Nippon India Mutual Fund has extended the New Fund Offer (NFO) closing date for its Fixed Maturity Plan XLVI - Series 5. The deadline, originally set for March 19, 2024, has been extended to March 22, 2024, offering investors a few more days to consider their investment options.
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The Fixed Maturity Plan (FMP) comes with a tenure of 367 days, promising a relatively short-term investment horizon.
Investing in FMPs can be a strategic decision for certain investors, but it's crucial to weigh the pros and cons before committing funds.
FMPs offer several advantages, primarily in their predictable returns and tax efficiency.
These plans typically invest in fixed-income securities with a predetermined maturity date, providing investors with a clear idea of the returns they can expect at the end of the investment period.
Moreover, FMPs are known for their tax efficiency, as they often qualify for long-term capital gains taxation after three years.
However, potential investors should also consider the limitations and risks associated with FMPs.
One significant drawback is the lack of liquidity.
Unlike open-ended mutual funds, FMPs have a fixed investment period during which investors cannot redeem or sell their units. This lack of liquidity means that investors may not be able to access their funds in case of emergencies or sudden financial needs.
Additionally, FMPs are subject to interest rates and credit risks.
While FMPs may offer relatively low-interest rate risk due to their fixed investment horizon, they still carry the risk of default or downgrade by the issuers of the underlying securities, which could adversely affect returns.
Furthermore, the decision to invest in FMPs should align with an investor's overall investment strategy and financial goals.
FMPs are best suited for investors seeking stable returns over a fixed period and are willing to forgo liquidity in exchange for potentially higher yields, experts say.
A look at returns of similar funds:
| Scheme Name | 1-Year Return | 2-Year Return |
|---|---|---|
| Nippon India Fixed Horizon Fund XLI - Series 8 - Direct Plan - Growth | 8.78% | 6.53% |
| Bandhan Fixed Term Plan - Series 179 - Direct Plan - Growth | 8.82% | 6.40% |
| SBI Fixed Maturity Plan (FMP) - Series 1 - Direct Plan - Growth | 8.80% | 6.53% |
| ICICI Prudential FMP - Series 85 - 10 Years Plan I - Direct Plan - Growth | 8.74% | 6.40% |
| SBI Fixed Maturity Plan (FMP) - Series 58 - Direct Plan - Growth | 8.15% | 5.37% |
| SBI Fixed Maturity Plan (FMP) - Series 58 - Direct Plan - Growth | 8.15% | 5.37% |
| SBI Fixed Maturity Plan (FMP) - Series 6 - Direct Plan - Growth | 8.60% | 6.33% |
(Source: Moneycontrol)
It's essential for investors to carefully assess their risk tolerance, investment objectives, and liquidity needs before deciding whether FMPs are the right choice for their portfolios.
(Edited by : Amrita)
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