Fixed Maturity Plans
22 Nov 2021

Fixed Maturity Plans

All you need to know before investing in Fixed Maturity Plans

Key Takeaways

  • Fixed Maturity Plans or FMPs are debt mutual funds with a defined maturity profile.
  • These are close-ended funds where you can invest only when a New Fund Offer (NFO) opens.
  • The fund manager invests in debt securities or money market instruments.
  • You cannot enter FMPs before NFO, nor can you exit them prematurely.
  • The tenure for an FMP varies from 30 days to 5 years.

Looking to invest funds into a scheme that gives you fixed returns after a specific period? Perhaps your first thought is to consider fixed deposits. But did you know that there are several Debt Mutual Funds schemes that also allow you to earn stable returns and come with fixed maturity durations? One such Mutual Fund scheme is known as FMP. Let us decode FMPs in Mutual Fund in this article.

What is FMP in Mutual Funds?

FMP Full form is Fixed Maturity Plans. These are Debt Mutual Funds with fixed maturity tenures. FMPs are close-ended funds where you can invest only when A New Fund Offer (NFO) opens. This means that once the NFO of an FMP ends, you cannot purchase additional units. Also, you can redeem the investment only when it matures. Compared to high-risk Equity Funds, FMPs generate stable, but lower returns and are less risky.

In FMPs, the fund managers essentially invest in fixed income instruments such as certificates of deposit or bonds that lock in available yields. This quality of FMP in Mutual Funds mitigates interest rate fluctuation faced by debt markets.

Features of Fixed Maturity Plans

A Fixed Maturity Plan offers the following features:

Fixed Tenure

The tenure for an FMP varies from 30 days to 5 years. Once the Fixed Maturity Plan is closed, you cannot withdraw the funds until maturity or invest any additional money into the plan. So, you must be well aware of the tenure before investing in FMPs.

Low-Interest Rate Sensitivity

Usually, the interest rate is declared when the New Fund Offer is announced. The interest rate on any FMP is least affected by market volatility as the funds are invested in debt instruments. Also, since these investments are held till maturity, there is a low level of interest rate sensitivity. So, you can calculate your actual Fixed Maturity Plan returns on investment in advance.


Fixed maturity plan returns are generated by investing in debt tools such as government and corporate bonds, certificates of deposit, commercial papers, securitised debt instruments, non-convertible debentures, treasury bills, etc. Fund managers typically create such portfolios ensuring minimal risk on the total corpus, as stock market fluctuations have a relatively lower impact on debt securities.

Indexation Benefit on Maturity Amount

Most FMPs have a maturity period of three years or more. As such, the investments are subject to Long Term Capital Gains Tax, which includes indexation benefits. Indexation helps investors factor in inflation, which improves tax efficiency on gains.

Final Note

Fixed maturity Plans are ideal investments if you are looking to lock in your investments for a specific period. You can achieve your short-term or long-term goals in line with the maturity profile of the FMP and predict the returns. The best-Fixed Maturity Plans of Mutual Funds make for a stable investment option compared to most open-ended debt funds. They also bring in some diversity to your Debt Mutual Fund portfolio.

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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.