Folio number 

Folio number 

Folio number has recently become one of the most famous words in the financial world. Mutual funds require a system and method to maintain information about investor investments and transactions. Additionally, this information determines the fees for the investor and the fund they are eligible for. A numeric ID is assigned since many investors might have similar first or last names, and utilising their reputation as a unique ID is technically impossible. As a result, when investors make investments, they are given a folio number, which is the same as a bank account number.  

What is a folio number? 

A folio number is a unique identifier for identifying your account with mutual funds. The folio number is used to identify fund investors, similar to a bank account number. The amount of money each investor has contributed to the fund and their transaction history and contact information is tracked by a folio number. A folio number may alternatively identify journal entries or property plots. The process used by various fund firms and suppliers of folio numbers to generate a numerical value will vary slightly. 

Understanding folio number 

Every mutual fund must have a mechanism in place for keeping records. This information is required to ensure that every investment receives the money they are due and identify the fee schedule that each investor will be subject to. Folio numbers are used in accounting as a technique to identify a bookkeeping entry, and they are often numbered in either chronological or sequential order.  

 The specifics of an entry can be located and examined by referring to its folio number. Folio numbers have uses beyond mutual funds and their unitholders; they are helpful to bank creditors, attorneys, and regulators.  

 For instance, in the event of suspected fraud, investigators will use folio numbers to build an audit trail to track the location of specific monies or assets as they come into or go out of the system, identifying new folio numbers as they go. Folio numbers help identify duplicate ledger entries, assure the correctness and fidelity of financial accounts, and identify duplicate ledger entries. 

Relevance of folio number in mutual fund investment 

For each investor to receive the total amount he is due, it is essential to set up a system that keeps track of all transactions between him and the mutual fund. This is done effectively by allocating the portfolio numbers, which also assist in determining which fee structure applies to each investor.  

 Each investor typically has a single folio number for each investment made through a specific mutual fund. If a person receives more than one number, he can ask the appropriate fund manager to combine them. The development of computerised record-keeping tools has increased the demand for retaining a folio number. 

Advantages of using the folio number system 

The following are some of the advantages of the folio number system:  

• Each investor is uniquely identified by their folio number. It makes it simple for regulatory agencies and Asset Management Companies (AMC) to locate and identify each investor.  
• You can quickly estimate the units retained at each day’s end using this folio number. As a result, using this number, you can easily monitor and evaluate your portfolio.  
• Utilising this number would also spare you the difficulties of ongoing KYC compliance checks every time you interact with the same AMC, which is another benefit. 
• You may obtain these numbers from anywhere because they are digital. You can track your investments online, but you must input this number.  

Disadvantages of using the folio number  

There are certain disadvantages associated with using the folio number in mutual fund investments. While it may seem like a convenient way to track your investments, there are some concerns that investors should be aware of. 

• One of the main disadvantages of using the folio number is that it needs to provide information about the specific mutual fund you have invested in. Investors may be tempted to rely solely on the folio number to track their investments, leading to confusion and errors. For example, if you have multiple investments in different mutual funds, keeping track of which folio number corresponds to which investment can be challenging. 
• Another disadvantage of using the folio number is that it can be challenging to update your personal information. If you need to change your address or update your contact information, you must contact each mutual fund company individually to make the changes. This can be time-consuming and frustrating, especially if you have investments in multiple funds. 
• Additionally, the folio number can be susceptible to fraud and identity theft. If someone gains access to your folio number, they may be able to make unauthorised transactions or access your personal information. This can lead to financial losses and other negative consequences. 

While the folio number can help track your mutual fund investments, knowing its limitations and potential drawbacks is essential. Investors should take steps to ensure that they are using the folio number in conjunction with other methods of tracking and monitoring their investments. 

Frequently Asked Questions