Why is nomination important in Mutual Funds and what is the process for it?

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Life is unpredictable for all of us, and we can’t see our future. So if something happens to you then all your investments get transferred to your family which is why the nomination is important to ensure that all your investments are handed over to your family. And in today’s article, we will talk about one such investment which is a Mutual Fund in the context of the nomination.

What is a mutual fund?
A Mutual Fund is a type of fund, where money from multiple investors is pooled together and then invested in funds. Mutual Fund is majorly distinguished in 3 types – Equity, Debt, and Hybrid funds. Also, Mutual Funds offer a variety of options for you to invest in, such as based on sectors, index funds, or based on the market capitalization of the company. Mutual Funds are maintained by a fund manager. The average return on mutual funds falls somewhere between 8-12%. But some may go as high as 30-35% if you’re lucky enough. The main advantages of the mutual fund include low risk, professional management, and diversification. Mutual Fund is becoming a favoured choice of investors, as the minimum investment amount starts at Rs. 100.

Why is Nomination important in Mutual Funds?
Nomination can be understood as a process of nominating a person who would be entitled to your investment in case of your demise. The nominee can be any person from the investor’s family. Any new account opened has to by compulsion have a Nominee, in the case of a joint account you don’t have to opt for a nominee by compulsion.

A nominee is important to facilitate a smooth transfer of investment in case of the demise of the investor. If you don’t have a Nominee then it would be a difficult process for your family to claim their rights and would have to prove it. So to make it better for your family, it’s better to have a nomination.

What is the process of Nomination?
You would have to fill in the information about the person, in the given column in the form. It is a compulsion to nominate a person in case of any new account. But if you have a joint account then also you can appoint a Nominee, but in case of demise, the investment would be transferred to the joint holder only.

Conclusion – Nomination is a very important thing to do so make sure you nominate someone from your family so that in case of your demise, they can get the right to investments easily.

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