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Date of Inception in Mutual Funds
Investors tend to consider recent returns or CRISIL ratings when they compare mutual funds. However, there is one decisive piece of information that shows the real nature of a fund, that is, date of inception. It indicates the duration a scheme has been scrutinised by actual market forces, economic patterns and regulatory developments.
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Mutual Funds Terms Glossary
- Date of Inception in Mutual Funds
What is the Date of Inception
The inception date is the official launch date when the scheme becomes operational, and units are first allotted to investors. From this date, the fund house applies capital on the basis of the investment objective of the scheme. It is used in all official documents, such as scheme information documents and fact sheets, as the point of performance calculation.
Why Date of Inception Matters
The inception date would act as the benchmark when computing and reporting the historical performance data of a scheme.
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Performance Evaluation
Asset Management Companies (AMCs) compute and report performance from the inception date, with returns for standard periods (1‑, 3‑, and 5‑years) typically shown using CAGR. With the extended history of placement, data on the performance may be traced in various stages of the market.
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Track Record Assessment
Securities and Exchange Board of India (SEBI) guidelines require mutual fund schemes to present performance for standard periods such as 1, 3, and 5 years in annualised terms (CAGR). Disclosures also typically include returns since inception to provide a longer performance perspective.
Date of Inception vs Date of Allotment
The date of allotment is the crediting of the units to your account on subsequent subscription. This depends on individual investors and trade. The time of inception, however, is fixed throughout the scheme and does not vary with the individual purchases. For tax purposes, the holding period is determined by the investor’s date of allotment, not the scheme's date of inception.
FAQs
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In which case is the date of inception of a mutual fund scheme found?
The date of inception is revealed in scheme information reports, monthly newsletters and on official websites of the fund house. Registrars, as well as investment platforms, also share their performance reports. -
Will the date of inception not influence my returns on investment?
No, your returns may be computed based on your purchase date and not when the scheme was started. Nonetheless, it offers the background to the evaluation of the historical performance of the scheme. -
Is it possible to have two or more inception dates of a mutual fund scheme?
No, there can only be one inception date for the scheme. Every mutual fund scheme has a day of inception. However, Direct and Regular plans of the same scheme may have different launch dates, particularly if one is introduced later than the other.
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.