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How to Invest in SIP A Beginner's Guide
In summary
A Key Information Memorandum (KIM) is a concise document that gives you important information about a mutual fund scheme before you invest.
- KIM stands for Key Information Memorandum.
- It summarises important information about a mutual fund scheme, including its objective, features, risks, and costs.
- The KIM should be read along with the Scheme Information Document (SID) and Statement of Additional Information (SAI) when you need more detailed information.
- SEBI requires mutual fund schemes to provide a KIM with the application form and maintain the required disclosures.
- You should check the KIM for the scheme's investment objective, risk level, costs, investment details, and other important conditions before investing.
A KIM is designed to make important scheme information easier to review. It should not be treated as a substitute for understanding the complete scheme documents.
What is a Key Information Memorandum?
A Key Information Memorandum (KIM) is a document that summarises essential information about a mutual fund scheme. It helps investors understand the scheme’s investment objective, investment strategy, risks, fees and other important features.
The KIM is a shorter version of the information available in the mutual fund Scheme Information Document (SID). The Association of Mutual Funds in India (AMFI) describes the KIM as a summarised version of the SID containing key information that investors should understand before investing.
A KIM is intended to make important scheme information easier to review. However, it does not replace the SID or other applicable scheme-related documents. Investors should read these documents before making an investment decision.
What information does a KIM contain?
The exact information can vary by scheme, but a KIM generally provides important details about the scheme and its terms. Key areas include:
| Information | What it tells you |
|---|---|
| Scheme details | The scheme name, type and relevant scheme information |
| Investment objective | What the scheme aims to achieve |
| Investment strategy | How the scheme intends to invest its assets |
| Asset allocation | The intended allocation across asset classes and securities |
| Risk factors | Risks associated with the scheme and its investments |
| Fund manager | Details of the person or team managing the scheme, where applicable |
| Benchmark | The benchmark used to assess the scheme's performance |
| Fees and expenses | Applicable expenses and charges described in the scheme documents |
| Performance information | Applicable performance information where provided |
| Legal and regulatory information | Important disclosures, terms and other regulatory information |
You should not assess a scheme based on one section alone. Consider its objective, strategy, asset allocation, risk level and costs together.
Why is the KIM important for investors?
The KIM gives you a concise view of the key features and risks of a mutual fund scheme. This can make it easier to review important information before investing.
The KIM is particularly useful when you want to understand what a scheme aims to do, where it may invest and what risks may apply. It can also help you identify information that requires a closer look in the SID.
SEBI-hosted mutual fund documents instruct investors to read the KIM, SID and Statement of Additional Information (SAI) before investing.
A KIM therefore works as a starting point for reviewing a scheme. It should be read along with the latest applicable scheme documents rather than treated as the only source of information.
How should you use a KIM before investing?
You can use the KIM to review the main features of a scheme before going through the more detailed SID.
Check the investment objective
Start by understanding what the scheme aims to achieve. The objective gives you context about the type of investments the scheme may make and the return objective it follows.
Review the investment strategy
Check how the scheme plans to invest. Look at the types of securities, sectors, asset classes or markets covered by the stated strategy.
Check asset allocation
Review the stated asset allocation ranges. This can help you understand how the scheme may divide its investments between different asset classes.
Review the risk factors
Read the risk disclosures carefully. Mutual fund investments are subject to market risks, and the level and type of risk can vary across schemes.
Also check the scheme's Riskometer. SEBI's Riskometer categories range from Low to Very High.
Check costs and expenses
Review the applicable expenses and charges described in the KIM and related scheme documents. You can also refer to the expense ratio to understand the ongoing cost charged to the scheme.
Review the benchmark and fund manager
The KIM may provide information about the scheme's benchmark and fund manager. This can help you understand how the scheme's performance is intended to be assessed and who manages the portfolio.
Check the minimum investment
Review the applicable minimum investment amount and other transaction-related requirements before investing.
What is the difference between a KIM and an SID?
A KIM and an Scheme information document (SID provide information about the same mutual fund scheme, but they differ in their level of detail.
The SID contains detailed information about the scheme, while the KIM provides a concise summary of key information. AMFI describes the KIM as a summarised version of the SID.
| Particulars | KIM | SID |
|---|---|---|
| Purpose | Summarises key scheme information | Provides detailed scheme information |
| Level of detail | Concise | More comprehensive |
| Investment information | Key objective, strategy and allocation information | Detailed objective, strategy and allocation information |
| Risk information | Key risk disclosures | Detailed risk disclosures |
| Costs | Key applicable information | Detailed scheme-related information |
| Use | Quick review before investing | Detailed review of the scheme |
The Scheme Information Document should be reviewed when you need more detailed information than the KIM provides.
