A statement issued by the mutual fund, giving details of transactions and holdings of an investor. This is normally issued in lieu of a unit certificate.
Adjusted NAV (Total Return)
The notional net asset value of a unit assuming reinvestment of distributions made to the investors in any form. This is relevant to calculate the total returns from the fund.
Age Of Fund
The time elapsed since the launch of the fund.
The percentage of change in net asset value over a year's time, assuming reinvestment of distribution such as dividend payment and bonuses.
Absolute returns over a period (which could be larger or smaller than a year) aggregated to a period of one year. Used for the purpose of comparing returns over different periods.
The NAV at which a transaction is effected. A cut-off time is set by the fund and all investments or redemptions are processed at that particular NAV. This NAV is relevant if the application is received before that cut-off time. If the application is received thereafter, it will be treated as the next day's application and allotted the relevant NAV
Form prescribed for investors to make applications for subscribing to the units of a fund. Some funds also accept applications on plain paper
Allocation of the funds held by the mutual fund to various categories of assets such as equity, debt and others. This is based on the investment objective of the scheme.
Asset Management Company (AMC)
The company vested with the responsibility of managing investments of the schemes of a fund in line with the stated investment objective of each scheme.
Automatic Investment Plan
Under these plans, the investor mandates the mutual fund to allot fresh units at specified intervals (monthly, quarterly) against which the investor provides post-dated cheques. On the specified dates, the cheques are realised by the mutual fund and on realisation, additional units at the prevailing NAV are allotted to the investor. This inculcates a healthy and disciplined saving habit.
Average cost method
This is the average price of units purchased by the investor calculated by adding up all the costs involved in purchasing all the units of investment and then dividing the sum by the total number of units.
Average time to maturity of all fixed-period investments in the portfolio of a scheme.
Back End Load
The difference between the NAV of the units of a scheme and the price at which they are redeemed. The difference is charged by the fund.
Balance Maturity Tenure Of A Scheme
In the case of close-ended schemes, the time remaining until the redemption of the scheme.
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. 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.
A parameter with which some thing can be compared with. For example, the performance of an equity scheme can be benchmarked against the BSE Sensex. In this case, the BSE Sensex will be known as the benchmark index.
It shows the sensitivity of the fund to movements measured against the benchmark. A beta of more than 1 indicates an aggressive fund and the value of the fund is likely to rise or fall more than the benchmark. A beta of less than 1 implies a defensive fund that will rise or fall less than the benchmark. A beta of 1 indicates that the fund and the benchmark will react identically.
A debt instrument issued either by a company, the government or its agencies. It carries a fixed interest and promises return of principal on a specified date.
Additional units allotted to 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.
An index reflecting the stock prices of 30 companies listed on the Bombay Stock Exchange (BSE) which is taken to be representative of the stock market movement.
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. Gains on mutual fund units held for a period of 12 months or more are long-term gains.
Schemes which have a fixed tenor of maturity.
The total amount of money invested by all the investors in a scheme.
Cost Of Churning
The portfolio of a scheme changes from time to time. The rate of change depends on the style of the fund manager (whether he follows the buy-and-hold philosophy or aggressively churns the fund) and on the type of investors (whether the fund constantly receives fresh subscriptions and redemption requests). Such portfolio changes have associated costs of brokerage, custody fees, transaction fees and registration fees which lower the returns. These costs comprise the cost of churning.
Load structure applicable currently. Funds keep revising the load structures prospectively from time to time.
Agencies which have custody of all the securities purchased by the mutual fund. The service can be provided only by a person who has been granted a certificate of registration to carry on the business of custodian of securities under the SEBI regulations.
In respect of all mutual funds regulated by SEBI, fresh subscriptions and redemptions are processed at a particular NAV. Every fund specifies a standarad / 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.
Date Of Redemption
The date specified for the redemption of a scheme. No such date is specified for an open-ended scheme.
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.
Portion of profits that a company or a mutual fund distributes to its shareholders or unit holders.
The periodicity of dividend payout of a scheme. This is especially valid in the case of an income/debt scheme.
The past track record of dividends declared by a fund till date.
Dividend Per Unit
Total amount of dividend declared by a fund for a scheme divided by total number of units issued to all the investors.
The period for which the dividend is declared.
In a dividend payout option, the fund pays out dividend from time to time as and when a dividend is declared.
