What is an FMP ?

>> Tuesday, August 12, 2008

Fixed Maturity Plans(FMP) seem to be the latest bug to bite the Indian mutual fund industry. Practically every mutual fund house is dishing out new FMPs. Since January 2005, almost 40 FMPs have been launched with many more lined up in the near future.

What is an FMP ?

FMPs are mutual fund schemes that last only for a fixed period of time. FMPs are nothing but Fixed Maturity Plans.

Two features that make them distinct from other fund schemes are:-

1. Tenure-: FMPs have a fixed maturity date. It could be 15 days, 30, 90, 141, 180 or even 365 days. Some even have a three or five-year time frame. At the end of this period, the scheme matures, just a like a fixed deposit.

2.Investments -: FMPs invest in fixed income instruments, like bonds, government securities, money market instruments (very short-term fixed return investments), to name a few.

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