"What to look out for in Offer Documents of funds
The offer document is an essential read before investing. In fact, all mutual fund distributors and financial planners are required to give their clients a copy of the same before the investor signs the application form. Since these documents tend to be exceedingly lengthy and almost identical, you should go through the fund' Key Information Memorandum (KIM)
Here are some key factors that you need to keep an eye out for.
Investment Objective: This will explain the mandate and scope of investment. Whether the fund is equity or debt oriented, whether the fund will be multi-, large-, mid- or small-cap specific, the level of diversification, the option to the fund manager to invest overseas and other such issues.
Type of fund: Is the fund open- or close-ended? In case of a close-end fund, look at the lock-in period, liquidity window and repurchase options.
Costs: Fees, expenses and loads.
Investment: Minimum initial investment, methods of purchasing, redeeming and making additional investments, the time taken for redemption, so on and so forth.
Investment Team: Name of the fund manger, number of fund managers managing the fund and information on each. This information is useful to those who would like to check the antecedents of the manager.
Most of this information is available in the KIM as well, but if you can spare the time, give a good look to the offer document too."
