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  • Absolute Return
    The absolute return refers to the amount of funds that an investment has earned. Also referred to as the total return, the absolute return measures the gain or loss experienced by an asset or portfolio independent of any benchmark or other standard. Returns can be positive or negative and may be considered uncorrelated to other market activities. This measure looks at the appreciation or depreciation, expressed as a percentage that an asset, such as a stock or a mutual fund, achieves over a given period of time.
  • Account Statement
    It is the document issued by the mutual funds or the distributor/advisor, giving details of various transactions and holdings of an investor in schemes of the fund houses.
  • Accrual Fund
    An accrual fund is a fund that does not pay periodic interest payments. Instead, interest is added to the principal balance and is either paid at maturity or, at some point, the fund begins to pay both principal and interest based on the accrued principal and interest to that point.
  • Actively Managed Fund
    A fund that employs a portfolio manager or management team to manage the funds investments to try to outperform their benchmarks and peer group average. The expense ratio of such funds is typically higher than that of a passively or inactively managed fund.
  • Adjusted NAV(Total Return)
    When calculating NAV or Net Asset Value for collective investments such as mutual funds, NAV is the total value of the portfolio less liabilities, calculated on a daily basis. Adjusted NAV is the NAV calculated as mentioned above but after adjusting it for any possible surplus or liabilities such as a possible dividend payout. Hence adjusted NAV will reflect the nearer to actual value of the mutual fund portfolio.
  • Age Of Fund
    The time elapsed since the inception of the fund.
  • Alpha
    The excess return of the investment relative to the return of the benchmark index is its "alpha".Simply stated, alpha is often considered to represent the value that a portfolio manager adds or subtracts from a fund portfolios return. A positive alpha of 1.0 means the fund has outperformed its benchmark index by 1%. Correspondingly, a similar negative alpha would indicate an underperformance of 1%. For investors, the more positive an alpha is, the better it is.
  • AMFI
    The Association of Mutual Funds in India (AMFI) is an industry standards organisation in India in the mutual funds sector. It was formed in 1995. Most mutual funds firms in India are its members. The organisation aims to develop the mutual funds market in India, by improving ethical and professional standards. AMFI was incorporated on 22 August 1995. As of April 2015, there are 44 members.
  • Annual Report
    It is the record of a Mutual Fund's performance in a year. Under SEBI's guidelines, it is distributed to investors yearly.
  • Annual Return
    Annual return is the return an investment provides over a period of time, expressed as a time-weighted annual percentage. Sources of returns can include dividends, returns of capital and capital appreciation. In other words, the percentage changes in net asset value of any fund over a horizon of one year, assuming reinvestment of distribution such as dividend payment and bonuses.
  • Annualized Returns
    It is the absolute return over a period either greater or less than a year aggregated to a period of one year.
  • Application Amount For Fresh Subscription
    The minimum investment amount for a new investor to buy into a particular mutual fund scheme.
  • Arbitrage
    Arbitrage is basically buying in one market and simultaneously selling in another, profiting from a temporary difference. This is considered riskless profit for the investor/trader.
  • Arbitrage funds
    An arbitrage fund is a type of equity mutual fund that tries to take advantage of the price differential (of the same asset) between two or more markets or market segments. Arbitrage funds have the potential to deliver better post-tax returns at a similar level of risk compared to debt funds (money market/liquid funds). Arbitrage funds exploit the difference in the price of a stock between cash and derivatives markets or even different stock exchanges such as BSE and NSE.
  • Asset Allocation
    It is a means of diversifying the risk associated with a fund and refers to the distribution of total funds available with the scheme into instruments or assets of various types such as stocks, bonds etc. This is based on the investment objective of the scheme.
  • Asset Class
    A group of securities or investments that have similar characteristics and behave similarly in the marketplace. Three common asset classes are equities (e.g., stocks), fixed income (e.g., bonds), and cash equivalents (e.g., money market funds).
  • Asset Management Company(AMC)
    An asset management company (AMC) is a company that invests its client's pooled funds into securities that match declared financial objectives. Asset management companies provide investors with more diversification and investing options than they would have if investing on their own.
  • Asset Under Management
    AUM refers to the recent/updated cumulative market value of investments managed by a mutual fund.
  • Average Maturity
    Average time to maturity of all fixed-period investments in the portfolio of a scheme.
  • Balanced Funds
    Funds that invest in equity and debt instruments in varying proportions. These funds supplement capital appreciation from equities with a steady return from debt instruments, thus balancing the dual objective of capital appreciation and a steady income. To a large extent, the returns depend on the performance of the equity portion in the portfolio. There is some flexibility in changing the asset composition between equity and debt and fund managers exploit this to buy the best asset class at each time.
  • Bear Market
    It is a period in market when investors are on a selling spree and the share prices decline over a significantly stretched period.
  • Benchmark
    A group of securities, usually a market index, whose performance is used as a standard or benchmark to measure investment performance of mutual funds, among other investments. Some typical benchmarks include the Nifty, Sensex, BSE200, BSE 500, 10-Year G sec.
  • Beta Ratio(Portfolio Beta)
    Beta is a measure of an investment’s volatility vis-à-vis the market. Beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 implies that the security’s price will be more volatile than the market.
  • Bond
    A debt instrument issued either by a company, the government or its agencies. It carries a fixed interest (referred to as coupon) and promises return of principal on a specified date. It is considered to be a relatively safe form of investment.
  • Bonus
    Bonus is allocation of additional units to the investors on the basis of their existing holdings. Basically, there is a split of existing units into more than one unit resulting in the reduction of the NAV per unit.
  • BSE Index
    The S&P BSE SENSEX (S&P Bombay Stock Exchange Sensitive Index), also-called the BSE 30 or simply the SENSEX, is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on Bombay Stock Exchange. The 30 component companies which are some of the largest and most actively traded stocks are representative of various industrial sectors of the Indian economy. The S&P BSE SENSEX is regarded as the pulse of the domestic stock markets in India. The base value of the S&P BSE SENSEX is taken as 100 on 1 April 1979, and its base year as 1978–79.
