Things worth noticing in a fund offer document

Things worth noticing in a fund offer document

It often happens that mutual fund investors do not have enough time to do research work. But going through the offer document is a must.

In-depth knowledge about the subject sets apart a good investor from a bad one. It is quite difficult to understand the complex nuances of investments. But every investor should be well aware of the basic information. Generally, mutual fund investors tend to get away without gathering much knowledge about their funds. They believe that the fund manager will take care of the rest of the details. But, investors should at least go through the offer document carefully.

You will be given a copy of the offer document by mutual fund distributors or financial planners. Before signing the application form, an investor must go through the offer document. But these documents are quite lengthy. So, an investor can go through the Key Information Memorandum or KIM.

Below given are certain points which you should not give a miss:

  • Type of fund: Check whether the fund is open-ended or closed one. You can notice the liquidity window, lock-in period, and repurchase options in case of a close-ended fund.
  • Investment objective: Here, you will get to know the scope and mandate of the fund’s investment. You will get all the information related to the level of diversification, overseas investment, and so on. It will also let you know whether the fund is debt or equity-oriented, whether the fund will be mid or small-cap specific etc.
  • Costs: Here, an investor will get information related to the expenses, loads, fees, etc. which he can compare with other similar funds.
  • Investment team: You will know about the fund manager and the number of fund managers in this section.
  • Investment: This is perhaps one of the most significant sections. Here you will get details like a minimum initial investment, redeeming as well as making additional investments, methods of purchasing, etc.

You will know most of the information in the KIM. But it is still better to spare some minutes and read through the offer document.