Account statement

A document similar to a bank account statement that indicates the mutual fund units
owned. A statement is issued each time the investor carries out a transaction.
Annual report
A write-up given to shareholders containing the yearly record of a mutual fund's
performance. The report also informs the investor about the fund's earnings and
operations. Reports are sent out yearly.
Assets
Assets are a resource of money value such as stocks, bonds, real estate and cash.
Asset class
Different types of investments such as stocks, bonds, real estate and cash.
Asset Management Company (AMC)
The trustee delegates the task of floating schemes and managing the collected money to
a company of professionals, usually experts who are known for smart stock picks. This is
an asset management company (AMC). AMC charges a fee for the services it renders to
the MF trust. Thus the AMC acts as the investment manager of the trust under the
broad supervision and direction of the trustees. The AMC must have a net worth of at
least Rs10 crores at all times and it can not act as a trustee of any other mutual fund.
Annual Return
The percentage of change in net asset value over a year's time, assuming reinvestment
of distribution such as dividend payment and bonuses.
Annualized Returns
Absolute returns over a period (which could be larger or smaller than a year) aggregated
to a period of one year.
Applicable NAV
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 on a day. A different NAV holds if
received thereafter.
Application FormForm prescribed for investors to make applications for subscribing to
the units of a fund.
Asset Allocations
Allocation of the portfolio of a mutual fund in various categories of assets such as
equity, debt and others on the basis of the investment objective of the scheme. The
process of diversifying investments among different types of assets like stocks, bonds
and cash in order to optimise risk / return tradeoff based on a person's financial
situation and goals.
Average Maturity
Average time to maturity of all fixed-period investments in the portfolio of a scheme.
Appreciation
An increase in an investment's value.
Automatic Investment Plan
Periodic investment of a fixed amount by a unitholder , either directly from his bank
account or by issuing post-dated cheques, in his mutual fund account.

Automatic Withdrawal Plan

Allows an investor to receive periodic payments of fixed amount or units from his
investment in a mutual fund scheme. Retirees who want a regular income supplement
often choose this.
Average Portfolio Maturity
The average maturity of all the bonds in a bond fund's portfolio.
Balanced funds
A mutual fund scheme with an investment objective of both long-term growth and
income, through investment in stocks and bonds. Generally 60% is invested in stocks
and 40% in bonds , in order to obtain the highest returns consistent with a low risk
strategy.
Bear market
A period of time during which securities prices are falling in the stock market.
Benchmark
A standard used for comparison. Usually to provide a point of reference for evaluating a
fund's performance. The common benchmarks for equiy-oriented funds are the BSE 200
index or the BSE Sensex.
Beta
A measure of a fund's volatility in relation to the stock market, as measured by a stated
index. By definition, the beta of the stated index is 1; a fund with a higher beta has been
more volatile than the market, and a fund with a lower beta has been less volatile than
the market. Based on past historical records, a beta higher than 1.0 indicates that when
the market rises, the stock will rise to a greater extent than that of the market; likewise,
when the market falls, the stock will fall to a greater extent. A beta lower than 1.0
indicates that the stock will usually change to a lesser extent than that of the market.
The higher the beta, the greater the investment risk.
Blue chip
Stock of a nationally known company that has a long record of profit, growth, and
dividend payment, and a reputation for quality management, products, and services.
Bonds
A debt security or IOU issued by a government entity or corporation, which generally
pays a stated rate of interest, and plans to return the principal amount of the loan on
the maturity date. Unlike stockholders, bondholders do not have corporate ownership
privileges.
Broker
A broker is a licensed person authorised to receive commissions. Brokers are always
affiliated with a brokerage company, or broker-dealer network. He is basically a
salesman who sells stocks, bonds, or mutual funds.
Bull market
A distinctive time period, during which the prices of securities are rising, usually
characterised by high trading volumes.

