Need help selecting a Fixed Maturity Plan (FMP)

POSTED BY VG ON February 24, 2013 7:47 pm COMMENTS (6)

Hi,

I am planning to invest some amount in a Fixed Maturity Plan, but having difficulty in selecting one out of the many available.

Since all FMPs are NFOs, I am not sure how do I compare them to determine which one is better/safer than the others.

My aim is to invest for a horizon of 400+ days so that I can avail the benefit of double indexation and get returns similar/better than FDs, along with safety of my capital. Of course, I understand there is a small risk involved in FMPs when compared to FDs, but am willing to go for it.

I am referring to the list of NFOs at :

http://www.valueresearchonline.com/funds/fmpnfo.asp

So can anyone advise what approach to use for shortlisting 1-2 FMPs from the above? Also it would be good if you could suggest some good FMPs, which i can then research in detail.

Thanks in advance.

Regards

Vaibhav G

6 replies on this article “Need help selecting a Fixed Maturity Plan (FMP)”

  1. Vaibhav Goyal says:

    Thanks Ashal.

  2. Dear Vaibhav, no matter it’s routine Eq. funds or debt funds or one time affair – FMPs, I normally prefer to deal with only limited set of AMCs. My preference is always for following ones. This is an indicative list & not the order of preference.

    Franklin
    HDFC
    DSP
    ICICI
    IDFC

    Earlier when Fidelity was around, I was investing there but after the take over, I’m not comfortable with L&T, hence the old Fidelity (New L&T) is not in the above list.

    Thanks

    Ashal

  3. Vaibhav Goyal says:

    Ashal,

    Didn’t get your point completely. I was planning to compare FMPs of different AMCs, of the SAME maturity and launched at approx the SAME time. So that the REPO impact u r referring to would be applicable to all of them in a similar manner, thus making possible an Apple-to-apple comparison.
    Do u have a better way to choose an FMP?

    Regarding 2nd point – Yes FMP dont have any liquidity apart from the very limited trading that takes place on exchange, since there is steep penalty for early exit. But I dont need any liquidity for the money am planning to invest. All i want is capital protection/minimal risk and good tax adjusted returns. Can u suggest another better product which gives that?

  4. Dear Vaibhav, what was the running ROI in terms of REPO/Reverse REPO in 2008, 2009, 2010, 2011, 2012? This ‘ll impact the returns of FMPs launched during all these years. So your understanding or should I say a try to compare the returns & then deciding the FMP is not a great thing to do. The comparison ‘ll not give you a clear & actual picture.

    Regarding the post indexation returns from FMPs better than FDs is beneficial upto an extent but it’s not the end of the road. Think over it for safety & liquidity related issues.

    Thanks

    Ashal

  5. Vaibhav Goyal says:

    Hi,
    Thanks for your response FFC.

    Even for a reputed AMC, I feel it would be better to first compare the historical returns with those of other AMCs for a similar duration.

    So lets say i want to go for a 416 day plan, then I can compare the returns of FMPs of similar durations (which were launched in 2011) of 4-5 reputed AMCs, and then probably go for the AMC which gave the best return. Do u find this approach correct?

    The problem I am having is finding a site which gives the past returns of all these FMPs.

    Secondly, I agree that open ended debt funds provide greater liquidity, but I feel they are bit more risky than FMP, since they regularly churn their debt portfolio rather than holding it till maturity. Since i am looking to invest an amount which i would otherwise put in an FD, hence I feel FMP is the safest among all types of debt funds. Would u agree with this?

  6. As long as the date of maturity of the FMP matches with the time horizon of your need there is not much to differentiate between one FMP and the other. Just choose one from a trusted AMC.
    If you are looking for better tax adjusted returns FMPs are good but open ended debt funds are better since you can pull out anytime.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Download Our FREE Ebook!

Available only for first 100 people today

Download Our FREE Ebook!

Available only for first 100 people today