Every mutual fund investor enjoys certain rights under SEBI’s laws and rules and fund houses are bound to extend those rights to their investors. Some fund houses, which are investor focused, however, extend services which are more than what their regulatory obligations. Here are some of those rights that mutual fund investors currently enjoy.

Scheme Related Documents
As a potential investor in a mutual fund scheme, you can go through all the details about the scheme that you intend to invest in. You have the right to get a set of documents which include scheme information document (SID) and statement of additional information (SAI). These two together forms the offer document for the scheme you intend to invest in. The fund house should also provide you key information document (KIM), a set of documents containing some important information about the scheme and the fund house. In case there are any changes to the scheme you have invested in, the fund house should inform you about such changes.

Distributor Commission/Fees
You could invest in a mutual fund scheme directly or through an authorized distributor. In case your investment is through a mutual fund distributor, you have the right to know the fees, commissions etc. that the fund house is paying to the distributor who is getting you to invest in the scheme. Rules also allow you to know how much the distributor makes through fees, commissions etc. You also have a right to seek professional help, from a financial planner or advisor, in such situations. After you have invested in a scheme through a distributor, he/she should keep you updated, on a regular basis, about the scheme, market conditions, the investing climate etc. which could make the investing experience better.

Scheme Related Updates
You should get an SMS/email alert from your fund house within five working days after each investment, even SIPs. You can also get a monthly update for all the transactions done during that month from Association of Mutual Funds in India (AMFI), the fund industry trade body. Named consolidated account statement (CAS), this file would contain the details of all transactions, across all schemes from across all the fund houses through which you have invested. For CAS, income tax PAN is the sole identifier. You can register your email ID to get e-CAS. Even if you don't transact every month, every six months you will get a CAS with all the details of your mutual fund holdings. As an investor, you should also receive annual reports from all the fund houses you have your investments with.

Redemption, Dividends Etc.
We invest to reap the benefits when we need the money. So, redemption is as important as investment. When you redeem your investments, you should receive your redemption proceeds within 10 working days. If the proceeds are sent after 10 days, you have a right to receive interest at the rate of 15% per annum for the period of delay after the expiry of the 10th working day. The same rule also applies in case of dividend payments from fund houses, but here the duration is of 30 calendar days. You are entitled to receive interest for any delay in payment of dividend after the expiry of the 30-day period.

Dividend Statement
At times investors may require a summary of dividends received during a financial year. Some fund houses provide mail back services to investors, detailing dividends paid in a portfolio. In case dividend and redemption is not received by an investor, some fund houses provide trackers on their website which help investors to know the status of such payouts.

Missed Call and SMS Services
Some fund houses give the facility to investors where they could give a missed call to a dedicated number and get the full details of their portfolio with that fund house. Some fund houses also allow investors to transact through SMS.

Complaint Redressal System
Every fund house has a complaint redressal mechanism to address investor grievances. If you have any complaints, you can approach the designated officer in the fund house. If that is not redressed to your satisfaction, you can approach AMFI, or even SEBI, the regulator.

Keep KYC Updated, prepare a WILL
As the link between investors and mutual fund houses and companies which sell other financial products, financial planners and advisors play a very important role. They are the first point of contact who make investors aware of their rights and duties. Often along with fund houses, they conduct financial literacy seminars for existing as well as prospective investors to make them aware of various issues related to investing, which also include the rights and the duties of an investor so that the experience of investing remains smooth & hassle free.

"One of the first things that we insist for all our clients is that they should go for the 'Anyone or survivor' option for accounts and also opt for nomination," said Nirav Panchmatia, founder-CEO, AUM Financial Advisors. Such a process ensures that the transition of wealth and investments are smooth in case the main person who is investing incapable to carry of the transaction for any reason.

Updated information in every investor’s Know Your Customer (KYC) log is also very important. For the last couple of years, SEBI has made KYC compliance much easier and once a KYC data is uploaded with one KYC registration agency, the same is valid for all transactions across all investments regulated by SEBI. Any change in KYC data is also replicated with other KRAs within a few days.

Financial planners and advisors also help investors keep away from schemes which are not registered with SEBI. Often investors fall prey to ponzy schemes. So, make them aware of such schemes and tell them that they should not invest through cash, the investments should be in cheque and should be in the name of an entity registered with SEBI.

Financial planners and advisors also tell their clients that they have the right to ask about the fees and commissions that the planners and advisors receive by selling a product to them. This is a SEBI mandate and once this is settled, usually the process of advisor-investor relationship is smooth.

Source: timesofindia.indiatimes.com

Investment amount varies every month or quarter depending on the direction of the market.

Systematic investment plans (SIPs) have been one of the most popular vehicles to invest in mutual funds for quite some time now. With its popularity on the rise, fund houses also came up with new ways to invest through SIPs, starting with equity funds and then moving on to investment in debt funds. And among the fund houses that aimed at stable funds inflow went on an overdrive to get their investors invest through SIPs.

Of late, fund houses, driven by different investor needs, have started exploring new avenues. One such option is where an investor can increase or cut down on the amount he or she invests in a mutual fund scheme each month or quarter. While popularly this is called a flexi-SIP, the underlying principles are that of a tool first proposed by Michael Edelson, a Harvard University professor. The process is called averaging. Although the original process is based on mathematical models, there are some easy-to-use investment tools that are available with fund houses and financial advisors who can help you invest through this method.

