Floating Rate Funds

Floating rate fundsFloating rate funds (or floaters as they are called) are just as critical in an uncertain interest rate scenario. These funds invest in floating rate debt instruments wherein the coupon rate is revised at regular intervals. Uncertainty in interest rates does not significantly impact the prices of floating rate instruments, because the coupon rate is adjusted (either lower or higher depending on the interest rate scenario) in response to the market rates. Again, given that portfolios of floaters are largely comparable, lower expenses are crucial in clocking a competitive return. While floaters come in both variants (short-term and long-term), opt for short-term floaters, which allow investors to redeem any time without paying an exit load (long-term floaters usually have an exit load on premature redemptions).

FMP Simplified

FMP's are investment instruments that are to be bought in the month of march. Since banks invite funds for investment for a very short duration of time, say a week or even less than that, in case you are interested in investing in FMP's, keep your eyes and ears open when March starts :)

Following piece of text would give some insight to what's and how's of Fixed Maturity Plans.

Fixed maturity plans (FMPs) have become popular amongst investors mainly as a foil for uncertain interest rates. FMPs by staying invested in a portfolio of bonds/government securities till maturity offer a relatively certain return despite their market-linked nature. During periods of uncertainty, the certain return offered by FMPs assumes even more significance. While FMPs are launched with varying tenures, go for the short-term FMPs (less than a year). If the interest rate scenario appears uncertain even after the FMP matures, you can consider rolling over to the next issue (provided the fund house is offering another FMP with a similar tenure).

Risks involved in FMP's: Visit this link :- http://www.personalfn.com/detail.asp?date=3/27/2008&story=2

Compare FD with FMP :-
http://personalfn.com/detail.asp?date=4/29/2008&story=1

Happy Investing.