Mutual funds are one of the best investment instruments for building wealth, making them an important part of your investment portfolio. However, understanding the specifics of the chosen scheme is crucial.
This is where the Scheme Information Document (SID) plays a vital role. Although the SID is an essential resource for mutual fund investors, its importance is often underestimated.
So, let us learn what an SID is, where to find it and what valuable investor information it contains.
What is a Scheme Information Document?
A Scheme Information Document is a mutual fund offer document that sets forth the information about a particular mutual fund scheme that a prospective investor should be aware of before investing.
This document is a tool that helps you, as an investor, to make informed decisions by providing a clear and concise summary of the scheme, including its type, investment objective, strategies, etc.
Where can you find the SID?
You can access the Scheme Information Document on the official website of the respective Asset Management Company (AMC).
For example, if you want to obtain the Scheme Information Document for a specific Axis Mutual Fund Scheme, you can find it on the Axis Mutual Fund website, which is a subsidiary of Axis Bank, one of India’s leading financial institutions.
Things present in Scheme Information Document
An SID is a long document that usually contains the following information.
- Riskometer: A metre that shows the risk level of the scheme.
- Scheme and Fund Details: Such as opening and closing dates.
- AMC-Related Information: Includes name of the mutual fund, AMC and trustee company.
- Information about the Scheme: Its type, investment objective, risk factors (both standard and scheme-specific), asset allocation pattern, investment strategy and performance track record (of old schemes).
- Units and Offer Details: Including available plans, eligibility, subscription procedure, switching options, entry and exit load, computation of NAV, etc.
- Other information: SID also provide crucial information related to fees and expense ratio, rights of unit holders and penalties and pending litigation or proceedings.
Why should you read the SID?
You should read the SID as it:
- Explains the strategy, objective and asset allocation, allowing you to make informed decisions.
- Reveals risk factors, helping you know whether the scheme matches your risk tolerance.
- Outlines fees and expenses, giving you an idea of the costs involved.
- Ensures that the scheme complies with SEBI regulations, safeguarding your interests as an investor.
How to read a Scheme Information Document?
- Start with the basics: Check the scheme’s name, category, risk level and type to understand its nature.
- Understand the investment objective: Evaluate the scheme’s focus and objective to ensure that it aligns with your goals.
- Check the portfolio: Analyse the portfolio to understand asset allocation patterns.
- Check the fees and expenses: This will help you get a transparent picture of the associated investment costs, such as exit loads, entry loads, AMC fees, etc.
- Read the terms and conditions: Study the scheme’s T&C, including the minimum investment required, redemption process, investor rights and other rules.
Fees and expenses
Some of the fees and expenses mentioned in SIDs include:
- Details about Exit load
- New Fund Offer (NFO) expenses
- Investment Management and Advisory fees
- Trustee fees
- Audit fees
- Custodian fees
- GST on expenses other than investment and advisory fees
- GST on brokerage and transaction cost
Other Mutual Fund offer documents
In addition to SID, there are two other mutual fund offer documents:
- Key Information Memorandum (KIM)
- Statement of Additional Information (SAI)
Conclusion
The SID, reviewed and approved by SEBI (Securities and Exchange Board of India), is more than just a disclosure document. It is the key to gaining comprehensive knowledge about specific mutual fund schemes.
Hence, you must always review the SID to make an informed decision and ensure that the selected scheme aligns with your financial goals, risk appetite and investment horizon.
Also Read: Understanding how Mutual Funds work
FAQs
What should I look for in a Scheme Information Document?
When reviewing a scheme information document, look for its investment details, risk level, past scheme performance, asset allocation section, list of fund managers, fees and expenses and benchmark index.
What is a Key Information Memorandum?
A Key Information Memorandum is a mutual offer document that provides useful information about a mutual fund scheme in a short and easy-to-understand format. Plus, it usually comes with the application form for the respective mutual fund scheme.
What is the importance of a Scheme Information Document?
A Scheme Information Document comprehensively discloses all relevant information about a mutual fund scheme.
What is SID and SAI in mutual funds?
In mutual funds, SID provides detailed information about a mutual fund scheme the SAI provides supplementary information to the SID.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
Mutual Fund investments are subject to market risk, read all scheme related documents carefully. Axis Bank Ltd is acting as an AMFI registered MF Distributor (ARN code: ARN-0019). Purchase of Mutual Funds by Axis Bank’s customer is purely voluntary and not linked to availment of any other facility from the Bank. T&C apply.