  • Bull Market
    Period during which the prices of stocks in the stock market keep continuously rising for a significant period of time on the back of sustained demand for the stocks.
  • CAGR
    The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period. CAGR is the year-over-year growth rate of an investment over a specified period of time. It’s an imaginary number that describes the rate at which an investment would have grown if it grew at a steady rate. CAGR is a way to smoothen out the returns; it determines an annual growth rate on an investment whose value has fluctuated from one period to the next. In that sense CAGR isn’t the actual return in reality. This is similar to saying that you went on a trip and averaged 60 km/hr. Whole time you did not actually travel 60 km/hr.Sometimes you were traveling slower, other times faster.
  • CAN
    The CAN is a new mutual fund investment identification number created by MF Utilities(MFU India), a transaction aggregation portal of the mutual fund industry. CAN is very similar to a folio ID, except that it does not have the constraint of needing to have all the schemes associated with it from a single AMC. This means that an investor can hold schemes from different AMCs using a single CAN. However, the constraints regarding the holding pattern continue to be applicable. So, if you want to invest in some schemes as a single holder and some other schemes jointly, you will need two CANs to do so. The principle advantage of CAN is in terms of how fresh investments are made.
  • Capital Gains
    As per the Income Tax Act, the gains made on sale of securities and certain other assets (including units of mutual funds) are charged to capital gains tax. The gains can be long-term or short-term depending on the period of holding of the asset and are charged to tax at different rates.
  • Capital Growth
    A rise in market value of a mutual fund's securities, reflected in its net asset value per share. This is a specific long-term objective of many mutual funds.
  • Certificate Of Desposits(CDs)
    A certificate of deposit (CD) is a savings certificate with a fixed maturity date, specified fixed interest rate and can be issued in any denomination aside from minimum investment requirements. A CD restricts access to the funds until the maturity date of the investment. A certificate of deposit is a promissory note issued by a bank. It is a time deposit that restricts holders from withdrawing funds on demand.
  • Close Ended Scheme
    These schemes have a pre-specified maturity period. One can invest directly in the scheme at the time of the initial issue. Depending on the structure of the scheme there are two exit options available to an investor after the initial offer period closes. Investors can transact (buy or sell) the units of the scheme on the stock exchanges where they are listed. The market price at the stock exchanges could vary from the net asset value (NAV) of the scheme on account of demand and supply situation, expectations of unit holder and other market factors. Alternatively some close-ended schemes provide an additional option of selling the units directly to the Mutual Fund through periodic repurchase at the schemes NAV; however one cannot buy units and can only sell units during the liquidity window. SEBI Regulations ensure that at least one of the two exit routes is provided to the investor.
  • Commercial Papers
    Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note. It was introduced in India in 1990 with a view to enabling highly rated corporate borrowers to diversify their sources of short-term borrowings and to provide an additional instrument to investors. Subsequently, primary dealers and all-India financial institutions were also permitted to issue CP to enable them to meet their short-term funding requirements for their operations. CP can be issued for maturities between a minimum of 7 days and a maximum of up to one year from the date of issue. CP can be issued in denominations of Rs.5 lakh or multiples thereof. Individuals, banking companies, other corporate bodies (registered or incorporated in India) and unincorporated bodies, Non-Resident Indians (NRIs) and Foreign Institutional Investors (FIIs) etc. can invest in CPs. However, investment by FIIs would be within the limits set for them by Securities and Exchange Board of India (SEBI) from time-to-time.
  • Compounding
    When you decide to reinvest your investment income back into the investment, the income starts earning you more income. This is called compounding.
  • Corpus
    The total amount of money invested by all the investors in a scheme.
  • CRS
    The Common Reporting Standard (CRS), generally known as the Global FATCA, is a regulation initiated by the OECD(Organization for Economic Co-operation and Development), aiming at preventing tax evasion and leading to a global automatic exchange of information between CRS-participating jurisdictions. A CRS participating jurisdiction (or "CRS jurisdiction", is a country that agreed to implement the CRS). The CRS regulation applies to any Financial Institution located in a CRS jurisdiction and obliges those Financial Institutions to identify residents of another CRS jurisdiction. CRS applies to both individuals and entities.
  • Cut Of Time
    In respect of all mutual funds regulated by SEBI, fresh subscriptions and redemptions are processed at a particular NAV. Every fund specifies a standard / uniform cut-off time in respect of fresh subscriptions and redemption of units. All requests received before the cut-off time are processed at that day's NAV and thereafter the request is treated as received on the next day and hence the next business day’s NAV is applicable. Online platforms & offline channels could have a cut-off time which is earlier than that specified by Fund houses to ensure timely & orderly reporting of all transactions in the prescribed formats.
    CDSL Ventures Limited (CVL) is a wholly owned subsidiary of Central Depository Services (India) Limited (CDSL), a leading securities depository in the country. The provisions of The Prevention of Money Laundering Act, 2002 (PMLA), has made it mandatory for all Mutual Funds to comply with the "Know Your Client" (KYC) norms of the applicants desirous of subscribing to their "units". In this regard, CVL has been mandated by the Mutual Fund industry to create the necessary infrastructure in order to handle the KYC on behalf of the Mutual Fund Industry. CVL is handling the work of "Customer profiling and Record Keeping" for issuance of Know Your Client (KYC) acknowledgement to mutual fund investors. Hence CVL becomes the KRA (KYC Registration Agency).
  • Debt/Income Funds
    Funds that invest in income bearing instruments such as corporate debentures, PSU bonds, gilts, treasury bills, certificates of deposit and commercial papers. Although these funds are less volatile, the underlying investments carry a credit risk. Comparatively, these funds are less risky and are preferred by risk-averse investors.
  • Direct Plan
    Direct mutual fund plans are those where mutual fund Houses incur less expense ratio as commission paid to distributors is not charged under expenses of the scheme. "Direct" means no intermediaries and is akin to a transaction done directly with the Fund House. Direct mutual fund schemes have lower Expense Ratio than that of Regular plans. This is the main reason why the NAV of a direct plan will be higher than the NAV of a regular plan of the same scheme.