Basis Point (BP)

The smallest measure used in quoting yields on fixed income securities. One basis point
is one percent of one percent, or 0.01%.
Bottom-Up
An investment strategy that first seeks individual companies with attractive investment
potential, then considers the economic and industry trends affecting those companies.
Capital Gains
The gains made on sale of securities and certain other assets (including units of mutual
funds) are called capital gains. 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.
Call Risk
The risk that bonds will be redeemed (or "called") before maturity. This possibility
increases during periods of falling interest rates.
Capital Appreciation
An increase in the value of an investment, measured by the increase in a fund unit's
value from the time of purchase to the time of redemption.
Capital Market
A market where debt or equity securities are traded.
Close-ended schemes
Schemes, which have a fixed date of redemption.
Collection Center
Locations where application forms are accepted by funds.
Corpus
The total amount of money invested by all the investors in a scheme.
Custodian
The keeper of a fund's securities and other assets.
Cut off Time
In respect of all mutual funds regulated by SEBI, fresh subscriptions and redemptions
are processed at a particular NAV. Every fund specifies a cut-off time in respect of fresh
subscriptions and redemption of units. All requests received before the cut-off times are
processed at that day's NAV and thereafter at the next day's NAV.
Call money
Money, which is, loaned in the call market, which can be demanded for repayment on
call, which basically means immediately. The term call money is also known as money at
short notice as it is repayable in 24 hours. It is also traded in the money market.
Capital (or principal)
Initial amount of money invested, excluding any subsequent earnings.
Capital appreciation
Increase in the value of an asset such as a stock, bond, commodity or real estate.
Capital gains/losses
Net profit or losses from the sale of securities in the fund's portfolio. Short-term gains or

losses are generated on securities held one year or less; long-term gains or losses
pertain to securities held for more than one year.
Capital growth
A rise in the market value of a mutual fund's securities shown by it's net asset value per
unit. This is a long-term objective of many mutual funds.
Certificate of Deposit (CD)
Short-term debt instrument issued by scheduled commercial banks excluding regional
rural banks. They are unsecured instruments that mature between three months to one
year.
Closed-end scheme/fund
A type of fund that has a fixed number of shares usually listed on a major stock
exchange. Unlike open-end mutual funds, closed-end funds do not stand ready to issue
and redeem shares on a continuous basis. Price is determined by supply and demand.
Closing price
The price of a security after the final trade at the end of the day.
Commercial paper
They are short-term unsecured instruments issued by a company that needs to raise
money; and is willing to pay an interest rate. These are included in portfolios of some
mutual funds. Such instruments have maturities ranging from 3 months to 1 year.
Coupon Rate
The interest rate that the issuer of a bond agrees to pay the bond-holder until maturity
of thebond
Commission
A fee charged by a broker or distributor for his or her service in the buying or selling of
securities.
Commodity
A commodity is a product which trades on a commodity exchange. Examples of these
are food, metal or another physical substance that investors buy and sell which also
includes foreign currencies and financial instruments and indices
Compounding
Interest earned not only on the initially invested principal but also on accumulated
interest during the period.
Consumer Price Index
The index compiled by a governmental agency which follows the cost of living by
following the changes in price of basic goods and services over time. This index
measures inflation.
Contingent Deferred Sales Charge (CDSC)
A type of exit sales load which is charged when units are redeemed within a specific
time period following their purchase. These charges reduce the longer the units are
held.
Credit analysis
The process of analysing information on companies and bonds in order to estimate
whether the issuer will meet with its future obligations to pay out.

