Maturity

Maturity is the end of a fixed-income investment’s life. On a bond’s maturity date, the issuer repays the face value along with the final coupon; on a fixed deposit’s maturity date, the bank pays back the principal and any accumulated interest. Residual maturity, or time to maturity, is how long remains from today.

Why it matters

Maturity is an anchor for planning. It tells you when money will come back, which lets you line up investments with known future expenses — a school fee in three years, a down payment in five. It also shapes risk: longer maturities generally mean more sensitivity to interest rates and more time for an issuer’s circumstances to change.

How to read it

• Maturity vs duration. Maturity is when the final payment arrives; duration is the weighted average time of all payments. For coupon-paying bonds, duration is shorter.
• Call and put options. Some bonds can be redeemed early by the issuer (a call) or the investor (a put), which can shorten their effective life.
• Debt funds. Average maturity is a portfolio figure. Open-ended debt funds have no maturity date of their own; target maturity funds and fixed maturity plans do.

Common misconceptions

• “Holding to maturity removes all risk.” It removes the effect of interim price moves, provided the issuer pays. Credit risk and inflation risk remain.
• “Longer maturity always means higher yield.” Usually, but not always — the shape of the yield curve changes over time.

In India: Premature withdrawal of a fixed deposit is often allowed but may carry a reduced interest rate. The terms are set by each bank and stated when you open the deposit.