  • Diversified Fund(Flexi Cap)
    An investment fund that contains a wide array of securities and typically is theme-agnostic, sector-agnostic and captilisation-agnostic in approach, to reduce the amount of risk in the fund. Actively maintaining diversification prevents events that affect one sector from affecting an entire portfolio, make large losses less likely. A diversified fund contrasts with specialized or focused funds, such as sector funds, which focus on stocks in specific sectors such as biotechnology, pharmaceuticals or utilities, or in particular regions such as Asia or Europe.
  • Dividend
    Money that a fund or company pays to its shareholders or unitholders, typically from its investment income, after expenses. The amount is usually expressed on a per-unit basis. A dividend is a type of distribution.
  • Dividend Frequency
    The periodicity of dividend payout of a scheme. This is especially relevant in the case of an income/debt scheme.
  • Dividend History
    The past track record of dividends declared by a fund till date.
  • Dividend Payout
    In a dividend payout option, the fund pays out dividend from time to time as and when a dividend is declared.
  • Dividend Per Unit
    Total amount of dividend declared by a fund divided by total number of units issued to all the investors.
  • Dividend Period
    The period for which the dividend is declared.
  • Dividend Reinvestment
    In a dividend reinvestment option, the dividend is reinvested in the scheme itself. Hence instead of receiving dividend, the unit holders receive units. Thus the number of units allotted under the dividend reinvestment option would be the dividend declared divided by the ex-dividend NAV.
  • Dividend Stripping
    The mechanism under which an investor invests in a scheme with the motive of withdrawing the funds immediately after the dividend is paid. Typically one enters just before the record date for payment of dividend and withdraws the funds immediately after the dividend payment. The mechanism is used for receiving tax-free income and booking capital loss to be set off against other capital gains. Under the current norms, an investor can claim notional loss caused by a dividend payment if the units are purchased three months before the record date or are held for at least nine months after the dividend is paid.
  • Dividend Yield
    The dividend yield indicates the percentage of return that you can expect by way of dividends on your investment at the prevailing market price. It gives an idea of what are the earnings through dividends on the current market price.
  • Dynamic Bond Fund
    Dynamic bond funds, as the name suggests, has the flexibility to move into short-term/long-term instruments depending upon the fund manager’s outlook on interest rates. That is, if the fund manager expects interest rates to fall in the near future, he will start taking exposure to longer tenure debt papers else, the fund manager will position the portfolio on the shorter end of the curve. The fund manager also has the liberty to move completely into short-term instruments like Commercial Papers (CPs), Certificate of Deposits (CDs)’s etc or can take exposure to longer tenure papers like corporate bonds, gilt securities, etc. The fund manager’s flexibility in managing such a fund can be seen from the variation in average maturity and duration.
  • Entry Load
    A mutual fund may have a sales charge or load at the time of entry and/or exit to compensate the distributor/agent. Entry load is charged at the time an investor purchases the units of a mutual fund.
    The entry load is added to the prevailing NAV at the time of investment. For instance, if the NAV is Rs.100 and the entry load is 1%, the investor will enter the fund at Rs.101.
    However SEBI, vide circular dated June 30,2009 has abolished entry load and mandated that the upfront commission to distributors will be paid by the investor directly to the distributor, based on his assessment of the service rendered by the distributor. Investor can however, opt for Direct Plans to avoid incurring this upfront commission as part of the expense ratio of the scheme invested.
  • Equity
    A security or investment representing ownership in a company.
  • Equity Linked Savings Scheme
    A special product offered by mutual funds. The Equity Linked Savings Schemes (ELSS) gives their investors the option of saving tax while participating in the growth of the capital market. An investment of up to 1.5 Lacs (as prescribed by the finance bill) under ELSS qualifies under Section 80C of the Income Tax Act, 1961. As per the ELSS guidelines issued by the Central government, mutual funds have to ensure that at least 80 percent of the funds are invested in equities and equity-related instruments. Investors can sell back their units to the mutual fund at the NAV-based repurchase price after the lock-in-period of three years. The long term capital gains on sale of units are not taxable in the hands of the investor.
  • Equity Schemes
    Schemes where more than 65% of the investments are done in equity and equity related securities of various companies. These funds tend to provide maximum returns over a long-term horizon. However, the returns from these funds are directly linked to the stock market and are volatile as compared to those from debt funds.
  • Exchange Traded Fund
    An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors. Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated once at the end of every day like a mutual fund does.
  • Exit Load
    Exit load is charged at the time an investor redeems the units of a mutual fund. The exit load is reduced from the prevailing NAV at the time of redemption. The investor will receive redemption proceed at net value of NAV less exit load. For instance, if the NAV is Rs. 100 and the exit load is 1%, the investor will receive Rs.99.
  • Expatriate
    An expatriate is an individual living in a country other than their country of citizenship, often temporarily and for work reasons. An expatriate can also be an individual who has relinquished citizenship in their home country to become a citizen of another. If your employer sends you from your job in its India office to work for an extended period in its London office, once you are in London, you would be considered an expatriate or "expat". Expats are allowed to invest in Mutual Fund schemes in India, basis certain conditions which vary from fund house to fund house. If you are an expat and keen on investing, please write to us at .
  • Expense Ratio
    The Expenses of a mutual fund include management fees and all the fees associated with the fund's daily operations. Expense Ratio refers to the annual percentage of fund's assets that is paid out in expenses. The expense ratio is a measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual calculation, where a fund's operating expenses are divided by the average value of its assets under management. Operating expenses are taken out of a fund's assets and lower the return to a fund's investors. Also in-built commission paid to distributors is a part of Expense ratio. This forms almost 40-60% of the Total expense ratio of a scheme. In Direct Plans, this component is not charged to clients, resulting in lower expense ratio and higher net returns.
