Nomination facility is offered for the transfer of mutual fund units in case of the unfortunate demise of the unit holder
What is nomination for mutual fund investors?
Nomination is the process of appointing a person to take care of the assets in the event of the investor’s demise. A nominee can be any person — spouse, child, another family member, friend or any other person you trust. Nomination facility is mandatory for new folios/accounts opened by individuals with single holdings. In case of joint holdings where there are more than one holders, it is not mandatory to have a nominee, but financial planners recommend that new folios should always have a nominee.

What if an investor does not wish to appoint a nominee?
If the investor does not wish to nominate, he must sign and indicate the same by signing on the requisite space.

How does a mutual fund investor make a nomination?
When you invest in a mutual fund, there is a column where you can fill the details of the nominee. Individuals holding accounts either singly or jointly can make nomination. But non-individuals including society, trust, body corporate, karta of Hindu undivided family (HUF), holder of power of attorney cannot nominate . Nomination for joint holders is permitted, but in the event of the death of any of the holders, the benefits will be transmitted to the surviving holder’s name. Only in the case of death of all holders will the benefits be transmitted to the nominee.

How many nominees can an investor appoint?
An investor has an option to register up to three nominees in a mutual fund folio. The investor can also specify the percentage of amount that will go to each nominee in case of his death. If the percentage is not specified, each nominee will be eligible for an equal share.

What are the benefits of appointing a nominee for your MF investments?
When a nomination is registered, it facilitates easy transfer of funds to the nominee(s) in the event of demise of the investor. However, in the absence of nominee, the heirs/claimant will have to produce a number of documents like a will, legal heir certificate, no-objection certificate from other legal heirs etc to get the units transferred in his/her name.

Is it possible to change a nominee once an investment is made?
Yes, the nominee can be changed/added/subtracted any time as per the investors wish.

Liquid funds belong to the debt category of mutual funds. They invest in very short-term market instruments like treasury bills, government securities and call money. They are getting popular with retail investors as they offer much higher returns than a savings bank account and because you can cash out in a day

1. When should you invest in liquid funds?
Liquid funds are used by investors to park their money for short periods of time typically 1 day to 3 months. For example, if you are saving money for a vacation to be undertaken three months from now, you could park it in a liquid fund. Many equity investors also use liquid funds to stagger their investments into equity mutual funds using the systematic transfer plan (STP), as they believe this method could yield higher returns and help them beat volatility over a period of time.

2. How fast can such funds be redeemed? What return can an investor expect?
Once an investor gives the redemption request before the cut-off time on a business day, the money reaches their bank account the next working day. There is no entry or exit load by fund houses in liquid funds. As per data, the category of liquid funds has given a return of 6.84% over the past year. This is higher than the 3.5-6% offered by banks on their savings account.

3. What is the risk of investing in liquid funds?
Financial planners consider liquid funds to carry lowest risk as well as least volatility in the category of mutual funds. This is because they generally invest in instruments with high credit rating (P1+). The net asset value of these funds sees a change to the extent of interest income accrued, including on weekends.

4. How are liquid funds taxed?
Liquid funds held for more than three years are eligible for long-term capital gains tax with indexation. If you sell before three years, you have to pay tax as per your tax slab. If you opt for the dividend option, the fund will be subject to a dividend-distribution tax of 28.84%.

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