Skip to main content

Risk factors to consider while investing in Fixed Meturity Plans (FMPs)

Mutual Fund Units involve investment risks including the possible loss of principal. Please read

the Scheme Information Document carefully for details on risk factors before investment.

Scheme Specific Risk Factors are summarized below:

 

• Price-Risk or Interest-Rate Risk: Fixed income securities such as bonds, debentures and

money market instruments run price-risk or interest-rate risk. Generally, when interest rates

rise, prices of existing fixed income securities fall and when interest rates drop, such prices

increase. The extent of fall or rise in the prices is a function of the existing coupon, days to

maturity and the increase or decrease in the level of interest rates.

 

Credit Risk: In simple terms this risk means that the issuer of a debenture/ bond or a money

market instrument may default on interest payment or even in paying back the principal

amount on maturity. Even where no default occurs, the price of a security may go down

because the credit rating of an issuer goes down. It must, however, be noted that where the

Scheme has invested in Government securities, there is no credit risk to that extent.

 

Liquidity or Marketability Risk: This refers to the ease with which a security can be sold at or

near to its valuation yield-to-maturity (YTM). The primary measure of liquidity risk is the

spread between the bid price and the offer price quoted by a dealer. Liquidity risk is today

characteristic of the Indian fixed income market.

 

Further, the Scheme being a close-ended income Scheme, as per SEBI guidelines, no

redemption / repurchase of units will be allowed prior to the maturity of the scheme. However,

the units of the Scheme will be listed on stock exchange (s) and the investors wishing to exit

may do so through stock exchange mode. Listing of units of the scheme on stock exchange(s)

does not necessarily guarantee liquidity and there can be no assurance that an active

secondary market for the units will develop or be maintained. Consequently, the Fund may,

depending on the market forces, even quote below its face value / NAV.

 

• Reinvestment Risk: Investments in fixed income securities may carry reinvestment risk as

interest rates prevailing on the interest or maturity due dates may differ from the original

coupon of the bond. Consequently, the proceeds may get invested at a lower rate.

 

Different types of securities in which the scheme would invest as given in the Scheme

Information Document carry different levels and types of risk. Accordingly the scheme's risk

may increase or decrease depending upon its investment pattern. e.g. corporate bonds carry

a higher amount of risk than Government securities. Further even among corporate bonds,

bonds, which are AA rated, are comparatively more risky than bonds, which are AAA rated.


Popular posts from this blog

National Savings Certificate

National Savings Certificate Here's everything you need to know about the 5-year savings scheme offered by the Government This is a 5-year small savings scheme of the government. From 1 July 2016, a National Savings Certificate (NSC) can be held in the electronic mode too. Physical pre-printed NSC certificates have been discontinued and replaced with Public Provident Fund-like passbooks. What's on offer The minimum amount you can invest in them is Rs100 and there is no upper limit. Under this scheme, all deposits up to Rs1.5 lakh qualify for deduction under section 80C of the Income-tax Act, 1961. The interest earned is taxable. You can invest in multiples of Rs 100. These certificates can be owned individually, jointly and also on behalf of minors. The interest rates for all small savings schemes are released on a quarterly basis. The effective rate for NSC from 1 October to 31 December is 8%. The interest is calculated on an annual compounding basis and is given along w...

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...

Different types of Mutual Funds

You may not be comfortable investing in the stock market. It might not seem like your cup of tea. But you can start by investing in Mutual Funds. Many first-time investors invest in Mutual Funds. This is because they do not know how to invest in individual securities. Basic information on Mutual Funds People invest their money in stocks, bonds, and other securities through Mutual Funds. Each Fund has different schemes with specific objectives. Professional Fund Managers look after these schemes. Your Fund Manager could help you invest in a scheme that suits your financial goal. Functioning of Mutual Funds You could make money through Mutual Funds in different ways. A single Mutual Fund could hold many different stocks, bonds, and debentures. This minimizes the risk by spreading out your investment. You could earn dividends from stocks and interest from bonds. You could also earn capital by selling securities when their price increases. Usually, you could choose to sell your share any t...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now