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One minute guide to understanding a fixed maturity plan

One minute guide to understanding a fixed maturity plan
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First Published: Sun, Dec 13 2009. 11 09 PM IST
Updated: Sun, Dec 13 2009. 11 09 PM IST
0-15 seconds
What am I?
I am a fixed maturity plan. I am just a mutual fund that does something a little different than your usual boring old diversified equity fund.
15-30 seconds
What is my claim to fame?
I give returns that are a little better than a fixed deposit (FD) because of my unique tax treatment. Since I carry very little risk, you’re practically getting a much higher tax-adjusted return.
30-45 seconds
How to best use me
I am meant only for those with a fixed short- to medium-term investment horizon. I give FD plus returns at best. I am also listed on the stock exchange in case you want to get rid of me quickly, but because there’s reward for holding me till maturity, I would suggest you don’t let go of me. Watch out for me between January and March every year. That’s when I offer double-indexation benefit.
45-60 seconds
Red flags about me
I do not guarantee any returns, much like any other scheme. However, to protect their reputation, fund houses will do a lot before investing in poorly rated assets. Earlier, I used to indicate the returns at the time of your investment itself. Now, I am not allowed to do so.
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First Published: Sun, Dec 13 2009. 11 09 PM IST