Importance of Nomination for Mutual Fund Investments
Over the last few years, online mutual fund investments have grown rapidly in India due to the ease of access in account opening, buying a scheme and redemption. Despite being risky as mutual funds are highly rewarding, many Indians have their accounts opened online for mutual fund investments. One essential risk on your mutual fund investments that you should definitely not ignore is to not have a nomination on your investment account.
Nomination plays a very important role in online mutual fund investments. A nomination is the method of appointing a person to receive the money allocated to a mutual fund in the event of death of the investor or investor’s incapacity or inability to manage the fund. Nomination provides the mutual fund investor with a sense of security and assurance that the intended person would receive the funds.
The requirements of forming a nomination are stated in the Indian Trusts Act and the Securities Contracts (Regulations) Act. In mutual fund investments, the nomination can be done by the investor either in favour of one person or multiple persons sequentially, wherein multiple persons can be listed in order of priority for the disbursal of the funds. The investor must provide the name of the person, address, and identification details as per the requirement of the nominee.
In India, the investor must be at least 18 years of age in order to start mutual fund investments. Such investors can make a nomination for his/her own investments or for the investments of any legal minor such as children, grandchildren or any other legal minors, who are below the age of 18. The nomination details in case of investments made by a legal minor can include either the name of the legal guardian or the name of the natural guardian along with the actual investor.
Apart from this, the nomination in case of investments made in joint names of two or more persons can either be made in favour of one or more than one names, wherein they can also be prioritised. Additionally, the nomination details can be changed at any time during the tenure of the investment.
One of the major reasons to opt for nomination in mutual fund investments is to ensure that the intended people benefit from the mutual fund investment in case of the investor’s sudden death car incapacity. Moreover, another key advantage it provides is that the nominee need not go through the legal process of succession in order to claim their money from the mutual fund investment.
Thus, when it comes to mutual fund investments in India, nomination plays an important role of providing assurance to the investor that the desired person or persons receive the money invested in the mutual fund in case of the investor’s inability to manage the investment themselves. Therefore, it is very important to make sure that the correct nominations are in place whenever investing in mutual funds.
