The rising yields in debt markets have resulted in FMPs (fixed maturity plans) emerging as attractive investment options for investors. Also, the testing conditions in equity markets have in no small measure, contributed to the allure of FMPs.
Simply put, FMPs are debt-oriented investment avenues from the mutual funds segment with a fixed investment tenure; also, they profess to offer a reasonably assured (predetermined) return. This is achieved by locking in a yield (return) at the time of getting invested. Hence an investor who is invested in the FMP until its maturity, is virtually assured of clocking the projected return.
However, it should be understood that FMPs are not the risk-free avenues they are made out to be. For instance, the possibility of the actual return varying from the indicated return cannot be ruled out. Market conditions, inappropriate investments (say a credit default in any of the underlying investments) or even a poor investment style (a mismatch between the maturity profile of the FMP and that of its underlying investments) can be responsible for the same.
In conclusion, while FMPs would qualify as low risk investment avenues, they are certainly not the risk-free avenues they are made out to be.
