Switching Your Investor Status: From Minor to Major

Nowadays, it is becoming more and more common for Indian investors to make mutual fund investments in the name of their children. This can be a suitable way to give children a head start in life. Moreover, children can keep investing in mutual funds after turning 18 years of age as major investors. However, the status change of the mutual fund investor from minor to major does not happen automatically and requires certain compliances to be followed. Further mutual fund investments are only allowed after the status change of the investor from minor to major.

• Table of contents

1. How can a minor investor switch to major investor status?
2. What is the difference between a minor and major investor?
3. Why would someone want to switch from minor to major investor status?
4. What are the risks involved in switching from minor to major investor status?

How can a minor investor switch to major investor status?

While the exact requirements may slightly vary from one Asset Management Company (AMC) to another, here’s how to change mutual fund status from minor to major:

• Provide the Know Your Customer (KYC) details.
• Permanent Account Number (PAN) card.
• Declaration confirming the attainment of legal age of majority.
• Updated bank account details and a cancelled original cheque of the new account.

What is the difference between a minor and major investor?

Here are the main differences between minor and major investors when making mutual fund investments:

Minor investors:

• Are individuals who have not yet reached the legal age of majority - i.e., 18 years.
• Lack the legal capacity to enter binding contracts or make independent financial decisions.
• Are not allowed to open investment accounts, such as mutual funds or brokerage accounts, in their own name.
• Cannot make investment decisions without the need for a guardian or custodian. Mutual fund investments are made on their behalf and held in the name of a guardian or custodian until they reach the legal age of majority.

Major investors:

• Are individuals who have reached the legal age of majority - i.e., 18 years.
• Have the legal capacity to enter financial contracts and make independent investment decisions.
• Can open investment accounts, such as mutual funds or brokerage accounts, in their name.
• Can make mutual fund investment decisions without the need for a guardian or custodian.
• Have full control over their investment portfolios and can buy, sell, or hold investments based on their own judgment and financial goals.

Why would someone want to switch from minor to major investor status?

Individuals gain legal autonomy and the ability to make independent financial decisions without the involvement of a guardian or custodian when they change the status for mutual fund investing from minor to major. This allows them to have full control over their investment portfolios and manage investments based on their own judgment and financial goals. They can buy, sell, or hold investments as they see fit. Thus, changing the investor status from minor to major represents the milestone of financial independence and signifies the transition to adulthood.

What are the risks involved in switching from minor to major investor status?

The status change of a mutual fund investor from minor to major is a regulatory requirement and cannot be avoided. However, it comes with a few risks, such as:

• Lack of knowledge: The main risk associated with the change of status for mutual fund investing from minor to major is the lack of experience or knowledge of the investor in financial matters. It could potentially lead to poor investment decisions and potential losses.
• Increased chance of fraud: These investors may also be targeted by investment scams or fraudulent schemes designed to lure young investors with false promises of lofty gains.
• Poor decision-making: Without external oversight or guidance, these investors may be more susceptible to behavioural biases, emotional decision-making, and impulsive investment choices.

In conclusion, transitioning from minor to major investor status grants individuals control over their financial decisions when making mutual fund investments. However, this transition is not without its risks. Lack of experience or knowledge in financial matters may potentially lead to poor investment decisions and susceptibility to scams or fraud. Thus, while the change in status is inevitable, investors should proceed with caution and seek guidance when needed.

FAQs

Can I switch from minor to major investor status at any time?

Investors can switch from minor to major status anytime after they turn 18 years old by meeting the necessary requirements and complying with the procedures outlined by the mutual fund company.

Are there any financial requirements for becoming a major investor?

No, it does not involve specific financial requirements. The key requirement is reaching the legal age of majority - i.e., 18 years and submission of requisite documentary evidence in this regard.

Will I have more control over my investments as a major investor?

Yes, major investors have complete control over their investments and portfolio.

Can I invest in SIP as a major investor?

Yes, you can use either lumpsum or SIP, depending on your investing preferences, risk appetite and goals. You can take the help of an SIP return calculator for planning your investments.

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.