    The Indian Government signed an Inter-Governmental Agreement (IGA) with the United States (US) on 9 July 2015 to implement the Foreign Account Tax Compliance Act (FATCA) in India. According to the IGA read with the FATCA provisions, foreign financial institutions (FFIs) in India are required to report tax information about US account holders to the Indian Government which will, in turn, relay that information to the US Internal Revenue Service (IRS). Furthermore, the US IRS will provide similar information about Indian citizens having any accounts or assets in the US. This automatic exchange of information was scheduled to begin on 30 September 2015.
  • FCNR Account
    An FCNR account is a term deposit account that can be maintained by NRIs and PIOs (Persons of Indian Origin) in foreign currency. Thus, FCNRs are not savings accounts but fixed deposit accounts. The funds in an FCNR account must necessarily come from your overseas funds. You can open an FCNR account for a minimum term of 1 year and maximum term of 5 years. Balances in FCNR account can be freely repatriated outside India. It can also be used to make local payments in India.
  • Fixed Maturity Plans(FMPs)
    Debt funds with a fixed date of maturity. Such schemes invest in debt instruments that mature around the same time as the scheme itself so as to minimize interest rate risk.
  • Folio Number
    A unique account number, akin to a bank account number given by fund house to you. By quoting your folio number, you can get a list of your unit holdings with the fund houses.
  • Fund Fact Sheet
    A newsletter sent by a mutual fund to its unit holders, either quarterly or half yearly. The newsletter reviews performance of all its schemes during the reference period, gives important schemes information such as portfolio details, and offers pointers on what lies ahead.
  • Fund Manager
    An employee of the asset management company such as a mutual fund, who manages investments of the scheme. He is usually part of a larger team of fund managers and research analysts. The fund manager is paid compensation which is usually a proportion of the assets under management.
  • Fund Of Funds
    Just as a mutual fund invests in a number of different securities, a fund of funds holds shares of many different mutual funds. These funds were designed to achieve even greater diversification than traditional mutual funds. On the downside, expense fees on fund of funds are typically higher than those on regular funds because they include part of the expense fees charged by the underlying funds. In addition, since a fund of funds buys many different funds which themselves invest in many different stocks, it is possible for the fund of funds to own the same stock through several different funds and it can be difficult to keep track of the overall holdings.
  • Gilt Funds
    Funds that invest only in government securities of different maturities. They offer lower returns as the credit risk is virtually absent and there are no chances of government defaulting on its payment obligations. This effectively reduces the yield on them.
  • Global Funds
    Mutual funds that invest in stocks of companies from all over the world and are not just limited to investing in Indian markets.
  • Government Securities
    Debt securities of tenures from 1 to 30 years, issued by the government. Since the government issues them, they don't carry any risk of default.
  • Growth Option
    A scheme where the fund ploughs back the dividend announced. The fund allots as many units of the scheme as are arrived at on dividing the dividend amount by the ex-dividend NAV.
  • Hedge Fund
    Both mutual funds and hedge funds are managed portfolios. This means that a manager (or a group of managers) picks securities that he or she feels will perform well and groups them into a single portfolio. Portions of the fund are then sold to investors who can participate in the gains/losses of the holdings. Usually a hedge fund will have a maximum of either 100 or 500 investors. Mutual funds may advertise freely; hedge funds may not. Also the hedge fund manager has fewer constraints to deal with; he can sell short, use derivatives, and use leverage.
  • Holding Period
    Length of time that an individual holds a security.
  • Holdings
    This is a fund's most recently reported top securities. The securities are ranked by the percentage of the portfolio's net assets they occupy. With this information, investors can clearly identify what drives the fund's performance.
  • Hybird Funds
    A hybrid fund is a category of mutual fund that is characterized by portfolio of a mix of stocks and bonds, which can vary proportionally over time or remain fixed.
    In the hybrid category, balanced funds tend to stick to a relatively fixed allocation of stocks and bonds. Actively managed asset allocation funds tend to have portfolios with a mix of stocks and bonds that responds to market conditions as perceived by the fund manager. Passively managed asset allocation, life-cycle and target-date funds generally have a stock-bond mix that changes over a lifetime, moving progressively from aggressive to more conservative structures.
  • Income Funds
    A debt fund that invests mostly in instruments issued by companies and government securities with long tenures. An income fund aims to maximize debt returns for the medium to long term. They are mutual funds that invest primarily in fixed income securities and aim to provide reasonable returns with low degree of risks.
  • Index
    A statistical indicator providing a representation of the value of the securities which constitute it. Indices often serve as barometers for a given market or industry and benchmarks against which financial or economic performance is measured. Most popular indices in India are BSE SENSEX & NIFTY.
  • Index Fund
    A scheme whose portfolio mirrors a particular index, both in terms of composition and individual stock weightages. It's a passive investment option, as a fund's performance will mimic the index concerned, barring a minor tracking error. These funds also have lower operating expenses as the portfolio managers of such funds don’t need to employ a lot of research and analysis and have to simply track the particular index to which the fund is linked.
  • Indexation
    Income tax laws have a provision for reducing the effective tax burden on long term capital gains, which allows you to increase the purchase price of the asset that you have sold. This reduces the net taxable profit allowing you to pay lower capital gains tax. The reason behind this is inflation- since inflation reduces asset value over a period of time. This benefit is termed as ‘indexation’. Under indexation, you are allowed by law to inflate the cost of your asset by a government notified inflation factor, known as the 'cost inflation index'. Benefit of indexation is not allowed for Equity or Equity oriented funds.
  • Inflation
    Inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every rupee you own buys a smaller percentage of a good or service. The value of a rupee does not stay constant when there is inflation. Inflation is one of the major risks to investors over the long term because it erodes the purchasing power of their savings.
  • Information Ratio
    The information ratio (IR) is a ratio of portfolio returns above the returns of a benchmark -usually an index - to the volatility of those returns. The information ratio (IR) measures a portfolio manager's ability to generate excess returns relative to a benchmark but also attempts to identify the consistency of thefund manager. The information ratio identifies whether a manager has beaten the benchmark by a lot in a few months or a little every month. The higher the IR, the more consistent a manager, with consistency being an ideal trait. Conversely, the lower the IR, the less consistency. The IR serves as a tool that investors use when selecting exchange-traded funds (ETFs) or mutual funds based on investor risk profiles. Although the funds being compared may be different in nature, the IR standardizes the returns by dividing the difference by the standard deviation.
