How to read a KID
The three-page document every fund and ETF must give you before you invest: what each box means and what to compare.
What it is
The Key Information Document (KID, in Spanish DFI) is required by the EU PRIIPs Regulation 1286/2014. It has a fixed layout, at most three A4 pages, so products can be compared like for like.
1. What is this product?
Type, objective, the index tracked if any, and who it is meant for. Check the ISIN matches the share class you are buying, and whether income is accumulated or distributed.
2. Risk indicator (1 to 7)
The summary risk indicator combines market risk and credit risk. 1 is lowest, 7 is highest. A global equity index fund is typically 4 or 5. It assumes you hold for the recommended period.
3. Performance scenarios
Stress, unfavourable, moderate and favourable outcomes for a 10,000 EUR investment, based on past data. They are not forecasts. Compare the stress scenario between products to see how bad things can get.
4. Costs
Entry and exit costs, ongoing costs (management fees and running costs, close to the TER) and transaction costs. The 'impact on return each year' line is the best single figure for comparing funds.
5. Holding period and complaints
The recommended holding period (often 5 years for equity) and whether you can cash out early. The last part says where to complain, in Spain usually the manager's customer service and then the CNMV.