What Are The Best Fixed Maturity Plan Mutual Funds in India?

 

26_Open-ended-Close-ended-Mutual-Funds

In this Samco Investor Education Series, we will cover a topic on Fixed Maturity Plan Mutual Funds in India, one of the preferred investment options for moderate risk investors at present.

If you’re a risk-averse investor and want to invest in liquid mutual funds then there is one type which is Fixed Maturity Plans which could be the best option for you. To put it in simple words, Fixed Maturity Plan Funds are like Fixed Deposits offered by the Mutual Fund Industry to the public.

Through this article you will get to know about:

  1. What is Fixed Maturity Plans (Fixed Maturity Mutual Funds)?
  2. Fixed Deposits vs Fixed Maturity Plans
  3. Salient features of Fixed Maturity Plans
  4. Pros & Cons of Fixed Maturity Plans
  5. Latest development in the taxation of Fixed Maturity Plans
  6. Who should invest in Fixed Maturity Plan?
  7. List of Fixed Maturity Plans in India

1) What are Fixed Maturity Plans (Fixed Maturity Mutual Funds)?

Fixed Monthly Plans (FMPs) are closed-end debt funds having a fixed maturity period. Unlike other open-ended debt funds, FMPs are not available for subscription continuously. The fund house comes up with a New Fund Offer (NFO) which will have an opening date and a closing date. You can invest in an NFO only when it is available for subscription. After the closing date, the offer to invest ceases to exist.   

2) Fixed Deposits Vs Fixed Maturity Plans:

Before you invest in Fixed Maturity Plans, it is better that you understand the difference between Fixed Deposits & Fixed Maturity Plans. Many beginner-level investors think that both are the same as both have a lock-in period. Investors need to understand that although both the instruments have a lock-in period fundamentally and technically both instruments are not the same. Refer to the table below to understand it better.

Basis Fixed Deposits Fixed Maturity Plans
Definition FDs are generally introduced by Banks & NBFCs with assured returns on investments. FMPs are plans introduced by fund houses that invest in company debt where return on investment is not guaranteed & government securities.
Returns Assured returns, better than saving interest rates. Only indicative returns with no assured returns.
Tax Implications There is a tax on the return generated, although there are certain FD Investments which are exempt under section 80C of IT Act.   In FMP – Dividend option, Dividend Distribution Tax is applicable.

In FMP – Growth option, Capital Gain Tax is applicable.

FMP investment doesn’t enjoy tax exemption under section 80C of the IT act.

Maturity Period There are FDs with various maturities available in the market. Popular FDs have 3-5 years of maturity period. There are varying options for FMP. The maturity period could vary between 30 days to 5 years.
Liquidity One can terminate the investment prematurely with some charges. Restricted liquidity before completion of the lock-in period.

3) Salient Features of Fixed Mutual Funds:

By now you might be having clarity on what is Fixed Maturity Plans and how is it different from a Fixed Deposit Investment. Following are the important features of Fixed Mutual Funds, which will help you in making investment decisions. For brevity purpose, we will use the term “FMP” to refer to as “Fixed Maturity Plans” in this article.

Fixed Maturity

FMP comes with a maturity period, meaning there is a lock-in period associated with FMP Investments. Different funds offer different maturity periods. Some funds have a maturity period of 30 days whereas some of the funds have a maturity period of 395 days. Investors can also find funds offering a lock-in period of 5 years.

Closed Ended Funds

FMP are usually closed-ended funds thereby restraining investors from taking out investments before the maturity. Usually investors can buy closed-ended fund units during NFO which can be redeemed only upon maturity. Investors can exit the funds prematurely if they have the investments in their demat account and the fund is listed on the exchange, else they have to wait for maturity for withdrawal of investment.

Pre-defined investment strategy  

Usually FMP funds invest in commercial papers (CP), certificate of deposits (CD), corporate bonds, Money market instruments, government-issued securities, non-convertible debentures (NCD) of high rated companies and the maturity of the instrument is in line with the maturity period of the FMP.

Fixed Return Expected

The fund has minimum exposure to the risk of rate fluctuations as the funds a get fixed rate of returns on investment.

Credit Risk

As the investments are done in highly rated credit investment vehicles, the credit risk is low and the liquidity risk is also minimal at the time of maturity of the invested securities.

Offers Investment Risk Mitigation

As FMP offers stable and less volatile return from fixed income generating instruments, it is used by many investors as a portfolio risk mitigation tool.

Taxation of FMP

FMP offers tax efficiency over other fixed income instruments. If an investor invests for more than three years time then one can leverage the benefit of indexation and can avoid the impact of inflation on returns.

4) Pros & Cons of Fixed Maturity Plans:

Pros:
  1. Offers comparatively less fluctuating return to investors, although there is no guarantee of return which an investor is expected to get under FMP as it could be investing in a number of instruments with a varying return. Usually, the fund houses invest in instruments having similar maturity periods as the fund has planned to have the maturity period of their offering.
  2. Investors also get the benefit of indexation for taxation purposes, when investments are held for 3 years or more, FDs don’t offer such benefits.
  3. Investors can diversify their investment portfolio by investing in FMPs.
  4. As fund houses invest in fixed income instruments, one can expect a positive return irrespective of the investment vehicle chosen by the house. The only limitation is that there is no pre-decided return declared by the fund house.
Cons:
  1. There is no return guaranteed by the fund house meaning you could get a return of 3% or you could get a return of 8.5% depending on the investments made. If the return is less than the inflation rate then effectively your capital is eroded due to inflation.
  2. There is a lock-in period so once you make an investment then under normal conditions you won’t we able to liquidate your investments.

