Investors should pay due attention to paper work. Most investors whether financially literate or not, hardly give any importance to documentation .Investors even go to the extent of readily signing on the dotted line without reading the entire document properly. For example: Before investing in a mutual fund, go through the offer document carefully. A mutual fund scheme’s blueprint contains details about the scheme, its objective, investment process, minimum investment etc. One may be reluctant to read the entire offer document due to short of time, patience and technical understanding. In order to address this problem, one can go through a shorter version of the offer document called as the Key Information Memorandum (KIM). The KIM outlines only the salient features of the scheme and it becomes easier to understand.
In order to invest in a mutual fund you need to have a bank account and a Permanent Account Number (PAN) card. The PAN is compulsory, irrespective of your size of your investment. You can hold mutual fund units on a single or jointly basis. One should also specify the mode of holding. It can be single or joint or by a third option which is anyone or survivor. If you make a careless choice, you could lead to legal complications. It is preferable to apply jointly and as “anyone or survivor”. Just in case one dies, it is the surviving one who can then operate the account. Also, when applying singly or jointly, always be sure to nominate a beneficiary. When a mutual fund investor nominates a successor and in case the unit holder dies, nomination process will then make it easier for the concerned relative to get the benefit of the investments.
Documentation is an integral part of any investment. It can stand in a court of law in case any dispute should arise. The law prevents bank and insurance companies etc from acting on claims backed by improper documentation by all means. I now conclude this article by stating that all investors should carefully read the contents of the offer document before signing the dotted line. A proper documentation provides stability and longevity to your finances.