Folio Number

An identification code to one’s own mutual funds

What is a Folio Number?

A folio number is an identification code to one’s own mutual funds. Similar to a bank account number, a folio number helps identify the investors’ fund. It also records the amount of money each investor has allocated within the fund, along with the contact and transaction details.

 

Folio Number

 

Understanding Folio Numbers

As individuals invest in mutual funds, the returns they receive and the fee structure are recorded on the folio number. Although the broker often facilitates the investments and communicates the results to the investor. Often, such individuals may request a folio number just to analyze the accuracy of the data. Furthermore, a folio number can be used to make multiple purchases; however, the purchases must be within the mutual fund that corresponds with the folio number.

An investor can request multiple folio numbers that directly link to a single mutual fund. If they wish to consolidate all their folio codes into one, they have the option to do that as well.

 

Defining a Mutual Fund

A mutual fund is an investment vehicle that holds a basket of equities, bonds, and other securities. They are diversified investments that are managed by portfolio managers at a low-cost fee. They tend to be built based on investor’s preferences, which is driven by risk tolerance.

For example, an investor who wishes to have a portfolio that is 60/40 equities and debt would have a significantly riskier mutual fund relative to an individual who would prefer 30/70 equity and debt allocation.

 

Advantages of Mutual Funds

 

1. Advanced portfolio management

When a mutual fund is purchased from an institutional investor, a management fee is often integrated to pay as a small price of managing the portfolio.

 

2. Dividend reinvestment

Dividends received from current investments are reinvested back into the fund to allow for growth.

 

3. Risk reduction (Safety)

As mutual funds offer a wide range of investments within a single vehicle, it ultimately provides diversification benefits, reducing unsystematic risk.

 

Disadvantages of Mutual Funds

 

1. High expenses

Despite the diversification and management aspects of mutual funds, they tend to be more expensive relative to other investments. Therefore, with higher fees, it tends to lower the overall investment return on the portfolio.

 

2. Poor management actions

The investment manager has significant authority over one’s investments. Meaning, if they wish to conduct any sort of unnecessary trading, selling investments under a realized loss, or any other behavior that would negatively affect the investors’ gains, they would be enabled to do so, as long as it is not within the contract they signed.

 

Where to Find the Folio Number

Checking the mutual fund statement used to be the only way to access the folio number. Thus, when these statements were misplaced, many investors had undergone trouble to receive a new one. However, now, there are a variety of methods to retrieve one’s folio number including:

 

1. Consolidated account statements

  • They are similar to bank-issued passbooks for saving accounts.
  • They are issued on a monthly basis for free. If additional statements are requested, there will be a charge.

 

2. App or website of the asset management company (AMC)

  • Fund transactions can be app-based or online.
  • The app and online portal are commission-free.

 

3. Mutual fund statements

  • Fund house gives the statements to investors at the time of purchase.
  • AMC charges requests for additional copies.
  • Generally, a folio number can be located on one’s property tax notice, on the bottom left of the letter. The folio number appears to be a 9-digit code.

 

Advantages of a Folio Number

The advantages of a folio number are the following:

  • Folio numbers can easily trace funds deposited or taken out by the investor.
  • It is an easy method to keep a record of the investor’s activity.
  • It helps locate the investor’s contact information and transaction history.
  • It saves time from undergoing a KYC registration process with the same fund house.
  • It enables fund houses to track an individual’s personal information and transaction history.
  • Individuals can access investment statements at any time with a folio number.
  • Investors can use their folio number to gather information regarding their list of MF units with an AMC instantly.
  • Folio number’s record-keeping system allows AMCs to check the veracity of the unitholders.

 

Learn More

CFI offers the Capital Markets & Securities Analyst (CMSA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following resources will be helpful:

  • Open-end vs. Closed-end Mutual Funds
  • Management Fees
  • Stocks, Bonds, and Mutual Funds
  • Success Fee

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