FMPs Vs Equity


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Which is a better investment – FMPs or equity shares?

fmp vs equity sharesA lot of mutual fund companies are aggressively selling FMPs ( fixed maturity plans ) in these days of recession forecasts and declining share markets. But, the question is whether FMPs (fixed maturity plans) are really the best option of investment for the Indian investor compared to equity funds and individual company shares?


Its not about fixed maturity plans (FMPs) vs equity or equity vs debt- its the portfolio!

Firstly, as every self respecting financial advisor will tell you , your investment decisions should ensure that you consider the various alternatives of investments such as equity, fixed maturity plans ( FMP ) and debt.

The FMP vs equity or equity vs debt argument basically depends on the state of the market and you essentially need to juggle your investment portfolio based on which investment option makes sense at that time. Essentially, FMPs , debt, equity, Government bonds, bank FDs (fixed deposits) and even gold can be a part of your investment portfolio.

The market situation should help you decide which of the options (FMPs or equity funds) should form a greater part of your investment portfolio. The other factors that decide your investment portfolios and the argument of FMPs vs equity investments is your age, the tenure of your investments , your risk profile and the time you are willing to wait for your investments to get you your desired return

FMPs vs equity funds, in the current murky share market scenario

Given the really poor recent share market performance, it would be tempting to suggest that the FMP vs equity argument is loaded heavily in favor of FMPs. Fixed maturity plans seem to provide almost assured returns with good tax benefits compared to the sagging share market that seems headed for a long recession

However, FMPs have their risks too. In these days of liquidity and credit crunches and struggling corporates, there exists the possibility of corporate debt defaults that may impact the performance of FMPs.

In short, there is no simple answer to the FMPs Vs equity dilemma, you should just balance your portfolio with the right mix of FMPs , debt and equity, knowing the potential returns and risks associated withe each investment

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