Mutual Fund Folio decoded: How to streamline and manage your investments effectively

Mutual fund folio can loosely be compared to an account in a bank. One can have multiple accounts in a bank.

As simple as it is to invest in mutual funds (MF) these days, keeping track of your portfolio can become quite a task if you have too many investments and too many MF folios. But this can be avoided if you just know how to manage your MF folios.

What is an MF folio?

Mutual fund folio can loosely be compared to an account in a bank. One can have multiple accounts in a bank. Similarly, one can have multiple folios with a mutual fund house. Mutual funds also allow zero-balance folio. Simply put, if you sell all units of schemes held in a particular folio then it becomes a zero-balance folio. Such folios can be used again to invest in schemes of mutual fund schemes. Each mutual fund house issues a separate folio number. For subsequent investments, you are supposed to quote the same folio number if you want to keep your investment under one folio. Otherwise, a different folio number is issued.ALSO READ: FD rates for Senior Citizens: Banks that offer up to 9.1% interest on 3-year deposits

Nowadays, while creating new mutual fund folios, the fund house asks for KYC (know-your-client) details, contact details and nominations before allowing investments. If you fail to provide these or do not choose explicitly not to appoint a nominee, then the fund folios cannot be created. Be it a paper route or an online route, while creating a new folio, these inputs are must.

But in earlier days it was not the case. Many times investors initiated investments without keying in the right inputs. For example, some investors used to ask distributors to write the distributors’ mobile numbers and email ids as the contact information. Over a period of time, such lapses can adversely affect the ability to transact. For example, the one-time password (OTP) sent for login into the portal or approving transactions may not reach the investor at all if the phone or email does not belong to the investor.

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Fixing the lapses

The capital market regulator, the Securities and Exchange Board of India (SEBI) has, over time, been tightening the operational aspects when it comes to investing in MFs. The mutual fund investors were asked to declare if the email and mobile numbers keyed into their folios belonged to them or their family members. If you have old folios without such details, then you need to fix them as soon as possible. Over time, fund houses and registrar and transfer agents (RTAs) got in touch with investors to set records straight in their MF investments.

As investors, you should make sure that the information and nominations in your folios are up to date. If your MF folio does not have a nomination or you do not explicitly opt out of it before September 30, 2023, then you will not be allowed to redeem, switch or register a systematic transfer plan or systematic withdrawal plan from such folios from October 1, 2023.

Managing folios

Some Do-It-Yourself investors prefer to create separate folios for each financial goal. For example, one may use a folio to fund a child’s education and another for funding retirement. Sometimes from the point of view of operational ease, separate folios are warranted. One can have a single-holder folio and a joint-holder folio as well. Within a joint-holder folio, a maximum of three investors are allowed including the first holder. Joint holder folios can be operated by either or a survivor mandate or with a joint mandate. There is no restriction on how many folios you can have. However, to make it easy for you to track, keep the number of folios to a bare minimum, especially within fund houses.

Rupesh Bhansali, head-mutual fund, GEPL Capital, says, “Consolidated account statement helps the investor with a list of all mutual funds investments. You can also sell trivial holdings in your MF portfolio and invest the proceeds in schemes that have meaningful weights in your portfolio.”

While consolidating the folios the holding patterns need to match. For example, only those folios can be consolidated where the unitholder is a single holder. If the folio is in the joint names, then it can be consolidated only with those folios held in the joint names in the same order. A folio held in the joint name, let’s say A and B, cannot be consolidated with a folio held in the name of A or held in the name of B or a folio held in the name of B and A.

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Viral Bhatt, Founder, Money Mantra, a Mumbai-based financial planning firm, says, “Mutual fund folios at AMC level can be consolidated by writing to the fund house or registrar and transfer agent (RTA). Single folio at the AMC level helps you to track your investment better and the AMC or RTA to service you better. Since you get a single view of your investments, you can make better investment decisions.”

Demat accounts

Demat accounts act as folios when the units are held in demat accounts. Many online platforms hold units in demat accounts to curb the hassle arising out of multiple folios. Those online platforms that do not use demat accounts to hold units of mutual funds show existing folio details to the investor when she opts to invest in a scheme of a mutual fund where she is already holding an investment. However, if your distributor is not offering you such a facility or you have some legacy investments or you are transacting on multiple platforms, then you should check the folios and update your contact details and nominees wherever applicable, at the earliest opportunity.