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.
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.
The dividend earned per unit of a scheme at the prevailing per unit price.
The fee charged at the time of investment. It amounts to the difference between the NAV of the units of a scheme and the price at which new units are allotted on fresh investments. The fee has to fall within the overall limit laid down by SEBI. No entry load shall be charged in case of direct applications received by the AMC i.e. application received through internet, submitted to AMC or Collection Centre/ Investor Service Centre and are not routed through any Distributor/ Agent/ Broker. It shall also be applicable to additional purchases done directly by the investor under the same folio and switch-in to a scheme from other schemes if such a transaction is done directly by the investor.
Equity Linked Savings Scheme
A special product offered by mutual funds. The Equity Linked Savings Schemes (ELSS) give their investors the option of saving tax while participating in the growth of the capital market. An investment of up to 1,00,000 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.
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.
In respect of any distribution of dividend, the date from which the holders are not entitled to the dividend. The NAV is accordingly reduced to the extent of the dividend declared.
The fee charged at the time of redemption. It amounts to the difference between the NAV of the units of a scheme and the price at which existing units are redeemed. The fee has to fall within the overall limit laid down by SEBI.
The original issue price of one unit of a scheme.
First In First Out Method (FIFO)
The method under which for the purpose of computing capital gains on sale of units, the units sold are assumed to be those in stock which were purchased first. This method is followed for the purpose of computing tax on capital gains. If the units purchased are in different folios, then the option of considering the sale of units on a one-to-one basis is available but one can still opt for FIFO method.
The service charge collected by the fund from the investor. This is charged through a markup on the NAV for purchase by new investors. The load has to fall within an overall limit laid down by SEBI.
A mutual fund is a trust under the Indian Trust Act. Each fund manages one or more schemes.
Classification of a scheme depending on the type of assets in which the corpus is invested by the mutual fund company. It could be a growth, debt, balanced, gilt or liquid scheme.
All the schemes which are managed by one mutual fund.
Fund Management Costs
The charge levied by an AMC on a mutual fund for managing their funds.
The person who makes all the final decisions regarding investments of a scheme.
Funds which invest only in government securities of different maturities with virtually no default risk. While returns are steady and secure, they are generally lower than those from other debt funds.
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.
The return assured by the mutual funds as a minimum return in certain schemes, subject to meeting the conditions stipulated by SEBI.
Income / Debt Funds
Funds that invest in income bearing instruments such as corporate debentures, PSU bonds, gilts, treasury bills, certificates of deposit, commercial papers etc. 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.
A class of equity funds that invest in equity shares of various companies in the same proportion in which they appear in the composition of any popular index, such as the BSE Sensex, S&P 500 or NASDAQ composite. The performance of such funds closely tracks the performance of the index.
The central government specifies an index linked to the wholesale price index. The indices of two years (year of purchase and the year of sale) are used for the purpose of computing capital gains tax. The purchase price is multiplied by the index of the year of sale and the product is divided by the index of the year of purchase. This benefit is available only if the security has been held for more than 12 months (long-term). Since capital gains on long-term equity mutual fund investments are tax free, indexation benefits are applicable only to investments in debt mutual fund schemes. On sale of any debt mutual fund scheme, one can opt for paying tax at the rate of a flat 10% of capital gains or go in for paying 20% of capital gains after taking the benefit of indexation. This benefit of indexation is available only to investors who are resident under the Act.
Initial Offer Price
The price at which units of a scheme are offered in its New Fund Offer (NFO).
The declared purpose of investment of a mutual fund scheme.
The internal guidelines that a fund follows in investing the money received from the investors.
Liquid funds / money market funds
Funds investing in short-term money market instruments including treasury bills, commercial paper and certificates of deposit
The cash and cash equivalent assets available with a fund to meet expenses and immediate redemption requirements of the investors.
The process of registration with the stock exchanges after which the stock qualifies for trading on a stock exchange. all close-ended schemes, with few exceptions, of a mutual fund are generally listed on a stock exchange. there are also a few open-ended schemes which have been listed on the stock exchange.
The fee charged by the fund either at the time the investor buys into the fund (entry load) or when he redeems his units (exit load). funds that charge these loads at the time of entry or exit are called load funds. it amounts to the difference between the nav of the units of a scheme and the price at which new units are allotted on fresh investments or existing units are redeemed. though the load is decided by the amc, it has to fall within the overall limit laid down by sebi. schemes that do not charge any load and are called "no-load" schemes
Lock in period
The period after investment in fresh units during which the investor cannot redeem the units.
