Definition
Fixed Maturity Plan (FMP)
A fixed maturity plan is a closed-end debt fund with a defined tenure that buys bonds maturing around the same time, aiming to deliver a predictable return.
By holding bonds to maturity, an FMP largely neutralises interest-rate risk, since the manager does not need to sell before maturity. The indicative yield is roughly the portfolio's YTM at launch, minus expenses.
FMPs were once popular for tax-efficient returns over three years, but the removal of debt-fund indexation in April 2023 reduced that edge. They still suit investors who want a target-date, FD-like debt holding, accepting the lock-in until maturity.
Related terms
- Corporate Bond FundA corporate bond fund is a debt mutual fund that, under SEBI rules, invests at least 80% of its assets in high-quality corporate bonds rated AA+ and above — aiming for yields above government paper while keeping credit risk low.
- Yield to Maturity (YTM)Yield to maturity is the total annualised return an investor would earn on a bond if held to maturity, accounting for its price, coupons and the gain or loss to face value.
- Fixed Deposit (FD)A fixed deposit locks a lump sum with a bank or NBFC for a chosen tenure at a guaranteed interest rate, returning principal plus interest at maturity.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.