Top Performing Fixed Maturity Plans That Can Be A Part Of Your Portfolio

A fixed maturity plan or FMP is as a close-ended debt fund with a limited investment window and a fixed lock-in period. You can invest in such plans only during NFO or new fund offers made by the AMC (Asset Management Company) via subscription requests. 

Such corpus mainly includes debt securities like – corporate bonds, treasury bills, certificates of deposit, etc. Here, in this article, we will share information about the best-fixed maturity plans (2020) and the benefits of such plans.

Best Fixed Maturity Plans (2020)

We have mentioned the list of the best 5 fixed maturity plans with a few details below.

Name of Plans	Fixed Maturity Plan Features	Annualised 5-year return
IDFC Government Securities Fund IP	Net Asset Value (NAV): Rs. 29.94 as of 20th Oct 2021 AUM: Rs. 1,956.66 crores as of 30th Sept  2021  Expense Ratio: 0.62%	8.84% as of 20th Oct 2021
ICICI Prudential Constant Maturity Gilt Fund	NAV: Rs. 19.89 as of 20th 2021 AUM: Rs. 382.09 crores as of 30th Sep 2021  Expense Ratio: 0.23%	8.73% as of 20th Oct 2021
Nippon India Gilt Securities Fund	NAV: Rs. 33.67 as of 20th Oct 2021 AUM: Rs. 1,327.94 crores as of 30th Sep 2021 Expense Ratio: 0.6%	8.85% as of 20th Oct 2021
SBI Magnum Constant Maturity Fund	NAV: Rs. 52.13 as of 20th Oct 2021 AUM: Rs. 817.28 crores as of 30th Sep 2021 Expense Ratio: 0.63%	9.15% as of 20th Oct 2021
PGIM India Short Maturity Fund	NAV: Rs. 36.29 as of 20th Oct 2021 AUM: Rs. 37 crores as of 30th Sep 2021  Expense Ratio: 1.42%	4.69% as of 20th Oct 2021

Now, let us take a look at their features and benefits below.

Features of Fixed Maturity Plans

A fixed maturity plan comes with the following features, as mentioned here.

Lock-in period

Fixed maturity plans usually have a lock-in period of three years where the principal amount is locked for a specific period. You cannot redeem the returns or even make partial withdrawals during this period. 

Portfolio

Returns from such plans are generated through debt tools like non-convertible debentures, corporate and government bonds etc. Fund managers create such a portfolio so that stock market volatility has a lesser impact on these funds.

Close-ended Scheme

A fixed maturity plan is a close-ended scheme. You can invest in such schemes by simply subscribing to a new fund offer from an AMC. 

Quality Assets

Fixed maturity plans have quality debt instruments offering the best returns. Primarily, portfolio managers select assets issued by top companies to build a corpus. Such securities are pretty safe as they offer returns at very low risk.

Also Read- What Are Liquid Funds?

Benefits of a Fixed Maturity Plan

Low Risk

These plans offer low-risk returns as they target debt securities of top firms in India.

Stable

They are also quite stable as they get relatively less impacted by stock market fluctuations.

Fixed Returns

You will know the fixed expected returns beforehand as such schemes offer negligible deviations from the ascertained amount.

Taxation in Fixed Maturity Plans

FMPs with dividend options are subject to Dividend Distribution Tax (DDT) at 12.5%, which is paid by the financial institution and is tax-free for investors.

With the growth option, FMPs are taxed in a similar way to that of debt mutual funds. Like debt funds, short-term capital gains (STCG) are applicable at individual income tax slab rates if the fund is held for less than three years.

Like other debt funds, long term capital gains are applicable if the asset is held for more than 36 months. After adjustment for indexation, the total returns generated are subject to a 20% long term capital gains tax. 

Indexation reduces your overall tax liability on capital gains as it factors in the effects of inflation. This helps you enjoy real growth in your return portfolio.

Now, who should invest in such plans? Let us find out!

Who Should Invest in FMPs?

If you are seeking a higher return than your FD or fixed deposit but do not have an appetite for risks, then FMPs or fixed maturity plans are ideal for you. Compared to equity funds, such schemes offer returns at a lower risk. Such plans are also an excellent way to diversify your investment portfolio.

Things to Remember About FMPs Before Investing

1. First, check the past performance of a particular security. The return trends are crucial before you choose.
2. Your investment objective is critical before investing in such financial schemes. 
3. You should also pick an appropriate maturity period of an FMP as the funds will stay locked in for that period.
4. Check the investment portfolio to make sure that the debt instruments carry minimal risk.
5. Pick an FMP with a low expense ratio to save more money in the long run.

Also Read- Balanced Mutual Fund

Final Words

Fixed maturity plans offer decent returns over a specific period of time without getting impacted much by the volatile stock market. It is an important way to diversify your investment portfolio. If you are looking for a scheme with low-risk returns, then you may consider FMPs.

If you want an investment with better yields than FMPs, you can choose something like Navi Nifty 50 Index Fund. Download the Navi Mutual Fund application to invest in India’s top 50 companies. 

Frequently Asked Questions

Before you go… 

• Looking for instant 🚀 personal loans 24*7 anywhere, anytime? Install the Navi app now!
• Or, maybe you’re looking to buy that house you’ve been eyeing 🏠 and you need a loan of up to Rs. 5 crores. Install the Navi app now and get your instant in-principle approval right away! Interest rates starting at 6.40% p.a.
• How about an affordable health insurance policy 👨‍⚕️ starting at a monthly premium of just Rs. 241? Install the Navi app and get your policy in under 2 minutes
• Instead, want to put your savings into action and kick-start your investment journey 💸 But don’t have time to do research. Invest now with Navi Nifty 50 Index Fund, sit back, and earn from the top 50 companies.

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully before investing.