  • Initial Offer Price
    The price at which units of a scheme are offered in its New Fund Offer (NFO).
  • Investment objective
    The declared purpose of investment of a mutual fund scheme. Investors can find this information in the scheme documents or the prospectus.
  • Investment Strategy
    The internal guidelines that a fund follows in investing the money received from the investors.
  • Investment Yield
    The income return on an investment. This refers to the interest or dividends received from a security and are usually expressed annually as a percentage based on the investment's cost, its current market value or its face value.
  • IRR(Internal Rate of Return)
    Internal rate of return (IRR) is a metric which measures the profitability of potential investments. Internal rate of return is a discount rate that makes the net present value (NPV) of all cash flows from a particular investment equal to zero. IRR calculations rely on the same formula as NPV does. You can think of IRR as the rate of growth a portfolio is expected to generate. While the actual rate of return often differs from its estimated IRR rate, a higher IRR value would still provide a much better chance of strong growth. The IRR is the interest rate (also known as the discount rate) that will bring a series of cash flows (positive and negative) to a net present value (NPV) of zero (or to the current value of cash invested).
  • Know Your Customer (KYC)
    Know your customer (KYC) is the process of a business verifying the identity of its clients. The term is also used to refer to the bank regulation which governs these activities. Financial service providers like mutual funds, banks, brokerages, etc. are required to verify the identity and information furnished by their clients like their name, address, beneficiaries, etc. when they open accounts. This is called the "Know Your Customer" or KYC. Know your customer policies are becoming much more important globally to prevent identity theft, financial fraud, money laundering and terrorist financing.
  • KYC Registration Agency (KRA)
    These are SEBI-registered agencies which maintain investor records on behalf of capital market service providers. This eliminates the need for different service providers to keep repeating KYC processes for the same customer over and over again.
  • Large Cap Fund
    There are a plethora of mutual funds available in the market. Funds which invest a larger proportion of their corpus in companies with large market capitalization are called large cap funds.
  • Liquid Fund
    Liquid funds are a type of mutual funds that invest in securities with a residual maturity of up to 91 days. Assets invested are not tied up for a long time as liquid funds do not have a lock-in period.
  • Liquidity Ratio
    A ratio that compares the amount of cash relative to total assets held by a mutual fund. Equity investors use the mutual fund liquidity ratio to gauge the demand and the bullishness or bearishness of portfolio managers. For example, if a mutual fund is sitting on a large amount of cash, the theory is that it is doing so because it is hard pressed to find quality investment opportunities; therefore, it has a bearish sentiment toward the market. Conversely, if a mutual fund is highly invested and has a very small amount of cash on hand, the theory is that it has found some excellent investing opportunities and is taking advantage of these opportunities by being nearly fully invested - that is to say, it is bullish.
  • Lock-In Period
    Period during which an investor is restricted from selling a particular investment.
  • Long Term Capital Gain
    Capital gain arises when a capital asset is sold for a sum larger than the amount for which it was purchased.
    Long term capital gain as far as mutual funds are concerned is when an equity portfolio sells for a profit when the period between purchase and sale is at least 12 months.
    Long term capital gain for debt portfolio would be the gain on selling the portfolio after a period of at least 36 months.
  • Long Term Capital Loss
    Long term capital loss arises when the equity purchased is sold after a period of 12 months at a loss. The difference between the purchase price and the sale price will be termed as long term capital loss in this case. Similarly, long term capital loss in case of debt would be the loss incurred by the investor on selling after an interval of at least 36 months.
  • Mid Cap Fund
    Mid cap funds are those mutual funds, which invest in medium sized companies. As there is no standard definition classifying companies, each mutual fund has its own classification. Generally, companies that have a market capitalization between Rs 500 crore and Rs 1,000 crore are classified as medium sized. Big investors like mutual funds and Foreign Institutional Investors are increasingly investing in mid caps nowadays because the price of large caps has increased substantially. Small/ midsized companies tend to be under researched thus they present an opportunity to invest in a company that is yet to be identified by the market. Such companies offer higher growth potential going forward and therefore an opportunity to benefit from higher than average valuations. Mid cap companies are looked upon as wealth creators and have the potential to join the league of large cap companies. Such companies are nimble, flexible and can adapt to the changes faster. One of the challenges that fund managers of mid cap funds face is to identifying such companies. But mid cap funds are volatile and tend to fall more compared to large cap companies, in bad times. So, caution should be exercised while investing in mid cap mutual funds. Mid cap funds are a good option in case the investor wants to add some diversity to his portfolio and is looking for aggressive returns.
  • Minimum Additional Amount
    This is the minimum multiple in which an investor can invest in existing mutual fund scheme.
  • Minor
    A minor is a person who does not have the legal rights of an adult. A minor is usually defined as someone who has not yet reached the age of majority. In most states, a person reaches majority and acquires all of the rights and responsibilities of an adult when he or she turns 18.
  • Model Portfolio
    Model portfolio is nothing but the "ideal" portfolio an investor should have in order to meet his/her financial objectives and needs. Each investor will have a different model portfolio based on his risk assessment . In other words a model portfolio is a pre-constructed portfolio of investment funds that meets a specific risk profile and has a specific mandate, e.g. growth, income or a combination of the two.
  • Modified Duration
    The modified duration tells you how much the price of a bond will change for a given change in its yield. In general, the longer the maturity of a bond, the higher it’s modified duration. Higher-interest bonds tend to have smaller modified durations because more of their cash flow comes from interest payments that come sooner in the bond's lifespan. Bonds that have high modified durations are especially subject to interest rate risk. When rates are looking to head higher, looking at modified duration is important to understand exactly what could happen in a rising-rate environment.
  • Money Market Fund
    A money market mutual fund is a type of fixed income mutual fund that invests in debt securities characterized by their short maturities and minimal credit risk. Money market mutual funds are among the lowest-volatility types of investments; they seek to preserve the value of your investment. These funds are not insured or guaranteed by any government agency.
