What is a Scheme Information Document (SID)?

Providing investors with comprehensive information about the mutual fund scheme is the primary goal of the offer and scheme-related papers. All investments must be well-informed, and reading these materials may contribute to the much-needed openness. Although a SID's structure varies from fund house to fund house, the material is generally organized similarly.

• Table of contents

• Scheme Information Document Definition
• Where can investors find the SID?
• Key Points of Scheme Information Document (SID)
• What is contained in a scheme information document?
• Why should you read the SID?
• How to read a scheme information document of mutual fund?
• Fees and expenses
• Other mutual fund offer documents

Scheme Information Document Definition

Mutual fund firms give potential investors a detailed document called a Scheme Information Document (SID). It provides crucial details regarding a certain mutual fund plan, assisting investors in making well-informed selections before investing. The SID is an important resource for information on a mutual fund scheme's characteristics, risks, and conditions.

Where can investors find the SID?

The scheme information document is freely available online. You can find it on the website of the relevant mutual fund house. The SID, along with other key documents, will be typically available on the dedicated scheme page. You can also find the SID on authorised third-party investment platforms.

Additionally, all SIDs are filed with the Securities and Exchange Board of India and can be found on their website.

Key Points of Scheme Information Document (SID)

• Information disclosure: The SID offers comprehensive details on the asset allocation, investing approach, risk considerations of the mutual fund scheme. It reveals the kinds of securities the fund may invest in and how it plans to accomplish its objectives.
• Fund structure: Details on the fund's structure, including the choices available within each plan (such as Income distribution cum capital withdrawal (IDCW) payment and reinvestment) and the sorts of options offered (such as growth and IDCW options), are accessible to investors.
• Fees and expenditures: This document lists all fees and expenditures related to the mutual fund plan, such as the expense ratio, exit load, and any additional charges that investors may be subject to.
• Risk factors: This covers risks related to the market, credit, interest rates, and other variables that might impact the mutual fund's performance.
• Benchmark and performance: The benchmark against which the fund's performance is evaluated is usually included in the SID. Historical performance statistics can give investors a sense of how the fund has fared over various periods.
• Information on law and regulation: This paper outlines the legal and regulatory requirements and the rights and obligations of the investors and trustees. It also offers information on the regulatory structure that oversees the mutual fund sector.

Considerations of scheme information document

Required Reading: Investors may also get a Key Information Memorandum (KIM) and a Statement of Additional Information (SAI) in addition to the SID. These publications provide further information about the mutual fund house and the schemes/plans offered by the mutual fund.

Investors may benefit greatly from the Scheme Information Document, which provides clear and comprehensive details regarding a mutual fund scheme. It makes it easier for investors to comprehend the fund's goals, risks, and expenses, empowering them to make wise investment decision. While understanding the SID is crucial, don't forget about planning your investments. An SIP yearly calculator can be a useful tool to estimate your potential returns based on your contributions.

What is contained in a scheme information document?

The scheme information document (SID) is an essential document for mutual fund investors in India. It contains detailed insights about a mutual fund scheme, helping investors evaluate their options. Below is an overview of what an SID typically includes:

Fund specifics:

• Scheme name and category (equity, debt, hybrid, etc.)
• Investment objective and approach
• Asset allocation structure
• Risk level of the scheme
• Names of the asset management company (AMC) and fund manager

Investment-related details:

• Minimum required investment
• Entry and exit charges (if applicable)
• Information on systematic investment plans (SIPs) and systematic transfer plans (STPs)
• Lock-in period details
• Procedures for purchasing and redeeming units

Fees and costs:

• Scheme's expense ratio
• Other applicable fees and costs

Performance and risk considerations:

• Historical performance of the scheme (not a guarantee of future outcomes)
• Associated risks
• Benchmark index information

Why should you read the SID?

Reading the scheme information document (SID) is an important step for mutual fund investors in India. Here’s why reviewing it should be a regular practice:

• Understanding the fund’s objective and strategy: The SID outlines the fund’s investment objective and the strategies it follows. This helps you evaluate whether the fund’s goals align with your investment approach.
• Assessing risk: The SID provides details on risk factors, helping you understand the potential fluctuations in your investment. This allows you to determine if the fund’s risk level suits your risk appetite.
• Understanding costs and expenses: The SID discloses the expense ratio and other charges, giving you clarity on the costs of investing in the fund. This helps you decide whether the fund is cost-effective.
• Knowing the fund manager and AMC: The SID provides insights into the fund manager and asset management company (AMC), including their expertise and experience.
• Making informed decisions: Reading the SID allows you to make well-informed investment choices that align with your financial goals and risk tolerance.

