Mutual funds may hold the potential to offer investors with capital appreciation over the long term, but investors are expected to read all scheme related documents before making an investment decision. Even if you have seen a mutual fund advertisement, at the end of it they usually ask investors to really all the scheme related information carefully. The motive behind reading the offer document is to get potential investors acquainted with all the facets of a mutual fund scheme. All mutual fund schemes have a scheme information document which tries to bring in transparency and keep the investor informed about the product.
What is Scheme Information Document (SID)?
A Scheme Information Document, also referred to as SID, is an important document that aims at providing almost all the information about a particular mutual fund scheme. Although there are other important documents like product leaflet and KIM (Key Information Memorandum), the SID is treated as the most detailed and transparent document of all. A Scheme Information Document holds all the important aspects pertaining to the mutual fund scheme such as entry/exit load, risk factors, minimum investment amount, investment objective, type of scheme, liquidity, lock in period (if applicable), plans (direct and regular), benchmark where will the scheme invest, riskometer etc.
The format and flow of a Scheme Information Document may vary from one AMC to another, but the content of the document are almost the same.
Where is SID available?
When investors are browsing through the website of an AMC and looking for various mutual fund schemes, they can find the SID at the bottom of the mutual fund product page. Again, the placement of SID on the mutual fund product page may vary depending from AMC to AMC but it is usually placed next to the product leaflet and KIM.
Importance of SID
Scheme Information Document can be as lengthy as a little above 100 pages which may sometimes leave investors with a dilemma as to whether is it really necessary to go through it. However, it is recommended that retail investors go through this important piece of document before investing their hard earned money.
What are some of the most important parts of a Scheme Information Document?
Let’s understand some of the important parts from the Table of Contents –
Investment objective – Every mutual fund scheme has a unique investment objective which it aims at accomplishing at some of time in future. For example, the investment objective of an ELSS fund is to offer tax benefit and long term capital appreciation. The investment objective of a liquid fund is to offer stable returns and high liquidity with minimum investment risk.
Minimum investment sum – The minimum investment sum is the sum which the investors can invest in a mutual fund scheme. One can either make a lumpsum investment or start a monthly SIP. The minimum lumpsum investment and minimum SIP investment are unique and different from each other.
Risk factors – This section discusses all the risks associated with the mutual fund scheme. This may include a detailed brief about standard risk factors, scheme specific risk factors, risk associated with investment in equities, interest rate risk, credit risk etc.
Eligibility – This section draws light upon the eligibility criteria for mutual fund investors. This section explains the categories of investors who are eligible to buy units of that particular mutual fund scheme.
Entry/Exit load – Entry load is the extra sum which investors have to pay for making an investment in a mutual fund scheme. Usually the entry load for all mutual fund schemes is NIL, however investors should confirm the same with the AMC. Exit load on the other hand refers to the fee which the investor may have to pay the AMC while existing the scheme.
SID is an integral part of every investor’s decision making process and mutual fund investors are advised to thoroughly go through this important piece of document before making an investment decision.