Under this method, as an investor you would need to invest in such a way that the total value of your portfolio would go up by a pre-fixed amount. And the increase would be regardless of how the market moves. So, when the market is rising your investment each month (or quarter) would be lesser than the previous month, while when the market is in a declining phase, your investments each month would be rising. Under the value averaging method, the size of your regular investments would be inversely proportional to the direction of the market. Theoretically, financial advisors say, there could also come a month or two when to stick to the rules, you may also need to withdraw some amount from your accumulated funds. One of the main differences between SIP and flexi-SIP is that in flexi-SIP you also need to incorporate a rate of return on your portfolio that you wish to have in the long run. This rate of return is completely left to the market forces in case of regular SIP. For example, in SIP when you invest say Rs.5000 or Rs. 10,000 every month (or quarter), you don’t look at how much return it generates at the end of your chosen period. However, in case of flexi-SIP you target some rate of return, say 10% at the end of each period. So, if at some period, because the market was good, and the rate of return is higher than the target rate of 10%, the next period you would invest a bit less than what you had invested. Similarly, in case of periods when the actual return was lower than your target return, you would increase the amount to be invested during the next period.

To start a flexi-SIP in your mutual fund, you need to zero down on a benchmark amount to be invested, say Rs.5000, Rs. 10,000 or whatever. This would work as the post, and the monthly amount that you invest, although varying, would be done in relation to this benchmark. You should set some maximum amount that you can afford to invest every month. On the other hand, the minimum investment amount would be nil. And then you need to fix expected rate of return. Here, you should be practical and should neither set the rate at too high a level or at a rate which is too low. Here again, if you are not trained in fixing the rates, your financial planner or advisor could be of help. Historically, it has been observed that executed properly, over the long run, the flexi-SIP method can give you a return that is higher by 1.5-2% than the regular SIP return for the same period. Analyses with historical data have also shown that flexi-SIP method also gives a superior return over investments made in a lump sum.

Source: UTI Swatantra

Systematic withdrawal plan (SWP) are comparatively an unknown entity unlike the most popular investment tool - Systematic Investment Plans. So, what is SWP? And how can an investor benefit from it?

Systematic Investment Plans (SIPs) have become a common terminology in most cities now. People use SIP as a generic name for mutual fund investments. We commonly hear people say they want to invest in SIP, like asking for Colgate when buying toothpaste or Bisleri for bottled water. Systematic withdrawal plan (SWP) is comparatively an unknown entity.

What is SWP?
SWP is the reverse of SIP. Where in SIP you look at accumulating a corpus by making regular investments into a fund, in SWP you regularly withdraw a fixed amount of money from a fund.  The amount to be withdrawn and the frequency is fixed by the investor. So, you can have a monthly, quarterly or annual frequency for any fixed amount that you wish to receive.

Let’s look at a hypothetical case where you invest Rs 10 lakhs and the fund gives a return of 9%p.a. You run a SWP of Rs 10000 per month.  In this case your funds will last you for 182 months. That means will be funding more than 15 years of your needs. In this case, if your annual withdrawal is less than the expected annual rate of return, then the SWP can run to perpetuity. So, if our fund can be expected to give 9% return, if you draw only 7-8% of the invested corpus every year, you can use your one-time investment forever.

Let us look some other popular fixed income products which are the Senior Citizen Savings Scheme (SCSS) and the Post Office Monthly Income Scheme (POMIS).

Both these schemes offer guaranteed returns. But they also have limitations in terms of amount, period and mode of holding. SCSS allows maximum investment of Rs 15 lakhs in one name and is currently offering a rate of 9.3% p.a. Which means you can get a minimum monthly income of Rs. 7750 from this source. Similarly, POMIS allows maximum investment of Rs. 4.5 lakhs in single name and Rs. 9 lakhs in joint name. Both these incomes will be fully taxable as per the tax slab applicable to the investor.

So, while the income is guaranteed and regular, there are other restrictions. In such scenarios, SWP option of MF becomes a strong contender for a place in the portfolio as a big support to these options.

Benefits:
Regularity: With an SWP, you are assured of getting a fixed amount at your pre-determined frequency. The problem with other options like a monthly income plans, which pay dividends, is that the amount and the frequency of the payouts is not fixed. Sometimes, if there is no appreciation which can be distributed, you might have no dividends to be paid. Hence every month you will have different amounts coming in and some month there might be no money received.

Taxation: SWP is better from the taxation point of view too. In debt funds dividends are paid after deduction of dividend distribution tax (DDT) of 13.5%. So that will be your tax in case you depend on dividend income from your debt mutual funds. In case of SWP, you will pay a short-term capital gain (STCG) or a long-term capital gains tax (LTCG). Though STCG may be more expensive as it is on the income slab of the investor, LTCG will be beneficial as it is a fixed rate of 10% or 20% with indexation. Things get better in case of SWP from equity funds. As the long-term capital gains from equity mutual funds are exempt in case of holding beyond a year, you end up paying no tax on the withdrawals.

Inflation Protection: Most of the fixed income instruments do not offer inflation beating returns. So, though the principal may be secure, the income might fall short of needs in future. Here again SWP scores in terms of generating returns to keep up with inflation especially if you opt for an equity fund.

The only drawback in the SWP is that it will at some point eat into your capital. But judicious mix of investment instruments will ensure that your primary goal of income generation will be met without you running out of money in times of need.

So, the conclusion is that SWP is a noteworthy strategy to use for generation of regular income in various scenarios.

Source: http://www.moneycontrol.com