Lock into rising bond yields with fixed maturity plans; here's why

Do not compromise on credit quality in pursuit of high returns, and make sure that the fund's tenure matches your investment horizon

In May, investors put Rs 117 billion in fixed maturity plans (FMPs), a category of closed-end debt mutual funds (data for June is not fully available yet). In a rising interest rate scenario, these are attractive products that allow investors to lock into existing yields. Investors, however, need to pay heed to a few aspects when selecting these funds.  

FMPs can be purchased during the new fund offer (NFO) period. At the time of investing, investors can consult the scheme information document (SID) and learn about the rating of the instruments that the portfolio will hold. Expected returns are not disclosed,