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Understanding Fixed Maturity Plans in Mutual Funds

Takendra Verma
Last updated: 05/01/2026 2:00 PM
Takendra Verma
Published: 05/01/2026
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There are many types of mutual funds, and one such category is the Fixed Maturity Plan (FMP). Many investors may not be familiar with it.

Contents
What Is a Mutual Fund FMP?How Does an FMP Work?Who Should Invest in FMP?Major Benefits of Investing in FMPPredictable ReturnsLow RiskTax BenefitsNo Entry or Exit ChargesProtection From Market VolatilityDisadvantages of FMPCan You Invest in FMP Through SIP?

An important thing to understand is that, like fixed deposits (FDs), FMPs also come with a fixed maturity date.

For investors who prefer safer investment options, FMPs can be a good choice. In some cases, they may offer better returns than fixed deposits.

Let us understand what FMPs are, how they work, who should invest in them, and whether SIP investment is possible.

What Is a Mutual Fund FMP?

An FMP (Fixed Maturity Plan) is a closed-ended debt mutual fund. Closed-ended means investors can invest only during a limited time period. Once this investment window closes, new investments are not allowed.

FMPs do not invest in the stock market. Instead, they invest in safe debt instruments such as government bonds, corporate bonds, treasury bills, and debentures. This helps in keeping the risk low.

How Does an FMP Work?

When an Asset Management Company (AMC) launches an FMP, it clearly decides the maturity period, such as 1 year, 3 years, or 5 years. The money collected from investors is then invested in debt instruments that mature around the same time.

This method reduces the effect of interest rate changes and helps provide more predictable returns to investors.

Who Should Invest in FMP?

FMPs are suitable for investors who:

Want low-risk investments

Need money after a fixed time period

Are looking for better returns than FDs

Want to save tax

Major Benefits of Investing in FMP

Predictable Returns

Before investing, investors usually have an idea of the expected return range. Although returns are not guaranteed, they are more stable because FMPs are debt funds.

Low Risk

FMPs carry much lower risk compared to equity mutual funds and remain relatively safe during market fluctuations.

Tax Benefits

If an FMP is held for more than three years, investors get the benefit of indexation, which reduces the tax payable by adjusting the cost for inflation.

No Entry or Exit Charges

Most FMPs do not charge entry or exit loads, meaning there are no extra costs at the time of investment or maturity.

Protection From Market Volatility

During uncertain stock market conditions, FMPs help in balancing the investment portfolio.

Disadvantages of FMP

It is difficult to withdraw money before maturity

The investment remains locked for the entire period

Losses may occur if the bond-issuing company defaults

There is no guarantee of getting the same interest rate after reinvesting post-maturity

Can You Invest in FMP Through SIP?

No, investing in an FMP through SIP is not possible. SIP is a method where small amounts are invested regularly, usually every month. On the other hand, FMP requires a lump-sum investment for a fixed period.

Since FMPs are closed-ended and have a limited investment window, SIP investment is not allowed.

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