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Buy fixed maturity plans only to lock in yields when interest rates peak

Open-ended debt funds, with their liquidity advantage, should be preferred in other circumstances

Even though the equity market was opened up for foreign investors immediately after the early 1990s, the norms for foreign investment in debt were released in 1995 and in 1997, Rs 29 crore trickled in
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Sarbajeet K Sen
Fixed maturity plans (FMPs) have been in the news in recent times due to leading fund houses like Kotak Mutual Fund (MF) and HDFC MF, which had exposure to the troubled Essel Group papers, facing issues at the time of redemption. 

The decision by Kotak MF to redeem partially and by HDFC MF to roll over its FMP created controversy. These events also led to investors asking if they should invest in FMPs at all, or whether they should stick to open-ended debt funds. FMPs have fixed tenures, ranging from one month to five years. An investor in an FMP new