Big news for those investing in Mutual Fund! Your schemes will change, know everything

  • SEBI (SEBI) has asked mutual fund companies to change the name of their Dividend Plan. These include both existing and new schemes. The regulator has also asked fund houses to clearly tell investors that they give some of their capital as dividend. Explain that fund houses offer three types of dividend options. The names of these three are to be changed for each existing scheme with new fund offer (NFO).
  • The dividend reinvestment will be named Reinvestment of Income Distribution cum Capital Withdrawal Plan. Dividend Transfer plan will be known as Transfer of Income Distribution cum Capital Withdrawal Plan.
  • According to distributors, there have been many cases where equity and hybrid products have been sold by promising to pay regular dividends. Many investors buy such schemes without understanding the risk associated with the product. Fund houses do not pay the dividend when the market falls. Investors also redeem them without thinking that it is part of their capital.
  • Mutual fund companies have to ensure that they keep both income distribution and capital distribution separately. Income distribution is the increase in net asset value ie NAV. It is important to state both types of distribution in the consolidated account statement to the asset management companies.

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