    The types of debt securities held by money market mutual funds are required to be very short in maturity and high in credit quality in order to improve their ability to maintain a stable share price even during times of financial market stress.
    From time to time the regulatory requirements for certain types of money market funds may change.
  • Mutual Fund
    An investment company that pools money from its unit holders and invests that money into a variety of securities, including stocks, bonds, and money-market instruments. This represents a way of investing money into a professionally managed and diversified pool of securities that hopefully will provide a good return on unit holder's money. Mutual funds are able to take advantage of their buying and selling size and thereby reduce transaction costs for investors. Another advantage of mutual funds is the ability to get in and out with relative ease. In general, you are able to sell your mutual funds in a short period of time without there being much difference between the sale price and the most current market value.
  • Nature Of Scheme
    The investment objective and underlying investments determine the nature of the mutual fund scheme. For instance, a mutual fund that aims at generating capital appreciation by investing in stock markets is an equity fund or growth fund. Likewise, a mutual fund that aims at capital preservation by investing in debt markets is a debt fund or income fund. Each of these categories may have sub - categories.
  • Net Asset Value (NAV)
    The NAV is the total asset value per unit of the mutual fund after deducting all related and permissible expenses. The NAV is calculated at the end of every business day. It is the value at which the investor enters or exits the mutual fund.
  • Net Equity
    Net equity level is the net equity exposure percentage adjusted for any derivative positions in stocks or index for hedging or rebalancing purpose.
  • NFO
    When a mutual fund launches a new scheme and invites investors to invest in the scheme, it is called a New Fund Offer (NFO).
  • Nominee
    The person(s) to whom the assets should be distributed upon the death of the account holder.
  • Non Convertible Debentures (NCDs)
    Debentures are long-term financial instruments which acknowledge a debt obligation towards the issuer. Some debentures have a feature of convertibility into shares after a certain point of time at the discretion of the owner. The debentures which can't be converted into shares or equities are called non-convertible debentures (or NCDs).
    Non-convertible debentures are used as tools to raise long-term funds by companies through a public issue. To compensate for this drawback of non-convertibility, lenders are usually given a higher rate of return compared to convertible debentures.
  • NRE
    An NRE account is a savings or current account held in India that allows the account holder to repatriate funds that come from outside earnings. Money transferred to an NRE account from any foreign currency is converted to INR.
  • NRI
    NRI is a citizen of India who holds an Indian passport and has temporarily immigrated to another country for 182 days or more for employment, residence, education or any other purpose.
  • NRO
    A Non-Resident Ordinary (NRO) account is the normal bank account opened by an Indian going abroad with the intention of becoming an NRI. An NRI can also open this account by sending remittances from his home country or by transferring funds from his other NRO account. Funds invested through NRO account under normal circumstances can’t be repatriated.
  • Offer Document
    A document that contains information pertaining to a scheme, intended to help you make an informed decision on whether you want to invest in it or not. Also referred to as the prospectus.
  • Open-Ended Schemes
    An open-end fund is a type of mutual fund that does not have restrictions on entry. Investors are free to invest anytime. The majority of mutual funds are open-end, providing investors with a useful and convenient investing vehicle.
  • Operating Expense
    Are the expenses that a company incurs for normal cause of business. It Includes cost of raw material, wages, etc.
  • P/E Ratio
    The P/E ratio or ‘Price to Earnings’ ratio looks at the relationship between a stock price and the company’s earnings. It is a valuation ratio of a company’s current share price to its per share earnings.
    P/E= Market value per share/Annual earnings per share
  • Pass through certificates
    A pass through certificate (PTC) is a certificate that is given to an investor against certain mortgaged-backed securities that lie with the issuer. The certificate can be compared to securities (like bonds and debentures) that may be issued by banks and other companies to investors.
    The only difference being that they are issued against underlying securities. The interest that is paid to the issuer on these securities comes to the investor in the form of a fixed income.
    Investors in such instruments are usually financial institutions like banks, mutual funds and insurance companies.
  • PEG Ratio
    The PEG ratio or "Price Earnings to Growth" ratio determines a stock’s value while taking into account future earnings growth. Like the P/E ratio, the PEG ratio is used to get a better understanding of whether or not a company’s stock is overpriced, underpriced or just right(fairly priced).
    PEG ratio=PE ratio/Expected Earnings Growth(%)
  • Pension Funds
    A pension fund is a common asset pool run by a financial intermediary on behalf of a company and its employees, to generate stable growth over the long term and provide pensions for the employees when they retire. It is a defined benefit plan made up of pooled contributions from employers, unions or other organizations providing the retirement benefits for employees or members. Pension funds make up most countries’ biggest investment blocks and dominate the stock markets in which they are invested. Pension funds managed by professional fund managers make up the institutional investor category with insurance companies and investment trusts.
  • Performance
    Performance of an investment indicates the returns from an investment. The returns can come by way of income distributions as well as appreciation in the value of the investment.
  • PIO
    Person of Indian Origin (PIO) is a person of Indian origin or ancestry but who is not a citizen of India and is the citizen of another country. A PIO might have been a citizen of India and subsequently taken the citizenship of another country, or have ancestors born in India or other states.
  • Portfolio
    The basket of investments in which the funds of a scheme are deployed.
  • Portfolio Churning
    Switches between different stocks in the market, keeping in view the market conditions, in order to give unit holders a better yield.
  • Portfolio Manager
    A professional hired by the mutual fund advisor to make investment decisions concerning the purchase and sale of securities for the mutual fund portfolio in accordance with the fund's objectives.
  • Portfolio PE (Average P/E)
    It is the price to earnings ratio of the stocks calculated for the entire portfolio on a weighted average basis.
  • Portfolio price to book ratio (Average P/BV)
    It is the price to book value of the stocks calculated for the entire portfolio on a weighted average basis.
  • Portfolio Yield (Yield to maturity)
    The Yield to maturity or the YTM is the rate of return anticipated on a bond if held until maturity. YTM is expressed as an annual rate. The YTM factors in the bond’s current market price, par value, coupon interest rate and time to maturity.