Credit rating
A measure indicating the bond issuer's credit worthiness, or his/ her ability to repay the
loan. The bonds are rated by an independent rating agency such as CRISIL, ICRA, and
CARE.
Cumulative total return
Usually calculated in the same manner as standardised average annual total return,
except that these figures represent the total change in value of an investment over the
stated periods and do not reflect any sales charges.
Current assets
Assets that can be converted to cash within a year.
Current liabilities
Liabilities that must be paid within a year.
Cyclical stocks
Stocks which rise and fall in price with the state of the economy, in such industries as
construction, automobile, engineering or those affected by the international economy
such as shipping, aviation, and tourism. Cyclical stocks are also stocks which are affected
by the natural environment such as fertilisers and tea. Examples of non-cyclical stocks
would be drugs, insurance, basic foodstuffs and many other consumer products.
Coupon
Interest rate on a debt security that the issuer promises to pay to the holder until
maturity Usually expressed as a percentage of the face value of the security.
Credit Rating
A measure of a bond issuer's creditworthiness or the ability to repay the loan as rated
by an independent rating agency, such as CRISIL, ICRA and CARE.
Credit Risk
The possibility that a bond issuer will default, and fail to repay principal or interest as
promised. Also known as "default risk".
Currency Risk
The possibility that fluctuating currency exchange rates will affect the rupee value of an
investment.
Custodian
The organization (usually a bank) that keeps and safeguards the custody of securities
and other assets of a fund.
Debentures
Instruments of debt, usually unsecured. They are also usually credit rated.
Debt funds/ securities
A general term for any security representing money loaned that must be repaid to the
lender at a future date. Bonds, T-notes, T-bills and money market instruments are debt
securities, but they vary in maturities.
Default
A term that denotes the failure to pay the principal or interest on a financial obligation
(such as a bond).

Derivative
Financial instrument whose value is based on the value of another underlying security.
Discount
Refers to the selling price of a bond when it's price is below its maturity value.
Dividend
Portion of profits that a company or a mutual fund distributes to its shareholders or unit
holders.
Dividend Reinvestment
In a dividend reinvestment plan, 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 plan would be the dividend declared divided
by the ex-dividend NAV.
Dividend Warrant
An instrument issued by companies/ mutual funds to an investor for the purpose of
payment of dividends
Distribution
Pay out to shareholders resulting from a mutual fund's realised capital gains, interest, or
dividend income. A mutual fund dividend, or distribution, may be physically paid to the
investor, or it may be reinvested in the fund, giving the investor more shares.
Diversification
The investment strategy which spreads investments among securities in different
industries, with different risk levels, and in different companies, potentially lowering risk
by reducing the impact of any one security. Mutual funds are the best method of
diversification because their portfolios consist of a variety of securities, unless otherwise
noted. Mutual funds are a diversified investment by nature.
Depreciation
A decline in an investment's value.
Duration
Duration is a measure of a bond's lifetime that accounts for the size and timing of the
bond's cash flows. Generally, the shorter the duration, the lower the price volatility, all
other things being equal.
Earnings (per share)
The net income for a company during a specific period. It is calculated by subtracting the
cost of sales, operating expenses and taxes from revenues, for a specific time period. It
is the reason corporations exist and often the single most important determinant of a
stock's price.
Entry load
The load on purchases after the Initial (Public) Offer.
Equity
A type of security representing part ownership in a company/ corporation. Common
stocks, preferred stock, and convertible stock are types of equity securities, but debt
securities are not, as they do not represent ownership.

Exit load
The load on redemption other than the Contingent Deferred Sales Charge (CDSC)
permitted under SEBI Regulations. A fee charged by some funds for redeeming or buying
back fund shares. The amount sometimes depends on how long the investment was
held, so the longer the time period, the smaller the charge.
Equity Schemes
A scheme that invests primarily in stocks while seeking to provide relatively high longterm growth of capital.
Ex-Dividend Date
The date following the record date for a scheme. When a fund's net asset value reduces
by an amount equal to a dividend distribution.
Expense Ratio
A fund's operating expenses, expressed as a percentage of its average net assets.
Ex Dividend Or Ex Distribution
The date when the dividend is deducted from assets of a fund i.e. from the NAV
Face value
The value printed on the face of a stock, bond or other financial instrument or
document.
FCNR
A Fully Convertible Non-Rupee account that can be opened for funds coming in from
abroad or from local funds. The funds in the account are held in a foreign currency.
Fixed assets
A long-term asset that will not be converted to cash within a year such as a house or a
plot of land.
Fixed deposit
An investment instrument where you invest a fixed amount of money for a fixed period
of time at a fixed rate of interest.
Fixed income funds/ securities
A security that pays a certain rate of return such as a bond but do not offer an investor
much potential for growth. This usually refers to government, corporate or municipal
bonds, which pay a fixed rate of interest until the bonds mature, or preferred stock,
which pays a fixed dividend. A mutual fund investing in these types of securities may
also be referred to as a fixed-income investment or security.
Fixed rate
A loan in which the interest rates do not change during the entire term of the loan.
Foreign Institutional Investor (FII)
FII means an institution established or incorporated outside India which proposes to
make investment in India in securities and is registered with SEBI.
Floating rate
An interest rate, which is periodically adjusted, usually based on a standard market rate
outside the control of the institution. These rates often have a specified floor and
ceiling, which limit the floating rate. The opposite of having a floating rate is having a
fixed rate.

