Glossary-Mutual Fund
Explore our comprehensive glossary of financial terms, including definitions like mutual fund, ETF, ROI, and more, essential for beginners and experts alike.
A
AMC (Asset Management Company): A Company that manages mutual fund schemes.
Account Fee: A fee charged annually to maintain your account.
Accredited Investor: An investor with sufficient income or assets to qualify for special investments.
Active Management: A strategy where a fund manager actively buys and sells securities.
Alpha: Measures how well a fund performs compared to its benchmark.
Annual Report: A yearly summary of a fund’s performance and financial status.
Arbitrage: Buying and selling securities to profit from price differences.
Asset Allocation: The process of dividing investments among asset categories.
Assets Under Management (AUM): The total market value of all the investments a fund manages.
Automatic Investment Plan: Allows investors to make regular contributions to mutual funds.
B
Back-End Load: A fee charged when you sell fund shares.
Balanced Fund: A mutual fund that invests in both equities and fixed income.
Benchmark: A standard used to compare fund performance.
Beta: Indicates a fund’s volatility compared to the market.
Blue Chip Fund: Invests in large, established companies with strong performance.
Bond Fund: A fund that invests in bonds or other debt instruments.
Book Value: Net asset value of a company as per its balance sheet.
Broker: A person or platform that buys/sells securities on your behalf.
Bull Market: A period when market prices are rising.
C
Capital Appreciation: Increase in the value of an asset over time.
Capital Gain: Profit from selling a security at a higher price than it was bought.
Capital Loss: Loss from selling a security at a lower price than it was bought.
Cash Reserve: Portion of the fund kept in cash for liquidity.
Close-Ended Fund: A mutual fund with a fixed number of shares.
Compounding: Earning interest on both principal and previously earned interest.
Contingent Deferred Sales Charge (CDSC): A fee charged when selling fund shares early.
Corpus: The Total amount of money invested in a mutual fund scheme.
Custodian: An institution that holds the fund’s assets securely.
D
Debt Fund: Invests primarily in fixed-income securities like bonds.
Demat Account: An account to hold shares and mutual fund units electronically.
Diversification: Spreading investments across various assets to reduce risk.
Dividend: A part of a company’s profit paid to shareholders.
Dividend Reinvestment: Using dividends to buy more units of the same fund.
E
ELSS (Equity Linked Savings Scheme): A tax-saving mutual fund that invests in equities.
ETF (Exchange Traded Fund): A fund traded on stock exchanges like a stock.
Entry Load: Fee charged when buying into a fund.
Equity Fund: A fund that invests primarily in stocks.
Exit Load: A Fee charged when exiting a fund before a certain period.
Expense Ratio: Annual fee expressed as a percentage of fund assets.
F
FMP (Fixed Maturity Plan): Closed-ended debt funds with a fixed maturity period.
Fund House: A Company offering and managing mutual fund schemes.
Fund Manager: A professional responsible for managing the mutual fund portfolio.
Fund of Funds: A fund that invests in other mutual funds.
G
Gilt Fund: Invests only in government securities.
Growth Option: Earnings are reinvested instead of distributed as dividends.
H
Hedge: An investment made to reduce the risk of adverse price movements.
Holdings: Securities owned by a mutual fund.
I
Index Fund: A fund designed to replicate the performance of a market index.
Inflation Risk: Risk that inflation will reduce purchasing power of returns.
Interest Rate Risk: Risk of falling bond prices due to rising interest rates.
Investment Objective: The Goal of a mutual fund scheme.
K
KYC (Know Your Customer): Process of verifying identity before investing.
L
Liquidity: Ease of converting investments to cash.
Load: Fee charged when buying or selling mutual fund units.
Lock-In Period: The Minimum time you must stay invested in a scheme.
M
Market Risk: Risk of losses due to market fluctuations.
Money Market Fund: A fund that invests in short-term debt instruments.
Mutual Fund: An Investment vehicle that pools money to invest in securities.
N
NFO (New Fund Offer): Initial offering of a new mutual fund scheme.
No-Load Fund: A mutual fund that does not charge entry or exit fees.
Nominee: Person designated to receive investment proceeds in case of the investor’s death.
O
Open-Ended Fund: A fund where you can buy/sell units anytime.
Overnight Fund: Invests in overnight securities with a 1-day maturity.
P
Passive Fund: A fund that mirrors a market index with minimal trading.
Payout Option: Fund pays out earnings as dividends.
Portfolio: Collection of financial investments held by the fund.
Portfolio Turnover Ratio: How often securities in the portfolio are traded.
R
RBI (Reserve Bank of India): India’s central banking institution.
Rebalancing: Adjusting asset mix to maintain desired allocation.
Redemption: Selling mutual fund units back to the fund house.
Risk: The Possibility of loss in an investment.
Risk-Adjusted Return: Return after adjusting for risk taken.
S
SEBI (Securities and Exchange Board of India): Regulatory body for mutual funds in India.
SIP (Systematic Investment Plan): Investing a fixed amount regularly.
STP (Systematic Transfer Plan): Regularly transfers a fixed amount between funds.
SWP (Systematic Withdrawal Plan): Withdraws a fixed amount regularly from a fund.
Scheme: A specific mutual fund product.
Sector Fund: Invests in one specific sector (e.g., pharma).
Securities: Tradable financial instruments like stocks, bonds.
Switching: Shifting money between schemes of the same fund house.
T
Tax Efficiency: Minimizing tax liability on returns.
Top-Up SIP: Increasing SIP amount periodically.
U
ULIP (Unit Linked Insurance Plan): Combines insurance and investment.
V
Volatility: Degree of variation in investment returns.
Y
Yield: Earnings generated from investment over time.