  • Prospectus
    An offer document by which a mutual fund invites the public for subscribing to the units of a scheme. This document contains information about the scheme and the AMC so as to enable a prospective investor make an informed decision.
  • R Squared
    It is a statistical measure of how closely the portfolio returns are correlated with its benchmark.
  • Rating Profile
    Mutual funds invest in securities after evaluating their creditworthiness as disclosed by the ratings. A depiction of the mutual fund in various investments based on their ratings becomes the rating profile of the fund. Typically, this is a feature of debt funds.
  • RBI
    The Reserve Bank of India (RBI) is the central bank of India, which was established on April 1, 1935, under the Reserve Bank of India Act. The Reserve Bank of India uses monetary policy to create financial stability in India, and it is charged with regulating the country's currency and credit systems. The main purpose of the RBI is to conduct consolidated supervision of the financial sector in India, which is made up of commercial banks, financial institutions and nonbanking finance firms. Initiatives taken on by the RBI include restructuring bank inspections, introducing off-site surveillance of banks and financial institutions and strengthening the role of auditors.
  • Registrars and transfer agents (RTA)
    The entity appointed by a mutual fund for servicing its investors. Investor's transactions like buying, exchanges, processing of mails and related information, changes in personal data, etc occur frequently and have to be recorded. Registrar & transfer agents have skilled expertise for maintenance of such data on a professional basis, thereby contributing to saving costs and time involved in keeping detailed accurate records of the investor transactions. Their role also extends to providing information to the investors about new offers, maturity dates and all other investor-friendly information at one place for their reference.
  • Repurchase Price
    The unit price at which a unit holder sells his units back to the mutual fund. Usually the repurchase price is the NAV less an exit load.
  • Returns
    The gain from an investment in percentage terms. In the context of mutual funds, returns are measured by changes in NAV. So if you bought units in a scheme when its NAV was Rs. 10/- and sold out when its NAV hit Rs. 12/- after one year your return works out to 20%(2/10*100). In the context of mutual fund there are various kinds of returns used to measure performance of a scheme.
  • RGESS Schemes
    Rajiv Gandhi Equity Savings Scheme or RGESS is a equity tax advantage savings scheme for equity investors in India, with the stated objective of "encouraging the savings of the small investors in the domestic capital markets". It is exclusively for the first time retail investors in securities market. This Scheme would give tax benefits to new investors who invest up to Rs. 50,000 and whose annual income is below Rs. 12 lakh. In 2013-14, the income ceiling of the beneficiaries was raised to Rs. 12 lakh from Rs. 10 lakh specified in 2012-13.
    The Scheme not only encourages the flow of savings and improves the depth of domestic capital markets, but also aims to promote an 'equity culture' in India. This is also expected to widen the retail investor base in the Indian securities markets.
    The investor would get 50% deduction of the amount invested during the year, upto a maximum investment of Rs. 50,000 per financial year, from his/her taxable income for that year, for three consecutive assessment years.
  • Risk Free Return
    The theoretical rate of return of an investment with safest (zero risk) investment in a country.
  • Risk Profile
    After assessing an investor’s financial needs, current status and demographics etc each investor is assigned an individual risk rating, which shows how much risk will be palatable for him/her. This is the risk profile of the investor and it is used to arrive at the model portfolio and also to provide recommendations.
  • Risk-o-Meter
    Investors in mutual funds now have a feature that will help them to assess risks associated with a particular fund that they are buying. This is in the form of a risk-o-meter and this will replace the earlier color coding that was present wherein there were three colors to mark the various schemes that the investors could look at. The exact nature of the risk-o-meter and the manner in which this is used is more important because this will be a part of the overall evaluation exercise as far as the individual is concerned. The earlier position had the presence of three colors namely blue, yellow and brown which represented low, medium and high levels of risk respectively. This meant that the investor could look at the color and then get an idea about the level of the risk that was present. This was not adequate to represent the entire range of risks that were present because it became difficult for the individual to actually fit some of the funds into a color because this might not be exactly representative of the risk. Another problem was that several different types of funds would fall under the same color which would mask the difference that was present within them. This is now proposed to be addressed with the presence of a risk-o-meter wherein there are five levels of risks that would be present. These would be low, moderately low, moderate, moderately high and high. This would provide more options for the mutual funds to actually classify the risk and paint a better picture of the whole situation which would go on to help the investor to recognize the right kind of risk present. It is mandatory for fund houses to provide a Risk-o-meter label for each of their schemes.
  • SEBI
    The Securities and Exchange Board of India (SEBI) is the regulatory authority in India established under Section 3 of SEBI Act, 1992. SEBI Act, 1992 provides for establishment of Securities and Exchange Board of India (SEBI) with statutory powers for (a) protecting the interests of investors in securities (b) promoting the development of the securities market and (c) regulating the securities market. Its regulatory jurisdiction extends over corporates in the issuance of capital and transfer of securities, in addition to all intermediaries and persons associated with securities market. SEBI has been obligated to perform the aforesaid functions by such measures as it thinks fit.
  • Sector funds
    Schemes of mutual funds that invest predominantly in a particular industry or sector of the economy such as information technology, pharmaceuticals, fast moving consumer goods etc.These funds tend to be more volatile than funds holding a diversified portfolio of securities across many industries, but may offer greater potential returns. These funds should be considered only if one has a relatively higher risk appetite.
  • Sharpe Ratio
    This measures how well the fund has performed vis-a-vis the risk taken by it. It is the excess return over risk-free return (usually return from treasury bills or government securities) divided by the standard deviation. The higher the Sharpe Ratio, the better the fund has performed in proportion to the risk taken by it.

    Sharpe ratio = (Mean portfolio return - Risk free rate)/Standard deviation of portfolio return

  • Short Term Capital Gain
    It’s a capital gain on equity if you sell it before holding it for 12 months, on debt if it has been sold before a holding period of 36 months.
