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Fixed Maturity Plans

FMPs are closed-ended mutual fund schemes, with a pre-specified tenure. FMPs are somewhat similar to bank FDs, in that the money invested is locked in for the tenure of the scheme varying from 30 days to 5 years. Investors can choose the FMPs that match their investment horizon and their cash flow requirements.

Where do they Invest?

» FMPs invest in fixed income instruments like certificate of deposits (CDs), commercial papers (CPs), other money market instruments, corporate bonds, non-convertible debentures (NCDs) of reputed companies, or in securities issued by the government, maturing in line with the tenure of the scheme.

Do they invest in Equity?

» FMPs are debt funds that invest in government securities and company debt. FMPs typically have no equity component, unless you invest in an FMP that chooses to have a limited equity component.

When can we invest and exit?

» Since FMPs are closed ended schemes, an investor can invest only during the initial offer period of the scheme, and redeem only at the time of maturity of the respective series under the scheme. However, unit holders holding units in demat mode, can exit by selling their units on the stock exchange where units of an FMP scheme are listed.

Are they sensitive to Interest Rates?

» FMPs are least exposed to interest rate risk, as the fund holds instruments till maturity-getting a fixed rate of return.

What are the Risks involved?

» FMPs generally invest in highly rated credit instruments with maturity profiles of the invested securities in line with the maturity of the scheme, so there is low credit risk, with minimal liquidity risk involved.