Invest in FMPs (Fixed Maturity Plans) Now

January 11, 2013 by  

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The right time to invest in FMPs – before interest rates fall

The best part of FMP Mutual Fund investment schemes is that fund managers are able to lock in high interest rates when the funds are launched. This is because in fixed maturity plans, the fund managers lock in the right mix of Govt Securities and corporate debt at the right maturities depending on the maturity of the FMP scheme

Interest rates are set to fall – lock in FMP investments now

The point in favour of FMP investments is that all indications from the RBI suggest that the RBI is set to cut interest rates now. This means that future FMP investments may not get you the same returns that an investment in fixed maturity plans will get you today.

Will interest rates really fall? That question is debatable and definitely depends on the trends in inflation, driven by commodity prices- which is not really in RBI’s control

If you believe in fixed maturity plan investments, this is definitely the right time.

FMPs also offer tax benefits in comparison to other investments

While it is a good time to lock in FD (fixed deposit) rates as well, FMPs score over FDs in terms of tax benefits.As a result, unless you need the high liquidity benefits offered by bank fixed deposits (FDs), fixed maturity plans are a better option at this point, especially if you fall into the tax brackets

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