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Target Maturity Funds are a type of government mutual funds in which there is no restriction on investing or withdrawing money. You can put your money in it whenever you want and withdraw it whenever you want. The most special thing about this fund is that it has a fixed date on which the fund closes and you get your money. This fund buys only those bonds i.e. government papers which are expiring on or around the day of closure of the fund. This fund mainly invests your money in Indian Government papers, bonds of government companies, loans given for the development of states and papers with AAA rating which are considered the safest.

The way it works is very straightforward. The fund manager maintains all these government papers till their last date. Meanwhile, whatever interest you get is invested again in this fund, which makes your amount bigger. When the last date of this fund comes, the investors get back their entire money and all the interest together.

working rules

When there is volatility or uncertainty in the market, this fund is best for those who want fixed returns in a fixed period of time. Recently, when the Reserve Bank of India (RBI) increased the interest rates, these funds have become even more attractive because now they are getting better returns than before. This fund protects you from the risk of changing interest prices as it locks in your interest rate at the outset. This is an open-ended fund, so sometimes people get nervous or greedy and withdraw money before maturity, which is wrong. To take full advantage of this, it is very important to stick till the last date.

Liquidity available in this fund

There is huge tax saving in this as compared to bank FD. If you keep money in it for more than three years, then long term capital gains tax is levied on it in which you get the benefit of indexation. Indexation means that while calculating the tax, the government also adds inflation, which reduces your tax significantly and increases the profit in hand.

It is also far ahead in terms of security because by investing money in government securities, the risk of default i.e. losing money is negligible. Before investing, you can go to its factsheet and see where your money is going. Besides, it has the benefit of diversification, that is, instead of investing your money in one place, it is distributed among different bonds, due to which the risk is greatly reduced.

Who is it best for?

Mirae Asset Mutual Fund has given an important point to make investors aware. It is necessary for all investors to complete the Know Your Customer (KYC) process once. You should always transact money only with registered mutual funds. If you have any complaint or want to know about KYC, you can visit the Knowledge Center section on the website of Mirae Asset Mutual Fund.