Floor
A lower limit for a price, interest rate, or other numerical factor. The price at which a
stop order is activated (an order to buy or sell at the market when a definite price is
reached either above (for a buy) or below (for a sell) the price that prevailed when the
order was given). Also the area of a stock exchange where active trading occurs.
Front-end load
A one-off charge that an investor must pay at the time the units of the scheme are
bought.
Face Value
The original issue price of one unit of a scheme
Fund
A mutual fund is a trust under the Indian Trust Act. Each fund manages one or more
schemes.
Fund Category
Classification of a scheme depending on the type of assets in which the mutual fund
company invests the corpus. It could be a growth, debt, balanced, gilt or liquid scheme
Fund Family
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.
Fund Manager
The person who makes all the final decisions regarding investments of a scheme
Family Of Schemes
A set of schemes with different investment objectives from a single asset management
company usually allowing investors to "switch" their investments from one scheme to
another at a no charge or a nominal charge.
Fixed Income Security
A security that pays a fixed rate of interest such as a "bond" but do not offer an investor
much potential for growth.
Front-End Load
A one-time charge that an investor pays at the time of buying units of a scheme.
Gilts
A type of government security.
Government securities
Securities that are sold to the public by the government, for example, bonds.
Growth funds
Mutual funds with a primary investment objective of long-term growth of capital. Unlike
income, which is somewhat regular and consistent in most cases, growth is much less
certain. Growth investments, however, usually outpace the returns on income
investments over the long-term (five to ten years, or longer). It invests mainly in
common stocks with significant growth potential.
Growth investing
A style of investing that invests in fundamentally sound businesses with the belief that

they will go up in price. The stocks in this portfolio are well researched, liquid and of
high quality and will usually give you a high P/E ratio and lower dividend yields in
comparison to the market.
Growth scheme
A scheme where investments are made in equity and convertible debentures. The
objective is to provide capital appreciation over a period of time.
Guaranteed Returns
The return assured by the mutual funds as a minimum return in certain income plans

Holdings
The possessions or securities in an investors portfolio.

