What is Scheme Information Document in mutual fund

Every asset management company (AMC) prepares a set of documents providing the minutest of details about the mutual fund scheme they offer. They submit these documents to SEBI (Securities and Exchange Board of India) for approval before opening the offer for general investors.SID is one of the most important of all these scheme related documents.

A scheme information document or SID is a document that contains all the necessary information about a particular mutual fund scheme. It is crucial for scheme buyers to carefully go through the SID to understand whether the plan suits their needs and the risk factors involved.Many investors tend to buy such products based on advertisements, recommendations of brokers or friends, etc. As a result, they risk purchasing the wrong scheme when there might be another plan more suitable for their needs.For instance, suppose you have a friend who believes in investing in risk-free investment products with low returns. While a debt fund is best suited for such a person, the same fund might not be suitable for you if you believe in taking risks for higher returns.Therefore, it is crucial for you to thoroughly understand the objective, the level of risk involved, and other vital information related to the mutual fund. This will help you decide whether to invest your money in that scheme or look for another plan.

You can easily find the SIDs of mutual funds on the official website of the asset management companies that manage them. You can either read the SID directly on the website or download it on your computer or smartphone and read it later.You would need a pdf reader like Adobe Reader to open and read these documents.

Almost all SIDs invariably start with a Risk-o-meter and general information about the AMC that floats the scheme.The Risk-o-meter is a miniature graphic representation that depicts the amount of risk involved. It can show different risk profiles depending upon the fund type and the investment principle the fund is expected to follow. For instance, a debt fund will be shown as low risk, and an equity fund may be depicted between moderate to high-risk.The same page contains general information like the fund name, AMC, head office address, etc.A scheme information document usually contains the following six sections.

1. Scheme Highlights This section contains a summary of investment objective, availability of liquidity, the benchmark that the fund will follow, NAV disclosure, transactional charges, etc. The section is usually drafted in tabular form and can run two to three pages.
2. Introduction A mutual fund can have different types of risks associated with it, such asAll such risks associated with various underlying assets or any other risk factors that an investor might face is discussed in detail in this section.
3. Information About the Scheme This section contains information about
4. Units and Offers You might have many such questions regarding the funds. All such queries are addressed in this section.
5. Fees and Expenses Mutual fund houses charge fees for managing the fund on your behalf. The expense ratio is the combination of different fees. A detailed breakdown of all such costs is provided under this section.
6. Penalties, Pending Litigations, Findings Of Inspections or Investigations This section provides declarations regarding any pending litigations or penalties that the AMC might be facing. If there are no such cases which is usually the case, it will simply state NIL against the statements.

The following are the two other mutual fund offer documents apart from the SID.

• The constitution of the fund.
• Key persons of the AMC.
• The registrars and custodians of the fund.
• The bankers.
• Legal counsels, external auditors.
• The AMC details.
• Details of sponsors and trustees.

• Key InformationMemorandum (KIM) KIM is just a shorter version of SID that contains all the essential information of the scheme in a concise format. It is generally attached to the mutual fund application and helps in having a cursory look at the scheme information.
• Statement of Additional Information (SIA) The SIA contains additional information that is not specifically about the scheme. It contains information like
• While most of the information provided in SIA are unrelated to the fund’s performance, you should at least pay attention to the sub-section called Right to unitholders. This subsection deals with the rights guaranteed to the investors and the remedies available to them in case of any dispute.

People generally tend to ignore the all-important scheme information document before signing the dotted lines, which is not recommended. The fund houses prepare these documents for the benefit of investors, and they can help clear most of the doubts you might have about a particular scheme.When you are about to invest your hard-earned money into a plan, you must learn about the specific scheme, and SID is just the right document for you to achieve this purpose.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.