Both products serve a similar purpose – they allow investors to lock into the existing portfolio yield. If these products are held till maturity, they take away the mark-to-market risk caused by interest-rate fluctuations. However, experts suggest that investors should opt for the former, owing to their superiority on several counts.
One, FMPs are usually launched for a horizon of up to three years. TMFs are available for a wider range of tenures, going up to 10-11 years.
Two, TMFs also have portfolios with higher credit quality. They usually invest in government securities (G-Sec), state development loans (SDLs), and triple-A rated public sector unit (PSU) bonds. Thus, they are low on credit risk. FMPs, on the other hand, invest in corporate bonds, which could be of below triple-A rating as well. (However, the higher risk can translate into higher returns.)
Three, TMFs are more transparent. A TMF replicates a public index. At the time of investing, the investor knows which bonds will be included in the portfolio. In the case of an FMP, he will just know the indicative portfolio (the ratings of the bonds that the fund manager
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
ASK THE EXPERT
Ques. One of my friends told me that your company provides detailed Retirement plans. I want to know what is the procedure to get my Retirement plan. I will be retiring in March 2025. R.P Gupta, Noida
How to Naturally Reverse Fatty Liver Disease
The liver, located on the upper-right side of the abdomen, is the body’s largest internal organ and plays a critical role in detoxifying the blood and processing nutrients.
Banking sector which has underperformed in the last two years, now offers a favorable risk-reward profile
Do you think the market is overpriced? Is yes, should investors refrain from investing in index schemes at the current valuation?
India will continue to enjoy benefits of a close US relationship and trade will continue to grow
Q1. The US elections are said to be one of the closest till date, what impact will the election of a Republican / Democratic party have on the US economy and how is that going to affect India in the short as well as the long term?
Understanding Momentum Funds
Momentum funds are a type of investment fund that focuses on companies experiencing positive momentum in factors such as earnings, revenue, and stock price movement.
Risks and opportunities associated with Small Caps
Small-caps are a stock-picker’s paradise.
How to navigate your portfolio through bull market a
Indian equities have been in a bull run for the past four years.
Choosing mutual fund schemes depending on your age to achieve life goals
The choice of mutual fund (MF) scheme might be influenced by one’s risk profile or age.
Thematic Fund Or Sectoral Fund, Which Fund Suits You?
A thematic fund is a type of mutual fund that focuses on investing in companies based on specific themes or trends.
Be Kind To Your Kidneys
The kidney is a vital organ in our body which is four inches long and two and a half inches in width.
