thanks for the reply...

Mutual Fund experts, can someone explain to me, what exactly is Fixed maturity plans.
krishnaprasad
...

dear,
you are right. we should invest ourselves. Atleast we do not have any one to blame. dont believe these mutual fund managers. they are all chamchas of company managements....

dear sinha
why are wasting you money in investing in this fund. Instead go for birla spl situations fund...

dear srikanth
i donot agree with you. Insurance gives capital protection but mutual fund doesnot. I am comfortable with ulip...

what is the longterm holding of this company, ...

Dear Krishnaprasad, Fixed Maturity Plans are the flavour of the season and the bug seems to have caught you. What are fixed maturity plans? FMPs, as they are popularly known, are the equivalent of a fixed deposit in a bank, with a caveat. The maturity amount of a fixed deposit in a bank is 'guaranteed', but only 'indicated' in the FMP of a mutual fund. The regulator does not allow fund companies to guarantee returns, and hence the 'indicated returns' in FMPs. Typically, the fund house fixes a 'target amount' for a scheme, which it ties up informally with borrowers before the scheme opens. Since the fund house knows the interest rate that it will earn on its investments, it can provide 'indicative returns' to investors. FMPs are debt schemes, where the corpus is invested in fixed-income securities. The tenure can be of different maturities, from one month to three years. They are closed-ended in nature, which means that once the NFO (new fund offer) closes, the scheme cannot accept any further investment. These FMP NFOs are generally open for 2 to 3 days and are marketed to corporates and well-heeled, high net-worth individuals. Nevertheless, the minimum investment is usually Rs 5,000 and so a retail investor can comfortably invest too. FMPs usually invest in certificate of deposits (CDs), commercial papers (CPs), money market instruments, corporate bonds and sometimes even in bank fixed deposits. Depending on the tenure of the FMP, the fund manager invests in a combination of the above-mentioned instruments of similar maturity. Say if the FMP is for a year, then the fund manager invests in paper maturing in one year. The fund received is for a pre-specified tenure and the exit load from this plan is high (usually 1 per cent to 3 per cent, depending on the time of redemption). So, the fund manager has the liberty to deploy most of the funds mobilised under the scheme. The actual return can vary slightly, if at all, from the indicated return. Against that, a bank fixed deposit exactly prints the amount which is due to you on maturity on the FD receipt. However, FMPs do earn better returns than fixed deposits of similar tenure. Another Advantage with FMPs is the Indexation Benefits available to it. Regards, Srikanth Shankar Matrubai ...

Ashalansu was clearing my doubts regarding the differences between FD and FMP. I think his analysis can be useful to you as well ... I am posting it below: "As u r in 30% Tax slab, FMPs r much better option than bank FDs. Let me explain u how? basis of calculation - Both Bank FDs & FMPs r offering 10% interest rate for 370 days period. amount invested 1L in each. Bank FD - after 1 year interest received = 10000 Rs. Tax on Interest = 30.9% = 3090 Rs. Net interest earned = 10000-3090 = 6910 = 6.91% effective yield FMPs - amount invested = 1L @ 10 Rs. per unit, alloted no. of units = 10000 @ 10% interest earning, NAV of units at maturity = 11 Rs. Value of units = 10000*11 = 110000 Cost inflation Index value in year of purchase = 551 (i have taken it for past FY 2007-2008) Cost inflation Index value in year of maturity = 582 (CII for current year) Hence Indexed purchase cost of Unit = 10*582/551 = 10.56 Rs. Hence Indexed Long Term Capital Gain (LTCG) = 11-10.56 = 0.44 Rs. Total LTCG = No. of units * LTCG on one unit = 10000*0.44 = 4400 Rs. LTCGs Tax @ 20.6% = 906.4 Rs. Net gain after tax payment = 10000-906.4 = 9093.6 = 9.09% effective yield I hope it 'll clear ur doubts. regarding FMPs. These r safe instruments as the investments r made in Top rated corporate papers & debt instruments. although relatively not that much safe as bank FDs."...

Dear N.krishnaprasad, please note, not every ULIP offers, capital protection. U may agree or disagree with the views of others here @ MMB. Invest or not to invest in ULIPs is a personal choice. Thanks Ashal...

Fixed maturity plans, or FMPs as they are popularly called, are close-ended funds with a fixed tenure. Such funds invest in a portfolio of debt products whose maturity coincides with the maturity of the fund. The primary objective of a Fixed Maturity Plan is to generate income while protecting the capital by investing in a portfolio of debt and money market securities. The tenure can be of different periods, ranging from one month to three years. FMPs are effectively quite similar to bank fixed deposits but are more tax efficient. Apart from this, FMPs are not affected much by interest rate volatility when held till maturity. The return on these funds is indicated and is close to the actual returns. If you are not a risk-free investor and look for an assured income, this is the right option for you. But since FMPs are closed ended in nature, it can be purchased only at the time of initial offerings. Regds Ashport ...