. The ratings of certain of the underlying instruments are liable to change over time, as was noted a few years ago.
  • Indexation Benefit: The majority of FMPs are issued with a minimum three-year maturity duration. Long-term capital gains tax regulations—which incorporate the indexation benefit for these non-equity investments—apply in this situation. The benefit of indexation is its capacity to factor in inflation, hence lowering the overall tax liability.

Advantages of Investing in Fixed Maturity Plan

The following are the advantages of investing in Fixed Maturity Plans.

  • Stable Investment

FMP investments are locked in for a predetermined period of time during which they experience market volatility. Debt funds, however, are less susceptible to changes in the market. Over time, they usually stabilize their performance. Moreover, FMPs are least impacted by changes in the market.

  • Stable Asset Structure

Redeemable dates from FMP are limited to the fund’s maturity date or other designated dates. This provides a consistent flow of assets to fund managers that aren’t subject to frequent redemptions. This relieves the fund management of the worry of the consistent inflow and outflow of funds. As a result, they can now design a comfortable investing strategy.

  • Low Cost

FMPs have a lower fee ratio as compared to other open-ended mutual fund schemes. There is less asset purchasing and selling, which lowers their turnover costs. This results in lower operational and administration costs.

How to Invest in Fixed Maturity Plan?

Get help from experienced fund managers or financial advisors to invest in excellent fixed-maturity plans. They can help you choose the best plan for your needs. 

The following provides a detailed guide on how to invest in one of the top fixed maturity plans available in India:

  • Step 1: Examine your risk tolerance and investment goals. 
  • Step 2: Find the best fixed maturity plan options by researching them and compiling a list of them. 
  • Step 3: Evaluate all the plans and select the one that best suits your financial objectives and risk tolerance. 
  • Step 4: Register on the fund house’s official website by visiting it. Point and click the “mutual fund” section with your pointer. 
  • Step 5: Select the mutual fund that you want to invest in by clicking on it. 
  • Step 6: Finish the e-KYC process by providing the necessary information. It will be useful if you maintain your bank account details, Aadhaar card, and PAN card close to hand. 
  • Step 7: Verify the information you have provided and transfer the first investment to begin investing in the fixed maturity plan of your choice.  

Taxation on Fixed Maturity Plan

Fixed maturity plans are taxable, just like other debt mutual funds, with the tax rate changing according to how long an investment is held. The taxation of FMP capital gains is contingent upon whether they are classified as long-term or short-term.

Take a look at its details below: 

  1. Short Term Capital Gains (STCGs)

The capital gains will be treated as STCGs and taxed based on your income tax slab rate if you redeem your investments within 36 months.

  1. Long Term Capital Gains (LTCGs

If your investment is held for longer than 36 months, you will pay 20% tax on it with indexation benefits.

Factors to Consider About FMP Before Investing

  • Analyze a certain security’s past performance. Take the return patterns into consideration before making a choice.
  • It’s critical to understand your investing goal before making any investments in these kinds of financial schemes. 
  • Additionally, you should select an appropriate FMP maturity period because the funds would be locked in at that point.
  • Check the investment portfolio to ensure that the debt instruments don’t carry a lot of risk.
  • Choosing an FMP with a low expenditure ratio will help you save more money over time.

Final Word

Financial experts say that the finest fixed maturity plans don’t get much affected by the volatile stock market and instead offer decent returns over a defined period of time. It’s an essential tactic for diversifying a portfolio. If you’re looking for a plan that offers low risk and high returns, think about Fixed Maturity Plan.

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