Target Maturity Fund — Mutual Fund Term Explained

An open-end index debt fund that invests in bonds maturing in a specific year. Low credit risk (PSU/G-Sec) with predictable returns if held to maturity.

Target Maturity Funds are open-end passive debt funds that invest in G-Sec, SDL or PSU bonds maturing around a specific target year. Being open-end, they offer flexibility unlike FMPs. Returns become more predictable as you approach the target date.

Related terms

• Gilt Fund — A debt fund investing only in Government Securities. Zero credit risk since backed by the government, but significant interest rate risk.
• FMP (Fixed Maturity Plan) — A closed-end debt fund with a fixed maturity date. Invests in bonds that mature around the same time. Gives relatively predictable returns.
• Debt Fund — A mutual fund investing in fixed income securities — bonds, G-Secs, commercial paper. Lower risk than equity but also lower returns.

Browse the full mutual fund glossary, or see this concept in action in the fund screener.