5) Latest Development in Taxation of FMP:

Post 2014, the Income tax department has modified the taxation rules for FMP. One needs to stay invested for a period of three years to claim the benefit of indexation.

6) Who should invest in Fixed Maturity Plan?

Now that you have a fair idea about Fixed Maturity Plan, it’s time to understand who all should invest in it.

It is to be noted that all individuals are allowed to invest in Fixed Maturity Plans but there are certain product features that may not be suitable to all investors, therefore it is advisable that you read through the below points to assess the suitability of FMP for investors.

  1. FMP is suitable for those who are risk-averse investors but want a higher return than typical fixed deposits.
  2. FMP is also suitable for those who don’t have liquidity requirements for a longer duration. As the lock-in could be for 3 to 5 years therefore before investing, investors should ensure that they have enough cash to sustain.

7) List of Fixed Maturity Plans in India

List of popular fixed maturity plans in India with other relevant details.

NFOs/FMP Schemes List

Fund name

Minimum Investment (Rs.) Launch Date Close Date Tenure

Maturity Date

Aditya Birla Sun Life Fixed Term Plan – Series QR -1126 Days – Regular Plan – Dividend

1000

20-09-2018 04/10/2018

Aditya Birla Sun Life Fixed Term Plan – Series QR -1126 Days – Regular Plan – Growth

1000

20-09-2018 04/10/2018 1126 Days 12-09-2018
Aditya Birla Sun Life Fixed Term Plan – Series QR -1126 Days – Regular Plan – Quarterly Dividend

1000

20-09-2018 04/10/2018

BOI AXA Midcap Tax Fund – Series 2 – Regular Plan – Dividend

1000

12-07-2018 11/10/2018

BOI AXA Midcap Tax Fund – Series 2 – Regular Plan – Growth

1000

12-07-2018 11/10/2018

ICICI Prudential Fixed Maturity Plan – Series 84 – 1286 Days Plan F – Cumulative

5000

24-09-2018 03/10/2018 1286 Days 11/04/2022
ICICI Prudential Fixed Maturity Plan – Series 84 – 1286 Days Plan F – Half Yearly Dividend

5000

24-09-2018 03/10/2018 1286 Days 11/04/2022
ICICI Prudential Fixed Maturity Plan – Series 84 – 1286 Days Plan F – Quarterly Dividend

5000

24-09-2018 03/10/2018 1286 Days 11/04/2022
ICICI Prudential Manufacture in India Fund – Dividend

5000

21-09-2018 05/10/2018

ICICI Prudential Manufacture in India Fund – Growth

5000

21-09-2018 05/10/2018

Kotak Fixed Maturity Plan Series 247 – 1308 Days – Dividend

5000

24-09-2018 26/09/2018

Kotak Fixed Maturity Plan Series 247 – 1308 Days – Growth

5000

24-09-2018 26/09/2018 1308 Days 26/04/2022
L&T FMP – Series XVIII – Plan A -1100 Days – Dividend

5000

25-09-2018 27/09/2018 1100 Days 01/10/2021
L&T FMP – Series XVIII – Plan A -1100 Days – Growth

5000

25-09-2018 27/09/2018 1100 Days 06/10/2021
Reliance Fixed Horizon Fund -XXXIX- Series 8 – 1308 Days – Dividend

5000

21-09-2018 26/09/2018

Reliance Fixed Horizon Fund -XXXIX- Series 8 – 1308 Days – Growth

5000

21-09-2018 26/09/2018 1308 Days 26/04/2022
Sundaram Money Market Fund – Regular Plan – Daily Dividend

1000

12-09-2018 26/09/2018

Sundaram Money Market Fund – Regular Plan – Fortnightly Dividend

1000

12-09-2018 26/09/2018

Sundaram Money Market Fund – Regular Plan – Growth

1000

12-09-2018 26/09/2018

Sundaram Money Market Fund – Regular Plan – Monthly Dividend

1000

12-09-2018 26/09/2018

Sundaram Money Market Fund – Regular Plan – Quarterly Dividend

1000

12-09-2018 26/09/2018

Sundaram Money Market Fund – Regular Plan – Weekly Dividend

1000

12-09-2018 26/09/2018

Tata Fixed Maturity Plan – Series 56 – Scheme B – 1105 Days – Dividend

5000

21-09-2018 27/09/2018 1105 Days 06/10/2021
Tata Fixed Maturity Plan – Series 56 – Scheme B – 1105 Days – Growth

5000

21-09-2018 27/09/2018 1105 Days 06/10/2021
UTI Fixed Term Income Fund – Series XXX – IV (1125 Days) – Annual Dividend

5000

12-09-2018 26/09/2018 1125 Days 25/10/2021
UTI Fixed Term Income Fund – Series XXX – IV (1125 Days) – Dividend

5000

12-09-2018 26/09/2018 1125 Days 25/10/2021
UTI Fixed Term Income Fund – Series XXX – IV (1125 Days) – Flexi Dividend

5000

12-09-2018 26/09/2018 1125 Days 25/10/2021
UTI Fixed Term Income Fund – Series XXX – IV (1125 Days) – Growth

5000

12-09-2018 26/09/2018 1125 Days 26/10/2021
UTI Fixed Term Income Fund – Series XXX – IV (1125 Days) – Quarterly Dividend

5000

12-09-2018 26/09/2018 1125 Days 25/10/2021

As of date 20th October 2018. For the latest top recommendation visit RankMF.com

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(Note: This content is for information purpose only. Avoid trading and investing based on the information given above. Before investing in stocks or mutual funds, please conduct proper due diligence)

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