How to Examine a Mutual Fund’s Scheme Information Document

By Varun | June 30, 2017

With multiple Mutual Fund schemes available in the market today, it’s important that we understand the potential of a product before zeroing in on it. One way of doing this is by reading the scheme information document (SID). Broadly, an SID indicates the objectives of a fund as well as how and where the invested money will be parked, whilst also providing an indicative asset allocation of its underlying instruments.

Such documents can run into multiple pages and be packed with financial jargon and complex terms, making it difficult for the average retail investor to understand. You would do well to seek help from a financial adviser to crack the hard ones. Here are some of the major aspects you must pay attention to while looking up a prospective fund’s SID.

Additional Reading: How To Stay Awake While Reading A Mutual Fund Offer Document 

Scheme Management

Being the fulcrum of a Mutual Fund, a fund manager is the entity who decides where to put your money, thus playing a crucial role in determining the path it chooses to tread. The SID tells you all about the past experience, track record and investment patterns of a fund manager.

Asset Allocation

Every fund has a different mantra to success. Some may invest primarily in equities, while others may channel most of the fund into government bonds. Some, on the other hand, may even choose to hold small quantities of cash. The specified asset allocation is, therefore, a critical piece of information about the fund, as the risks and returns of the scheme are dependent on it.

Fees and Expenses

Your Mutual Fund investment typically includes a percentage of its value dedicated to the fees you pay to the fund house. Popularly known as the expense ratio, this percentage varies from scheme to scheme and AMC to AMC, and is another important metric in choosing a fund. Another expense that may be incurred at the time of redemption is called the exit load. Add up theses associated fees and expenses to calculate the money you can eventually expect when you close your investment.

Disclosures

Certain details of a fund are regularly broadcast to its investors – including the performance of a scheme, assets under management and changes to its investment objective. Make a note of when to expect such periodic communication.

The scheme information document is effectively the catalogue of a fund and by assessing it carefully, you can make your investment decisions.

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit www.bankbazaar.com for the latest rates/offers.

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