Ask Value Research

FMP Investments

FMPs assume very low risk & generate fairly predictable returns. But they might get out of favour now…

Could you suggest any debt FMPs to invest in? Please also tell me their ratings.
-Chaitanya CS

Fixed maturity plans (FMP) make sense for risk-averse investors who have a set timeframe. So, if there is an FMP on offer that matches your investment timeframe and you don’t want to assume any risk, go for it. FMPs are structured in such a manner that they assume very low risk. They are low on costs and generate fairly predictable returns. However, the best time for FMPs might be coming to an end because of the falling interest rates, so you might as well consider income funds.

We don’t rate FMPs because they are offered as closed-end funds. For a fixed income fund to be rated, it must have a track record of at least 18 months, which FMPs don’t have.

This article was originally published on April 25, 2012.

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