Inception date
The end of a scheme's initial offering period and the start of the scheme's formation.
Income funds
A mutual fund that primarily seeks current income rather than growth of capital. It will
tend to invest in stocks and bonds that normally pay high dividends and interest.
Indexing
An investment strategy that consists of the construction of a portfolio of stocks. It is
designed to track the total return performance of an index of stocks.
Inflation risk
The possibility that the value of assets or income will be eroded by inflation affecting
the purchasing power of a currency. Often mentioned in relation to fixed income funds
as they may minimise the possibility of losing principal.
Initial Public Offer (IPO)
A fixed time period during which the first sale of units of a scheme are made available to
the public.
Interest rate risk
The risk that a security's value will change due to an increase or decrease in interest
rates. A bond's price will always drop as interest rates rise and when interest rates fall, a
bond's price will rise.
Issue
A security made available to the public. Mutual funds issue shares to investors in return
for cash.
Income / Debt Funds
A fund whose primary objective is current income in the form of interest or dividends.
Mutual funds that invest primarily in fixed income securities are called income funds.
Index Funds
A type of mutual fund in which the portfolios are constructed to mirror a specific market
index. Index funds are expected to provide a rate of return over time that will
approximate or match, but not exceed, that of the market which they are mirroring.
Indexation
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. On sale of equityoriented mutual fund schemes, one can opt for paying tax at the rate of a flat 10% or go
in for paying 20% after taking the benefit of indexation.
Index
A benchmark against which the performance of a scheme is measured. Usually, equity
funds use BSE 30 or BSE 200 as the benchmark. For fixed-income funds it is a bond
index. The benchmark index must consist of securities similar to which the scheme
invests in.
Index Fund
A fund that tries to mirror the performance of an index by investing in securities making
up that index. (note: it is not possible for investors to actually invest in the actual index,
such as the BSE 30). This is a passive management style which normally results in lower
management fees.
Investment Objective
The stated purpose or goal of a security's operations. This term often determines the
types of investments the security makes, the results expected, and the level of risk with
which it is associated.
Investment Grade
High quality bonds that are rated AAA or higher by a rating agency. Investment grade
bonds are considered safe. However, the higher the bond's rating, the lower the interest
it offers.
Liabilities
The claims of investors who have loaned to a company. The debts of a company.
Liquidity
The ease with which an asset can be converted to cash. Mutual fund units are generally
considered highly liquid investments as they can be sold on any business day at their
current net asset value.
Load fund
A mutual fund that charges an extra sales fee on top of the other fees. Loads do not
mean a fund is managed better. There are two types of loads; front-end, charged at the
time of purchase and back-end, charged at the time of redemption.
Liquid Funds /Money Market Funds
Funds investing only in short-term money market instruments including treasury bills,
commercial paper and certificates of deposit. The objective is to provide liquidity and
preserve the capital
Lock In Period
The period after investment in fresh units during which the investor cannot redeem the
units.
Market risk
The potential loss that is possible as a result of short-term volatility of the stock market,

indicated by beta. Owning mutual funds shields an investor to some market risk that a
stockholder may be vulnerable to because of their diversification.
Maturity date
Date on which the principal amount of a debt instrument or bond becomes due and
payable in full.
Maturity value
The amount the issuer agrees to pay out when the bond reaches it's maturity date.
Money market funds
A mutual fund that invests in short-term government securities, certificates of deposit
and other highly liquid securities such as T- bills and short-term commercial paper, and
generally pays money market rates of interest. An investment in a money market fund is
neither insured nor guaranteed by the government or by any other entity or institution,
so there is no assurance that the share price will be maintained.
Money Market Instruments
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.
Municipal bond fund
A mutual fund consisting of bonds issued by a state, city, or local government entity. The
interest these securities pay is generally passed through to shareholders free of tax.
Mutual fund
A Mutual Fund is a common pool of money from numerous investors who wish to save
money. Each fund's investments are chosen and monitored by qualified professionals
who use this money to create a portfolio. That portfolio could consist of stocks, bonds,
money market instruments or a combination of those. Mutual funds offer investors the
advantages of diversification, professional management,affordability, liquidity and
convenience.
Management Fee
The amount a scheme pays to its asset management company for its services. Typically,
a certain percentage of assets under management. A fund's management fee is listed in
its offer document.
Market Timing
Attempting to time the purchase and sale of securities or mutual fund units to coincide
with market conditions.
Maturity Date
The date on which the principal amount of a bond is to be paid in full.
Management Fee
The amount paid by a mutual fund to the asset management company for its services;
SEBI restricts this to 2.50% p.a. in equity funds and 2.25% p.a. for equity funds.
Minimum Purchase
The smallest investment amount a scheme will accept to open a new unitholder
account.

