Know your rights and responsibilities as a mutual fund investor

As a mutual fund investor, everyone knows the basics, the process, and all other factors they should know. But are you sure you have enough information about the funds you want to invest in? Well, you have to be.

It’s a common behavior of every investor that he never bothers about facts he doesn’t know until he sees the implications of not knowing them. However, it is not correct. When registering with an online portal, we come to the terms and conditions to confirm that we abide by them and intend to associate with them in full knowledge of all the facts and figures. But do we really read them? Many of us don’t. The reason for this is that we believe that this is a common practice and that such terms and conditions will not have much impact in our lives. Such loose behavior is sometimes okay, but in the case of investing in mutual funds, it can lead to various complications. Therefore, it is very essential for every investor to fulfill the duties and exercise the rights thoroughly in order to achieve a better investment.

The regulators in each country have established specific guidelines for the mutual fund industry. We have to stick to them and follow the rules to make the best decision. All asset management companies (AMCs) that develop and manage the mutual fund programs are required to disclose all program-related documents to investors so that they can know all the important details about the fund in which they wish to invest. Investors also have certain performance obligations and different rights when making an investment decision. They include:

Analyze the offer documents

The program related documents containing SID, KIM and SAI must be read thoroughly before purchasing the funds. They contain every single detail of the program including its type, nature, assets, portfolio and instruments. This provides information about the fund’s ability to generate the required returns.

Receive annual reports, statements and regular updates

It is both the right and duty of every investor to receive annual reports and statements from the AMCs. Additionally, there may be some other updates in the mutual fund houses that each AMC is required to share with investors.

Receive dividends within time

Suppose you are an investor in SBI mutual funds and you hold stock funds with dividend investing plan. Then you have the right to receive the dividend payments within the period after the declaration. This means once the AMCs have declared the dividends, investors have the right to receive their share within the time.

Receive updates of changes in schemas

AMC’s fund managers are constantly changing the funds’ portfolio to capture the best opportunity and provide better returns. Investors have the right to receive information or updates regarding changes made to the Program so that they can take appropriate action in relation thereto, if necessary.

Complaint Resolution System

Each fund house has a grievance mechanism that focuses on investor issues. Whenever you have a complaint, you can contact the AMC’s Complaints Department for an immediate resolution.

Details of the distributor’s commission

All investors have the right to know the amount of money or commission paid by the fund house to the mutual fund distributor. In addition, it is the duty of the distributor to inform the investor of the commissions or remunerations they receive from the sale of other competing systems.

Awareness of the rights and obligations of investors brings transparency to the fund management system. A well-regulated system has distinct benefits that help investors achieve superior benefits. This gives investors a clear overview of their investments and increases the possibility of generating returns. So you need to be aware of any updates related to the fund you have either invested in or intend to invest your hard-earned money in.