Fixed Maturity Plans

Everyone has different questions related to FMP, following are 5 frequently asked questions about FMP which is explained clearly. Hope it would be of great assistance for you:

1. What is a Fixed Maturity Plan?

Fixed Maturity Plans or, in short, FMP (may also be named as Fixed Term Plan (FTP), Fixed Term Interval Fund (FTIF) etc are debt schemes with a fixed maturity, launched by mutual funds. They have tenure for a fixed period of time that could range from one month to as long as three years or more. The objective of an FMP is to generate a stable return over a fixed maturity period.

2. Where do Fixed Maturity Plans (FMPs) invest?

FMPs invest in fixed income securities like money market instruments government securities, corporate bonds, certificate of deposits (CDs), commercial papers (CPs), bank fixed deposits (FDs) etc., which mature in line with the tenure of the fund. Since the instruments are held to maturity, there is no risk of the value of the security being affected by interest rate movements.


3. Who should invest in Fixed Maturity Plans?

Fixed Maturity Plans may be looked as an investment option by:

• Investors who seek safe avenues for investment and in the process keep money in fixed deposits (FDs) with banks. Such investors can earn tax efficient returns based on current tax laws. However, it is advisable to always consult Tax Advisor before investing in FMPs.

• Investors who want to park money for a fixed period of time in relatively safer instruments that offer potential for generating stable returns, with a view to meeting certain financial goals in the near future.

Even aggressive investors who normally prefer equity investments may invest a part of their funds in FMPs. As a prudent investor one needs to have a proper asset allocation in place and FMPs offer stability to the investment portfolio.

4. What are the kinds of risks associated with investing in Fixed Maturity Plans?

The three most important risks associated with debt instruments are Credit Risk, Interest Rate Risk and Liquidity Risk.

• Credit Risk – risk of default by the issuer of a security.

• Interest Rate Risk – A possibility of the scheme getting affected by changing interest rates. Such risks get nullified by investment in securities that mature in line with the Plan Period. Hence the returns are predictable and investors staying in the scheme till maturity are not likely to be affected by market fluctuations.

• Liquidity Risk – Risk of not being able to get the funds back at the time of maturity or otherwise.

UTI FMPs aim to minimize most of the risks by the very nature of their structure and investment concept.

5. What are the types of Fixed Maturity Plans/Interval Plans that UTI offer?

The Fixed Maturity Plans of UTI could be categorized into the following:

• Fixed Maturity Plan: Fixed Maturity Plan offered in quarterly, half-yearly and yearly maturity.

• Fixed Interval Income Fund: Fixed Income Interval Fund offered in quarterly, monthly, half-yearly and annual interval.

• Fixed Term Income Fund: Fixed Term Income Fund offered in varying maturities.

For scheme specific information, please refer to Scheme Information Document (SID) of respective scheme.


Mutual Fund investments are subject to market risks, read all scheme related documents carefully

Your Future is in your Hands, Literally.

Today, all of us work hard by sacrificing our social life and concentrating on our career. All this with an aim to have a peaceful and luxurious future ahead, however, the sooner you start the better it is, is what we suggest. Building a corpus i.e. the amount of money you need soon after you stop working is mostly intended to be a replacement of your income. Now, a corpus using mutual fund route can be a smooth job. However, there are several hurdles and options that you will witness while building your corpus which you ought to know.

When you are planning your retirement, there are certain Do’s and Don’ts that you should bear in mind, which is given in the article attached below.

In olden days, kids were the pillar and support in their parent’s old age time but recently according to the latest census data indicates that the median household size in urban India is now less than four, which is a first-of-its-kind phenomenon in the country. This means that the family size is shrinking and India as a society is becoming more nuclear, wherein planning for retirement becomes even more critical, with children not being a dependable any more. The times are changing what are you planning to do about this?

It doesn’t end here; click on the article > http://www.indiainvestkaro.com/toi_pdf/TOIM_2012_5_1_15.pdf to know how you can plan an effective retirement in present era, when is the best time to use your funds and how to build a corpus for annuity!