Management fee / expense
Fee, within the limits laid down by sebi, charged by the amc for managing of the mutual fund scheme.
The specified date on which the units of a close-ended scheme are due for redemption.
Maximum repurchase / withdrawal
A time frame decided by the fund beyond which the fund will not entertain any application for redemption of units. this could be a day or a week or any other period.
The minimum amount required to be invested to purchase units of a scheme of a mutual fund.
Magnetic Ink Character Recognition, is a character recognition technology adopted mainly by the banking industry to facilitate the processing of cheques.
The smallest sum that an investor can withdraw (get redeemed) from the fund at one time.
Money market instruments
As defined under the sebi (mf) regulations 1996 including commercial paper, treasury bills, goi securities with an unexpired maturity up to one year, call money, certificates of deposit and any other instrument specified by the reserve bank of india.
Money market mutual funds/ liquid funds
These funds invest only in money market instruments including treasury bills, commercial paper or certificate of deposits of a very short-term maturity.
A mutual fund is a collection of stocks or bonds. this happens when a large number of people give their money to professionals, to manage and invest, with the aim of achieving a return. these qualified and experienced professionals invest in instruments according to the objective of the fund.
Net asset value (nav)
The value of a unit of a scheme on any given business day. nav reflects the market value of the fund's investments that day after accounting for all expenses.
No load schemes
Schemes where the mutual fund does not charge either an entry or exit load.
Non performing investments
Part of the portfolio investment of a debt fund which is not making interest payment or principal amount repayments in time
An index of prices of a group of fifty specified stocks listed on the nse
Objective of investment
The purpose statement consisting of the goal and the avenues of investment specified by the fund in its offer dosument.
Document by which a mutual fund invites the public for subscription to units of a scheme, and informs them of the terms & conditions for management of the scheme on a day to day basis thereafter. the document contains information about the scheme to enable a prospective investor make an informed investment decision.
The period during which the initial offer to subscribe for the units of a scheme is open.
Schemes for which a fixed date of redemption is not specified. the fund offers to sell and buy units at any time at prices linked to the prevailing nav.
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.
The basket of investments in which the funds of a scheme are deployed.
Switches between different stocks in the market, keeping in view the market conditions, in order to give unit holders a better yield.
Price of units
Price offered by a mutual fund for repurchase or sale of a unit on a daily basis.
An offer document by which a mutual fund invites the public for subscription to units of a scheme, and informs them of the terms & conditions for management of the scheme on a day to day basis thereafter. the document contains information about the scheme to enable a prospective investor make an informed investment decision.
An evaluation of a scheme in relation to a parameter. the rating could be done in respect of the creditworthiness of debt instruments, risk of loss in an investment or the performance of an investment.
The date considered as a cut-off date for taking into account the unit holders of a fund who would be entitled to any benefit or who would be considered for any other purpose.
Redemption of units / repurchase
Buying back/cancellation of the units by a fund on an on-going basis or on maturity of a scheme. the investor is paid a consideration linked to the nav of the scheme.
The act of returning money to an investor by the fund. this could be on account of rejection of an application to subscribe units or in response to an application made by the investor to the fund to redeem units held by him.
An agent appointed by the trustees of a mutual fund in consultation with the amc or by the companies for the purpose of handling the records of the unit holders or shareholders.
Repurchase date /period
In the case of close-ended schemes, the specified date on which or period during which the investor can redeem units held by him in the scheme before the maturity of the scheme.
Redemption / repurchase price
The price of a unit (net of exit load) that the fund offers the investor to redeem his investment
A charge added on to the price of a mutual fund when you buy it.
Securities and exchange board of india established under securities and exchange board of india act, 1992.
Schemes of mutual funds that invest predominantly in a particular industry or sector of the economy such as information technology, pharmaceuticals, fmcg 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
The holdings of a mutual fund, such as stocks or bonds. stocks are securities representing ownership shares. bonds are securities representing a contractual debt obligation of the issuer to repay the holder, with interest.
The owner of shares of stock or shares of a mutual fund.