  • Short Term Capital Loss
    A capital loss realized on the sale or exchange of equity portfolio that has been held for exactly one year or less. In case of debt holdings, short term capital loss would be the loss realized on sale that has been held for three years or less.
  • Short Term debt Fund
    Short-term debt, also known as short-term liabilities, refers to any financial obligation that is either due within a 12-month period or due within the current fiscal year. Hence a short term debt fund is nothing but a fund which consists of companies largely having short term debts in their accounts.
  • Small Cap Fund
    When a mutual fund is described in terms of market cap (i.e., small cap, mid cap or large cap), it indicates the size of the companies in which the fund invests, not the size of the mutual fund itself.
    Small-cap funds typically include companies with market capitalization of less than Rs. 500 crores (bear in mind that these numbers are only approximations that change over time, and the exact definition of these categories can also vary between fund houses). Generally speaking, smaller companies are those in the early stages of business. They are presumed to have significant growth potential, but are not as financially strong or as established as larger companies.
    Because small-cap funds invest in companies that are less stable than large-cap companies, the funds can be quite volatile. This has its advantages and disadvantages. In times of market instability, small-cap funds can suffer as less-established companies go out of business. On the other hand, small-cap funds can also be great investments for those who can tolerate more risk and are looking for more aggressive growth. Investors hoping for aggressive returns will certainly want to park some money behind these funds. Finally, many mutual funds cannot take substantial positions in small-cap stocks without filing with the Securities and Exchange Commission (SEC), and this usually means greater transparency when it comes to the fund`s holdings.
  • Standard deviation
    Standard deviation measures the volatility of the returns from a mutual fund scheme over a particular period. It tells you how much the fund's return can deviate from the historical mean return of the scheme. If a fund has a 12% average rate of return and a standard deviation of 4%, its return will range from 8-16%.
  • Systematic encashment/Withdrawal plan (SEP/SWP)
    A systematic encashment / withdrawal plan permits the investor to receive a pre-determined amount / units from his investment in a mutual fund scheme on a periodic basis. Retirees in need of a regular income often opt for this.
  • Systematic investment plan (SIP)
    A Systematic Investment Plan or SIP is a smart and hassle free mode for investing money in mutual funds. SIP allows you to invest a certain pre-determined amount at a regular interval (weekly, monthly, quarterly, etc.). A SIP is a planned approach towards investments and helps you inculcate the habit of saving and building wealth for the future. Your money is auto-debited from your bank account and invested into a specific mutual fund scheme. You are allocated certain number of units based on the ongoing market rate (called NAV or net asset value) for the day.
    Every time you invest money, additional units of the scheme are purchased at the market rate and added to your account. Hence, units are bought at different rates and investors benefit from rupee cost averaging and the power of Compounding.
  • Systematic transfer pan (STP)
    STP allows the investor to transfer a pre-determined amount from his investment in a mutual fund scheme to another mutual fund scheme (of the same company) on a periodic basis. This plan is generally used to transfer sums from a money market / liquid / cash scheme to another scheme.
  • Tracking error
    Tracking error indicates how closely the portfolio return is tracking the benchmark index return. It measures the deviation between portfolio return and benchmark index return. A lower tracking error indicates portfolio closely tracking benchmark index and higher tracking error indicates portfolio returns with higher deviation from benchmark index returns.
  • Treasury Bills (T Bills)
    Treasury Bills are basically instruments for short term (maturities less than one year) borrowing by the Central Government. Treasury Bills were first issued in India in 1917. At present, the active T-Bills are 91-days T-Bills, 182-day T-Bills and 364-days T-Bills. In 1997, the Government had also introduced the 14-day intermediate treasury bills. Auctions of T-Bills are conducted by RBI.
    T-Bills are issued on discount to face value, while the holder gets the face value on maturity. The return on T-Bills is the difference between the issue price and face value. Thus, return on T-Bills depends upon auctions. When the liquidity position in the economy is tight, returns are higher and vice versa.
  • Treynor Ratio
    The Treynor ratio (sometimes called the reward-to-volatility ratio or Treynor measure), named after Jack L. Treynor is a measurement of the returns earned in excess of that which could have been earned on an investment that has no diversifiable risk (e.g., Treasury bills or a completely diversified portfolio), per each unit of market risk assumed.
    The Treynor ratio relates excess return over the risk-free rate to the additional risk taken; however, systematic risk is used instead of total risk. The higher the Treynor ratio, the better the performance of the portfolio under analysis.

    Treynor Ratio= (Portfolio`s return- risk free rate)/ portfolio`s Beta
  • Ultra Short Term Debt Fund
    Ultra short-term funds invest in fixed-income instruments which are mostly liquid and have short-term maturities.
    Ultra short-term funds help investors avoid interest rate risks, yet they are riskier and offer better returns than most money market instruments.
  • Unit
    Just like an investor buys shares of a company, he buys units of a mutual fund. A unit is nothing more than a share in a mutual fund scheme.
  • Volatility
    In investing, volatility refers to the ups and downs of the price of an investment. The greater the ups and downs, the more volatile the investment.
  • XIRR
    IRR or internal rate of return is the interest rate received for an investment—consisting of money invested at the beginning of the investment period and cash flows received at "regular" periods such as half-yearly or annually.
    But what happens if you make an investment in the beginning of the investment period and you receive cash flows that are "not" necessarily periodic such as dividends offered on mutual fund units. In this case how would you calculate the return on your investment? Using IRR to calculate the internal rate of return for a series of inconsistent cash flows is not the right method.
    Hence the concept of XIRR is used to find out the internal rate of return for a series of cash flows that is not periodic.
    XIRR is a more powerful function for calculating internal rate of return or annualized yield for a schedule of cash flows occurring at irregular intervals. Showing XIRR returns of a portfolio or a scheme is the most widely used & recognized practice in the world of investments.
  • Yield Curve
    The yield curve is the relation between the interest rate (i.e. the cost of borrowing) and the time to maturity of the debt for a given borrower in a given currency. Yield curves are used by fixed income analysts, who analyze bonds and related securities to understand conditions in financial markets and to seek trading opportunities.