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Are you a responsible investor?
Published On , 2 Feb 2018 By TOI
Mutual fund investors enjoy several rights under current laws. For a smooth investing experience the investor should also fulfil certain duties that will make him/her a responsible investor. Here are some of the important tools that all mutual fund investors should keep in mind.
Under current laws, Know Your Client (KYC) compliance is compulsory for every mutual fund investor. KYC is done mainly to prohibit money laundering and to stop illegal money from getting into the fund industry. In turn such slush money could also percolate into the stock, Debt and gold markets.
For KYC compliance, the investor should provide a valid proof of identity (Passport, PAN, voter ID etc.), proof of address, passport photo and PAN. The government has now also made it compulsory to link Aadhaar to all KYC compliance requirement.
Currently, once an investor updates his KYC information with a KYC Registration Agencies (KRA), the same will automatically get updated in the investments he/she has with all the entities regulated by Sebi.
Every MF investor should update all their relevant personal information__ address for correspondence, contact number(s), email ID, income tax PAN, at least one bank account number that will be used for all fund-related transactions__ with the fund houses where they have investments. The bank account details will include the 11-16 digit account number, 11 digit IFSC and 9 digit MICR numbers. In case of any change in personal information, it’s the duty of the investor to inform the fund house as early as possible. Among others, updated personal information helps fund houses to prevent frauds related to investments.
Current rules require that every fund investor should make at least one nomination for each of his/her investments. Alternately, the investor has to declare that he/she doesn’t want to nominate anyone. Nominations turn helpful in case of any eventuality of the investor.
WATCH YOUR INVESTMENTS
Every responsible investor should keep a tab on how his/her funds are performing by watching their funds’ NAVs on a regular basis. However, the regularity should not be too frequent like every day or week which could be detrimental to his/her investment and the long term financial plan. Reviewing investments on a regular basis is important because this makes the investor aware of the market trend and he/she could go for a course correction in case the investments do not perform as planned.
HAVE A FINANCIAL PLAN IN PLACE
One of the first things an investor should remember is that financial planning is never for an individual. It’s for the family. The process of financial planning involves a series of decisions relating to your family’s future financial Goals, investments in and buying of financial products, and executing the same.
Some of the important elements of financial planning are Goal setting, identifying needs and wants of the family and also of the individuals, keeping tab of income, expenses and savings of the people in the family, creation of an emergency fund, taking adequate insurance, investments for short, medium and long term Goals and finally reviewing and if needed rebalancing the portfolio.
AADHAAR AND FATCA COMPLIANCE
Lately the government has made it compulsory for all investors to link their Aadhaar numbers to all investments. It has also asked every investor to comply with Foreign Account Tax Compliance Act (FATCA).
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