When you invest in a mutual fund (MF) scheme, you typically do not do that just once. You put money as and when you have a surplus or you invest through a systematic investment plan every month or every three months. Throw in a few dividends that are declared through the year (assuming you have chosen a dividend plan) or a few redemptions that you may have made in the interim. At the end of the year, you would like to see a complete list of all your transactions you’ve made in the account. That’s where an account statement comes in.
What’s an account statement?
It’s just like your bank account statement that lists out all your transactions. An MF account statement would list all the recent activities relating to your investments in funds. It gives you an instant snapshot of what you did in your account in the year that went by.
An account statement is also a proof of your holdings. When you invest in an MF scheme, your fund house sends you an account statement, within a maximum of two to seven days, giving details of the scheme you’ve just bought.
Here’s a list of what you should look at once you get your statement.
Scheme name and details
Though not the most important thing in your statement, it’s the most basic check. Ensure that the scheme name that appears on your account statement is really the one you have bought. Next to your scheme’s name is the “plan” (growth, dividend, dividend reinvestment) you have opted for. Again, ensure it’s the same you selected in your application form. If you selected the dividend plan, you will get dividends as and when your fund declares them. But if you have selected the “growth” plan, your fund won’t distribute dividends; instead your net asset value (NAV) would keep growing.
Watch out for the default option. If you did not select any option, the fund house would apply the default option. For instance, the default option for Tata P/E Fund is dividend payout and for all other Tata mutual fund schemes it’s “growth”.
A name misspelt may tickle your funny bone, but a simple spelling error can make your life difficult. Reason: it is important that your name in your fund house’s records matches with that in your bank’s records. That is how it is established that the account number you’ve mentioned in your form actually belongs to you and not to someone else.
Maju A. Nair, associate vice-president (MF product manager), Sharekhan Ltd, says: “This matters if you have opted for a direct credit of your redemption proceeds. If your name is misspelt, you may not get your redemption proceeds because your fund house would refuse to deposit the money in the account because the bank would claim that the names don’t match.”
Mistakes such as these are common as your application forms are not scanned, but manually fed into the computers. Says Surajit Misra, national head (mutual funds), Bajaj Capital Ltd, one of India’s largest retail MF distributors: “On account of names and addresses being punched in manually by the staff at the registrar and transfer agent (firms that manage the back-end record-keeping activity of MFs as well as dispatch account statement to investors and settle investor grievances), names can be misspelt if people in that region are not familiar with names from other regions.”
Nair says it’s important to check such details when the customer gets the statement as such small mistakes can come to haunt us when we redeem our money after, say, five years.
“Check your permanent account number, especially if it is a year-end tax-saving investment. Ensure that your email id is in order as the fund house informs you of a change in fundamental attributes, by email. You may want to quit the fund if you don’t approve of such changes, but may ignore the switch if the fund house fails to communicate on time”, adds Hiren Dhakan, associate fund manager, fund-of-funds, Bonanza Portfolio Ltd, a Mumbai-based financial services firm.
Ensure that your bank account number is correct. If you have opted for the direct credit facility, you will get money directly in your bank account when you redeem your investments. A mistake here and your redemption can get unnecessarily delayed. Typically, customers tend to miss out a digit especially since most bank account numbers are lengthy 10-digit numbers.
Check details of your investment amount. Your account statement will carry the amount that you invested and also the NAV at which you invested. Make sure both are in order. It’s rare that the investment amount on your account statement is not the same as what you actually invested, but it’s safer to check. Similarly, when you redeem or even when you get the annual statement, watch out for “current cost” and “current value”. While the former is the value at the time of investment, the latter is the latest value of your units.
This isn’t as significant as it used to be once upon a time. Back in the days when entry loads were around and if you had invested directly with the fund house bypassing the agent, there were instances when an agent’s name, of whom you have never heard of before, used to make its way on your account statement. As agents were entitled to an upfront commission (2.25% entry load that was passed to the agent as his commission) and trail fees (loyalty bonus that MFs pay to distributors for as long as you stay invested in the fund), this mysterious agent used to get commission out of your money without even servicing you.
It’s a different story these days as systems have been upgraded and entry loads have been abolished. However, trail fees are still present and your agent gets a commission for as long as you stay invested. Your agent also gets some fees upfront from your fund, though this comes out of the fund house’s pocket. Still it makes sense to check if a broker’s name is mentioned on your account statement.
The name should be correct if you invest through a broker and should be absent if you invest directly.