What you should check when reading a mutual fund statement

Much like a bank account statement, this document offers all transaction details carried out within a defined time period. It is also available online and indicates account changes whenever there is a redemption, additional investment or dividend declaration. Here's a look at some of the important details in the mutual fund statement, which should be checked regularly by investors.

Investor's personal details: The name, address and phone number of the investor and joint investors (if any) are mentioned in this section. Ensure that all these details are correct and updated, and if there is any discrepancy, it should be communicated to the broker or fund house.

Adviser name: This indicates the source through which you have invested. If you have done so through an agent, the latter's name and code will appear on the statement. However, if you have invested directly, these parts should be blank on your account statement.

Bank details: Make sure your bank's name and your account number are accurately mentioned to avoid problems while redeeming units. If you want to change your bank mandate, fill out the slip at the bottom of your account statement and submit it to your fund house or agent.

Folio and account numbers: Most mutual funds offer one folio number and several account numbers in the same folio for all investments under the same unitholder combination. This makes tracking all your investments with same fund easier. Make sure you keep tabs on the different account numbers within a single folio.

Current cost and value: The cost indicates the amount you invested in a scheme while the current value is the latest market value of your investments as on the date the statement is generated.

PAN details: You must give the correct Permanent Account Number (PAN), irrespective of the amount invested. Check your PAN details mentioned in the account statement and ensure there are no discrepancies.

Transaction summary: This section details the type of transactions you have opted for, such as purchase, systematic investment plan (SIP) and systematic withdrawal plan (SWP). Transactions like dividend payout or reinvestment are also mentioned along with percentage or rupees per unit at which the dividend is reinvested or paid.

Transaction slip: At the bottom of the account statement, there is a transaction-cum-service request slip, which can be used for buying additional units, redeeming and switching units between schemes. The transaction slip can also be used if an investor wants to notify any changes in his/her correspondence address and bank details.

The back of the account statement is also worth a careful look. It contains important notes relating to investor services, KYC norms, additional purchase, switch, and the like. A little due diligence and careful monitoring by you can ensure the safety of your investment.

Should You Pay a Higher EMI on your Home Loan?

Should You Pay a Higher EMI on your Home Loan? This article is based on a query we received on whether or not it is advisable to pay more than the EMI amount back every month on the home loan, so as to reduce the tenure of the loan and become free from debt faster. Let's see how the case pans out. Let's call this person who wrote to us Mr. A. Mr. A has taken a home loan of Rs. 10 lakhs from bank at the rate of 10.50% p.a. for 20 years on monthly reducing balance basis. His EMI is Rs. 9,984 but because he has surplus of Rs. 5,016 per month he can increase his EMI to Rs. 15,000. Now he has 2 options, either he can increase the EMI or invest surplus amount in combination of Equity Mutual Funds and Debt Mutual Funds on which he can get approx. 10% p.a. Which option should he choose? In order to decide whether to increase EMI or invest surplus amount, we have to do some number crunching... Option 1 - Increasing EMI If Mr. A decides to increase his EMI from Rs. 9,984 to Rs. 15,000, he will be able to pay off his loan in 101 months i.e. 8.42 years instead of 20 years. In the remaining tenure i.e. 139 months amount of Rs. 15,000 can be invested at 10% p.a., it will give him Rs. 38,22,945. Option 2 - Investing Surplus If Mr. A decides to invest surplus of Rs. 5,016 p.m for 20 years at the rate of 10% p.a. he will get Rs. 36,31,517. Note: We have not assumed any tax savings on interest paid for home loans. Comparison: Option EMI Loan Completed in period (Months) Investment Investment Rate Tenure of Investment Future Value of Investment 1 15,000 101 15,000 10.00% 139 3,822,945 2 9,984 240 5,016 10.00% 240 3,631,517 Excess value of investment by increasing EMI 191,428 If we compare both the options we can analyse that in the 1st option loan is prepaid in just 101 months while it will take 240 months to pay off the loan if he doesn't increase his EMI. Since the loan is paid in just 101 months in option 1, Rs. 15,000 can be invested for the remaining tenure of 139 months (240-101) at 10% p.a. which will give him Rs. 38,22,945 at maturity which is Rs. 1,91,428 more than option 2. In such a scenario Mr. A is better off in Option 1 which is increasing EMI to Rs. 15,000. But what if the rate of return on his investment changes? Let's assume investment rate of 12% p.a. instead of 10% p.a. (everything else remains the same) Option EMI Loan Completed in period (Months) Investment Investment Rate Tenure of Investment Future Value of Investment 1 15,000 101 15,000 12.00% 139 4,334,677 2 9,984 240 5,016 12.00% 240 4,614,004 Excess value of investment by Investing Surplus 279,327 If we analyse it carefully we can see that just by changing the investment rate from 10% p.a. to 12% p.a. Mr. A's decision regarding increasing EMI changed to investing the surplus amount because it is giving him higher maturity amount by Rs. 2,79,327. Why did this happen? In the 1st scenario his investment rate is less than his rate of interest being charged on the loan which means he is earning interest on investment at lesser rate while paying higher interest on his loans, so its better to increase EMI and pay off loan ASAP. In the 2nd scenario his investment rate is more than rate of interest charged on the loan which means he is earning interest on investment at higher rate while paying lower interest on his loans, so its better to invest surplus amount. By now you might feel that all the calculations involved here are too much complicated, but do not get carried away by this. All you need to do is remember 1 simple rule: If you can earn higher rate of return on investment than what you pay as interest on loan, it would be always be better to invest the surplus amount rather than paying higher EMI. If you are still feeling confused you can always contact your financial planner to help you solve your query. ---------------------------------------------------- Source: http://www.personalfn.com/knowledge-center/financial-planning/case-studies/12-01-17/should_you_pay_a_higher_emi_on_your_home_loan.aspx?