Units of ownership in a corporation or a mutual fund. in a mutual fund, the value of each unit is calculated by dividing net assets by the number of shares.
Statistical measure of a portfolio's historic "risk-adjusted" performance. calculated by dividing a fund's excess return by the standard deviation of those returns. this is a measure of return of a portfolio given the risk taken by it. the higher the ratio, the better the portfolio.
S & P 500 stocks (standard & poor, composite index of 500 stocks)
Market value-weighted index that measures stock market price movements, based on the aggregate performance of 500 widely held common stocks.
This is a measure of deviation or historic volatility of a portfolio. it measures the dispersion of a fund's periodic returns from its mean value. the wider the dispersion, the higher the standard deviation and thus higher the risk. lower standard deviation is therefore preferred.
Stocks represent a part equity ownership of a corporation. when someone holds stocks of a certain company, it means that he/she owns shares of that company and therefore becomes a part owner of that company in proportion to his/her holding. these securities generally have the most potential for capital appreciation, but their rights are subordinated in the event of a company liquidation or bankruptcy.
It is the transfer of one's investment from one scheme to another.
Systematic investment plan (sip)
A systematic investment plan allows an investor to buy units of a mutual fund scheme on a regular basis by means of periodic investments into that scheme in a manner similar to instalments paid on purchase of normal goods. the investor is allotted units on a predetermined date specified in the offer document of the scheme. here the plan allows the investor to take advantage of the rupee cost averaging methodology.
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 transfer pan (stp)
An 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.
Securities transaction tax (stt)
Tax levied on your equity mutual fund investment, equity shares and derivatives.
The performance of an investment, including yield (dividends, interest, capital gains) as well as changes in per unit price, calculated over a designated period of time expressed in percentage terms. simply put, it is the return one gets on his investment taking all factors into account.
The actual date on which your units were purchased or sold. the transaction price is determined by the closing net asset value on that date.
Transfer agent / registrar
An agent appointed by the trustee of a mutual fund in consultation with the amc or by the companies for the purpose of handling the records of the unit holders or share holders.
Trustees (of a mutual fund)
Sebi requires all mutual funds to appoint a board of trustees. they appoint and oversee the operations of the asset management companies to ensure that the interest of investors is always safeguarded.
Tax deducted at source (tds)
No tax is withheld or deducted at source, where any income is credited or paid by a mutual fund, as per the provisions of section 194k and 196a of the act.
The top-down style of investment management places primary importance on country or regional allocation. top-down managers generally focus on global economic and political trends in selecting the countries or regions where they expect to find investment opportunities. only then do they employ a more fundamental analysis of individual stocks in order to make their final selections.
The costs incurred by the buying and selling of securities including broker commissions and the difference between dealer buying and selling price.
Treasury bills (t-bills)
A short-term debt instrument issued by the government with a maturity period of one year or less.
The organization that acts as the distributor of a mutual fund units to broker / dealers and the public.
The owner of units or shares of a mutual fund.
This is where a company merges or takes over other companies in the same supply chain. if a shoe manufacturer, takes over his supplier it would be vertical integration.
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.
A flexible plan for capital accumulation, involving no specified time frame or total sum to be invested.
The investment approach which favours buying under-priced stocks that are inexpensive relative to their intrinsic value and that may have the potential to perform well and increase in price in the future. it first seeks individual companies with attractive investment potential, then considers the economic and industry trends affecting those companies. value managers usually begin their search with fundamental analysis, in order to find companies whose current prices may fail to reflect their potential longer-term value.
The relationship between time and yield on securities is called the yield curve. the relationship represents the time value of money - showing that people would demand a positive rate of return on the money they are willing to part today for a payback into the future.
Year to date (ytd)
A time period in a calendar year starting from the first of january upto the present date in that calendar year. this term is generally used to calculate returns on an investment from the 1st of january of that year to the present date in that year.
Yield to maturity (ytm)
The yield earned by a bond if it is held until its maturity date.
Zero coupon bond
Zero coupon bonds are bonds that do not pay interest during the life of the bonds. instead, investors buy zero coupon bonds at a deep discount from their face value, which is the amount a bond will be worth when it "matures" or comes due. when a zero coupon bond matures, the investor will receive one lump sum equal to the initial investment plus interest that has accrued.the maturity dates on zero coupon bonds are usually long-term, many don't mature for ten, fifteen, or more years