How to read a scheme information document of mutual fund?

Reading a scheme information document (SID) may seem overwhelming, but breaking it into sections makes it easier to navigate. Here’s a step-by-step approach:

1. Start with the basics:
   • Scheme name and type: Identify the scheme’s name and whether it is equity, debt, hybrid, etc. This gives a broad understanding of the fund’s investment approach.
   • Investment objective: Carefully read the fund’s investment objective to ensure it aligns with your financial goals.
2. Understand the investment strategy:
   • Asset allocation: Check how the fund distributes investments across asset classes.
   • Investment style: Understand whether the fund focuses on large-cap, mid-cap, small-cap, value, or growth investing. This helps assess risk and potential returns.
   • Benchmark index: Identify the benchmark index to compare the fund’s performance with market trends.
3. Assess the risk:
   • Risk factors: Review the section detailing potential risks associated with the fund’s investments.
   • Risk profile: Understand whether the fund carries a high, moderate, or low risk level and see if it aligns with your risk tolerance.
4. Review fees and expenses:
   • Expense ratio: Note the annual cost of managing the fund.
   • Entry and exit loads: Check for any charges on investment or redemption.
   • Other charges: Be aware of any additional costs.
5. Examine performance and portfolio:
   • Past performance: Look at historical returns but remember that past results do not guarantee future performance.
   • Portfolio holdings: If provided, review the securities in the fund’s portfolio to understand where your money will be invested.

Read Also: What is the KYC process in mutual funds?

Fees and expenses

When discussing fees and expenses in Indian mutual funds, we refer to the costs involved in managing and operating a fund. Here’s a breakdown of the key components:

• Expense ratio: This is the primary cost, expressed as a percentage of the fund’s average daily net assets.
• Exit load: Charged when redeeming mutual fund units before a specified period. The period and percentage vary based on the scheme. It discourages short-term trading and encourages long-term investment.

Other mutual fund offer documents

Besides the scheme information document (SID), there are two other essential offer documents provide a comprehensive understanding of mutual funds in India.

• Key information memorandum (KIM): The KIM is a summary of the SID, presenting key details concisely. It highlights essential aspects of the scheme, including: investment objective, asset allocation, risk factors, expense ratio and exit load.
• Statement of additional information (SAI): The SAI provides legal and regulatory details about the mutual fund and the asset management company (AMC).

Read Also: How to invest in mutual funds: A step-by-step guide

Conclusion

The scheme information document (SID) serves as a vital resource for understanding the details of any mutual fund scheme in India. It is more than just a regulatory document. It provides the insights needed to make well-informed investment choices. Reviewing the SID helps you understand a fund’s objectives, strategies, risks, and expenses. Taking the time to understand this document strengthens your investment decisions, helping you navigate mutual funds with confidence.

FAQs

What Is Scheme Information Document?

A scheme information document (SID) is a legal document issued by a mutual fund company that provides comprehensive details about a specific mutual fund scheme. It includes information on the fund’s investment objective, asset allocation, risk factors, expense ratio, and fund manager. Reviewing this document is essential before investing.

How to read a Scheme Information Document of mutual fund?

Start by reviewing the investment objective and strategy to grasp the fund’s goals. Check the asset allocation to see how investments are distributed. Assess risk factors, expense ratio, and historical performance. Examine the fund manager’s credentials, taxation details, and investor rights. Reading all sections carefully and seeking professional advice if needed can provide clarity.

What should I look for in a Scheme Information Document?

Evaluate the investment objective, asset allocation, and risk factors to understand the fund’s approach and potential risks. Assess the expense ratio to gauge costs. Review the fund manager’s background and past performance. Check for entry/exit loads, taxation details, and any specific investment restrictions or conditions.

What is the importance of Scheme Information Document?

The SID is essential for making informed investment choices. It offers transparency regarding the fund’s structure, risks, and expenses. Investors can determine if the fund aligns with their financial goals and risk tolerance. As a legally mandated document, it ensures access to critical information before investing.

What is SID and SAI in mutual fund?

SID focuses on a specific mutual fund scheme. SAI provides information about the mutual fund company as a whole. SID provides details specific to a mutual fund scheme, including its investment objectives, strategy, risk factors, and expense ratio. SAI covers broader details about the mutual fund house, such as its structure, legal status, fund manager details, and regulatory disclosures.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.