Net Asset Value

Market value of one share of a mutual fund on a given day; also known as the bid price.
Unlike the public offering price, the NAV includes no sales charges. The NAV is
calculated each day by taking the closing market value of all securities owned by a
mutual fund, plus all other assets (e.g. cash), and deducting the fund's liabilities. This
sum is then divided by the fund's total number of shares outstanding.
Net profit margin
A measure of a company's profitability and efficiency calculated by dividing a measure
of net profits (operating profit minus depreciation and income taxes) by sales.
Net worth
The value found by subtracting total liabilities from total assets.
Net Assets
The net worth of a fund.
No Load Fund
A fund that sells its units to investors without a sales load/charge.
NRE
A Non-Resident External Rupee account that NRIs can open with any Indian bank. They
can use this account for making investments in India on a repatriable basis.
NRI
A Non-Resident Indian who is an Indian citizen or a person of Indian origin but who
resides abroad. NRIs have to follow specific rules when investing in India.
NRO
An Ordinary Non-Resident Rupee account which can be opened for funds coming in
from abroad or from local funds. The amount in the account is, however, nonrepatriable.
Offer document
The offer document or prospectus is a booklet, a legal document that provides
information about a specific mutual fund such as the funds investment objectives, load
structure, subscription and redemption policies. Its purpose is to also inform investors
of potential risks involved before they decide to invest in a fund and provides other
information that could help an individual decide whether the investment is appropriate
for him. An abridged offer document of the scheme also accompanies the application
form of every scheme.
Offering price
The price at which mutual fund shares are offered for sale to the public. Also known as
offering price. The public offering price represents the net asset value plus any
applicable initial sales charges.
Offer Document / Prospectus
A legal document, that describes a mutual fund scheme. It contains information
required by the Securities and Exchange Board of India explaining the offer, including
the terms, issuer, objectives, historical financial statements,

Open-Ended Scheme
A scheme where investors can buy and redeem their units on any business day. Its units
are not listed on any stock exchange but are bought from and sold to the mutual fund.
Operating Expenses
The day-today costs a mutual fund incurs in conducting business, such as for
maintaining offices, staff, and equipment. These expenses are paid from the fund's
assets before any earnings are distributed.
Opening NAV
The NAV disclosed by the fund for the first time after the closure of an IPO.
Performance
How a fund has done in the past and how well it is doing at present. Past performance is
often used to get an idea of future performance, however, past performance does not
guarantee future performance will be the same.
Portfolio
A pool of individual investments owned by an investor or mutual fund. Portfolios may
include a combination of stocks, bonds, and money market instruments. A list of the
fund's current portfolio will usually be contained in a mutual fund's annual report.
Preferred stock
A type of capital stock whose holders are paid dividends at a specified rate. It has
preference over common stock in the payment of dividends and the liquidation of
assets, but does not ordinarily carry voting rights. The benefits of owning preferred
stock are realised if the company ever goes bankrupt. If this occurs, preferred stock
shareholders receive their money first. General (also known as common) stockholders
may not receive any money, if none is remaining after paying preferred stock holders.
Price-earnings ratio (P/E)
One of the benchmarks used by portfolio managers to help them value companies. It is
calculated by dividing a company's share price by its earning per share.
Price Of Units
Price offered by a mutual fund for repurchase or sale of a unit on a daily basis.
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.
Principal (or Capital)
Initial amount of money invested, excluding any subsequent earnings.
Promissory note
A document signed by the borrower in which he promises to repay a loan under agreedupon terms.
Public Offering Price (POP)
The price at which mutual fund shares are offered for sale to the public. Also known as
offering price. The public offering price represents the net asset value plus any
applicable initial sales charges.

Rate of return
Rate of return is calculated by subtracting the purchase value by the present value and
then dividing it by the purchase value. For equities, we often include dividends with the
present value.
Real return
The rate of return earned on an investment after adjusting for the rate of inflation
during the time the investment was held.
Redeem
Cashing in units by selling them back to the mutual fund.
Redemption load
A fee charged by some funds for redeeming or buying back fund shares. The amount
sometimes depends on how long the investment was held, so the longer the time
period, the smaller the charge.
Redemption price
The price at which a mutual fund's units are redeemed or bought back by a fund. The
redemption price is usually equal to the current net asset value per unit and less the exit
load if applicable.
Repatriable
The return from abroad of the financial assets of an organisation or individual, and the
conversion of foreign currency to Rupees.
RBI
Reserve Bank of India, established under the Reserve Bank of India Act, 1934.
Return
The sum of the income of a fund plus its capital gains.
Risk
In general, risk is the possibility of suffering loss. There are many types of risk, such as
credit risk, principal risk, inflation risk, interest rate risk, and investment risk. If you are
prepared to accept greater risk, you have the chance of earning higher returns or profits
on your money. Low-risk investments, while generally safer, do not usually produce a
high return, hence the loss of potential gain.
Risk/ reward trade-off
The compromise made between high- and low-risk investments. High-risk investments
generally generate more earnings, while low-risk ones generate a lower rate of return.
Risk tolerance
The willingness of an investor to tolerate the risk of losing money for the potential to
make money.
Rupee Cost Averaging
An investment strategy based on investing equal amounts in a fund at regular intervals.
Because more shares are bought when prices are low and fewer shares when prices are
high, the average cost of your shares may be lower than the average price over the
period you bought them. Rupee cost averaging cannot guarantee a profit or protect
against loss in declining markets.

