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8 Things You Must Read In A Mutual Fund Offer Document


Mutual Funds are increasingly becoming a source of investment avenue for individual investors.


Systematic Investment Plans are receiving a lot of attention from investors. The mutual fund industry is seeing interest rising gradually. However, before you invest there are certain things that you must keep in mind.

 8 Things You Must Read In A Mutual Fund Offer Document
Here are 8 things to take note.

1) Debt or equity mutual fund scheme?

If you want to take a slightly higher risk, you must decide between an equity investment or a debt investment.

If you are an individual investor, who is close to retirement, it is best if you avoid investing money in equity dedicated schemes. On the other hand, if you are an individual investor with an appetite for risk, you would do well to invest in equity dedicated schemes, that can generate returns over the longer term.

2) Dividend income or growth

Similarly, if you are a retired individual you might want fixed income every month. You might hence want to look for a scheme that offers an income option every month along with safety, which is also called the dividend income plan. Hence, you might skip the capital growth option completely.


3) Open ended or close ended scheme

If you want liquidity and ability to sell the scheme, it is best to go in for an open ended scheme. Closed ended schemes might not offer you good liquidity.

4) Past performance of the fund

While the track record of the fund is important, it does not mean past track record will be an indication of future performance. If a scheme has done badly in the past, it could do well in the future with a portfolio churn and better fund management.

5) Look for the risk factors in the offer document

The offer document will also list out the risk factors. Most of them can be pretty standard, but, you must read them nonetheless. Sometimes, there could be something interesting that comes out of it.

6) Size of investment

Sometimes mutual fund investment schemes may defer in the amount of minimum subscription that is required. It's important to study that amount. Even for open ended funds there is an amount of minimum subscription that often differs from scheme to scheme.

7) Expenses and fees

Do not forget to look for switching charges, entry and exit loads, management fees and other service costs. Mutual funds are not charitable institutions and they also make money for them to survive. So do note the expenses involved.

8) SIP Options

These days investors prefer the Systematic Investment route to invest. Look for SIP options and the minimum amount that is needed.

Read more about: mutual funds
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