1. Date of issue
Initially Check Out that you have received an up-to-date edition of the OD. An OD must be updated at least annually.
2. Minimum investments
Mutual funds differ both in the minimum initial investment required, and the minimum for subsequent investments.
3. Investment objectives
As the investors need to be sure the fund's objective matches their objective as well so it's necessary to check the goal of each fund — from income, to long -term capital appreciation.
4. Investment policies
The prospectus also include information on minimum bond ratings and types of companies considered appropriate for a fund. Be sure to consider whether the fund offers adequate diversification.An OD will outline the general strategies the fund managers will implement.You'll learn what types of investments will be included, such as government bonds or common stock .
5. Risk factors
Every investment involves some level of risk. In an OD, investors will find descriptions of the risks associated with investments in the fund. These help investors to refer to their own objectives and decide if the risk associated with the fund's investments matches their own risk appetite and tolerance. Since investors have varying degrees of risk tolerance, understanding the various types of risks in this section( eg credit risk, market risk, interest-rate risk etc.) is crucial.
6. Past Performance data
ODs contain selected per-share data, including net asset value and total return for different time periods since the fund's inception. Performance data listed in an OD are based on standard formulas established by Sebi and enable investors to make comparisons with other funds. Investors should keep in mind the common disclaimer, "past performance is not an indication of future performance". They must read the historical performance of the fund critically, looking at both the long and short-term performance. When evaluating performance, investors must look at the track record of a fund over a time period that matches their own investment goals.
7. Fees and expenses
Entry loads, exit loads, switching charges, annual recurring expenses, management fees, investor servicing costs…these all add up over time. The OD lists the limits on these fees and also shows the impact these have had on the fund investment historically.
8. Key Personnel esp Fund Managers
This section details the education and work experience of the key management of the fund company, including the CEO and the Fund Managers. Investors get an idea of the pedigree and vintage of the management team. For example, investors need to watch out for the fund that has been in operation significantly longer than the fund manager has been managing it. The performance of such a fund can be credited not to the present manager, but to the previous ones. If the current manager has been managing the fund for only a short period of time, investors need to look into his or her past performance with other funds with similar investment goals and strategies. Only then can they get a better gauge of his or her talent and investment style.
9. Tax benefits information
Mutual funds enjoy significant tax benefits under Sec 23 D and Sec 115 .
10. Investor services
Shareholders may have access to certain services, such as automatic reinvestment of dividends and systematic investment/withdrawal plans. This section of the OD, usually near the back of the publication, will describe these services and how one can take advantage of them.