Dhirendra Kumar explains the incomparable natures of FMPs and equity savings funds
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My age is around 58. I was regularly investing in FMPs (fixed maturity plans) but since the last few months, FMPs have by and large vanished. I want to now invest in an equity savings fund. Will it be feasible and safe for me to invest in it?
The profile of an FMP is very different from that of an equity savings fund. An FMP is primarily a fixed-income investment. With about a three-year holding period, it is more comparable to a fixed deposit, although the former comes with a slightly higher return and greater tax efficiency.
As compared to FMPs, equity savings funds invest nearly a third of your money in equity, one-third in arbitrage and one-third in debt. Arbitrage position is almost like a liquid fund. So, equity savings funds are dominantly fixed-income but not entirely. Thus, it will show some volatility and will go up and down in value. But based on the kind of time period you want to invest with, it is very likely that these funds will give you superior returns as compared to FMPs.