How is a KIM different from an SAI?
The Statement of Additional Information (SAI) is another scheme-related document. It contains information about the mutual fund and other general, legal and operational matters.
The SID focuses on the individual scheme. The KIM summarises key information from the SID. The SAI provides additional information that may apply more broadly to the mutual fund.
SEBI's mutual fund filings distinguish between SAI, SID and KIM as scheme-related documents.
You may therefore need to refer to all three documents when you want a complete understanding of the applicable terms and disclosures.
How can a KIM help when comparing mutual funds?
A KIM can help you compare schemes by presenting key information in a concise format. You can review factors such as investment objectives, asset allocation, risk disclosures, benchmark and costs.
For example, suppose you are comparing two equity schemes. One may have a broader investment mandate, while the other may focus on a specific segment of the market. Their KIMs can help you identify these differences before you review the detailed SID.
You can also use mutual fund performance evaluation information when assessing a scheme. Past performance does not guarantee future results, so it should not be the sole basis for comparison.
What should you check before investing based on a KIM?
A KIM is useful for a preliminary review, but you should consider several factors before investing.
- Objective: Understand what the scheme aims to achieve.
- Strategy: Check how it proposes to invest.
- Asset allocation: Review the permitted allocation ranges.
- Risk: Read the risk disclosures and check the Riskometer.
- Costs: Review the applicable expense ratio and other charges.
- Benchmark: Understand the benchmark against which performance may be assessed.
- Fund manager: Review the applicable fund management information.
- Scheme documents: Read the latest SID, KIM, SAI and applicable addenda.
This approach can help you understand the scheme before deciding whether it is suitable for your investment needs.
Conclusion
A Key Information Memorandum helps investors review the essential features of a mutual fund scheme in a concise format. It covers areas such as the investment objective, strategy, asset allocation, risks and costs.
The KIM is useful for an initial review, but it should not be considered a substitute for the SID, SAI or applicable addenda. Check the latest scheme documents and understand the associated risks before investing.
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Frequently Asked Questions
Understanding the KIM
Using the KIM to evaluate a mutual fund
What is the full form of Kim in a mutual fund?
KIM stands for Key Information Memorandum. It is a concise document that summarises important information about a mutual fund scheme, including its investment objective, risks, costs and other key details.
How often should I review the KIM of a mutual fund?
You should review the latest KIM before making a new investment. It is also useful to check for updates when there are changes to the scheme's features, risks or other important information.
What information in a KIM can help investors compare mutual fund schemes?
A KIM provides details such as the scheme's investment objective, strategy, asset allocation, risk factors, costs, benchmark and other key features. Comparing these details can help investors understand how different schemes vary.
Can the information in a KIM change after a mutual fund scheme is launched?
Yes. Scheme-related information may be updated when changes affect the scheme or its disclosures. Investors should check the latest KIM before making a new investment, particularly when important features, risks or other details have been revised.
How does a KIM help investors understand the risks of a mutual fund?
A KIM provides information about the risks associated with the scheme and its investment strategy. These disclosures can help investors understand factors that may affect the NAV, such as market movements, interest rates, credit risk and the performance of underlying securities.
Disclaimer
Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319
BFL does NOT:
(i) provide investment advisory services in any manner or form.
(ii) carry customized/personalized suitability assessment.
(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.
In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.
Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.
Disclaimer on Risk-O-Meter:
Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.
Disclosure: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finserv Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.
Disclaimer
Bajaj Finance Limited ("BFL") is an NBFC offering loans, deposits and third-party wealth management products.
The information BFL contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed.
This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.
Disclaimer
Mutual Fund SIP calculator may provide potential investors an approximate estimate on the maturity amount of the monthly SIP, purely based on mathematical calculation of the projected annual return rate selected by investor. However, such calculation does not factor the actual performance by the Asset Management Company (AMC) and should not be treated as any advice or assurance about the actual return of investment. Mutual Funds do not have a fixed rate of return and it is not possible to predict the rate of return. Please note that the SIP calculator are for illustrations only and do not represent actual returns which may vary depending on various factors including but not limited to actual performance, expense ratio, taxation, exit load (if any), etc.