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Tuesday, October 16, 2018

FMPs are like bank FDs

.......but do not guarantee returns

Investors can look at fixed maturity plans as mutual fund industry's offerings that are equivalent to bank fixed deposits, although returns from FMPs are not guaranteed by mutual funds like FD returns are guaranteed by banks

FMPs are closed-end debt funds. That means, they are funds in which an investor can invest only at the time of a new fund offering (NFO), and take out the money at the time of maturity. This is as opposed to open-ended funds where investors can invest any time and take the money out at any time as well. FMPs invest in debt instruments of fixed maturities, mostly tallying with the time frame of the fund itself. That is, if the fund's time frame is 3 years, then the maturity of the underlying debt securities are also, on an average, likely to be 3 years.

Investors can look at these funds as mutual fund industry's offerings that are equivalent to bank fixed deposits (FDs), although returns from FMPs are not guaranteed by mutual funds like FD returns are guaranteed by banks.

The series numbers on FMPs are internal nomenclature for the fund houses and do not carry any meaning or significance for investors. They are simply a serial number notation to label these offerings and distinguish them from one another.




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