How to read a mutual fund offer document?

A mutual fund offer document offers investors essential information regarding the scheme. An investor should study the same thoroughly before making an investment. Here are some of the main topics covered in an offer document.


Investment Objective

Usually the first topic in an offer document, this section describes the nature and goal of the fund – whether to earn regular income or capital appreciation – in a nutshell.


Fund Manager

The Fund Manager is basically responsible for building and managing the fund portfolio. He or she is normally assisted by a team of analysts and other support staff who ensure that the fund operates efficiently and as per its objectives. Knowing the Fund Manager in charge and his or her past performance can add more confidence to an investor’s decision-making process.


Past Performance

Studying the past returns and performance of a fund may help an investor evaluate the future performance of the fund. While a fund may have delivered high returns in the previous year, it is important to check its performance over a period of time.


Benchmark Comparisons

This section helps an investor compare the fund’s performance versus a benchmark index for a wider perspective and better understanding of the fund’s performance.


Risk factor

It is mandatory for every fund to include a Riskometer that depicts just how safe or risky the fund is. This helps investors make a choice that matches their appetite for risk whether it is very low, low, medium, high or very high.


Expense Ratio

The expense ratio is the annual fee that all funds charge their investors. It expresses the percentage of assets deducted each fiscal year for fund expenses, management fees, administrative fees, operating costs, and all other asset-based costs incurred by the fund. It is calculated by dividing the fund’s total expenses by its assets under management on a daily basis.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.