Record Date
The date by which mutual fund holders are registered as unit owners to receive any
future dividend or capital gains distribution.
Redemption Of Units
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
Refund
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.
Registrar or Transfer Agent
The institution that maintains a registry of unitholders of a fund and their unit
ownership. Normally the registrar also distributes dividends and provides periodic
statements to unitholders.
Sales charge
A charge added on to the price of a mutual fund when you buy it.
SEBI
Securities and Exchange Board of India established under Securities and Exchange Board
of India Act, 1992.
Sector Fund
A fund that invests primarily in securities of companies engaged in a specific industry.
Sector funds entail more risk, but may offer greater potential returns than funds that
diversify their portfolios.
Settlement Date
The date by which a transaction must be settled, that is, to make the payment of funds
and the delivery of securities.
Standard Deviation
A measure of the degree to which a fund's return varies from the average of the
scheme's own return.
Stock Fund
A fund that invests primarily in stocks.
Switching
The movement of investment from one scheme to another usually within the family of
schemes. An investor may switch schemes because of market conditions.
Securities
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.
Shareholder (or stockholder)
The owner of shares of stock.
Shares
Units of ownership in a corporation. In a mutual fund, the value of each unit is
calculated by dividing net assets by the number of shares.

S & P 500 stocks (Standard & Poor's 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.
Stocks
A share of stock represents ownership, or equity, in a corporation. When a company
needs money to grow and expand, it may sell part of its ownership to the public in the
form of shares (stock). In exchange for the money received from the sale, the company
gives shareholders a portion of its future profits, as well as a measure of its decisionmaking power. These securities generally have the most potential for capital
appreciation, but their rights are subordinated in the event of a company liquidation or
bankruptcy.
Switching
Transferring your investment from one scheme to another. An investor may want to
switch due to changing market conditions.
Systematic Investment Plan (SIP)
Allows an investor to periodically invest in units by issuing post-dated cheques. It allows
the investor to benefit from rupee cost averaging.
Systematic Withdrawal Plan (SWP)
Permits the investor to receive regular payments of a fixed amount or capital
appreciation from his investment in a mutual fund scheme on a periodic basis. Retirees
in need of a regular income often opt for this.
Sale price
The price at which a fund offers to sell one unit of its scheme to investors. This NAV is
grossed up with the entry load applicable, if any.
Scheme
A mutual fund can launch more than one scheme. With different schemes, in spite of
there being a common trust, the assets contributed by the unit holders of a particular
scheme are maintained and managed separately from other schemes and any
profit/loss from the assets accrue only to the unit holders of that scheme
Scheme Objective
The purpose statement consisting of the goal and the avenues of investment released
by the fund.
Sector Fund or Specialty Fund
It concentrates its holdings in a specific industry such as health care, energy, insurance,
leisure.
Systematic Withdrawal Plan (SWP)/Recurring withdrawal facility (RWF)
A plan offered with some schemes under which post-dated cheques for fixed amounts
(as may be fixed by the fund) are issued to the investors for monthly, bi-monthly or
quarterly withdrawals. The withdrawals are as per the requirements of the investor
specified by him/ her at the time of investment.
Systematic Investment Plan (SIP)/ Recurring investment facility (RIF)
A program that allows an investor to provide post-dated cheques to the mutual fund to
allot fresh units at specified intervals (usually monthly or quarterly). On the specified
dates, the cheques are realized by the mutual fund and additional units at the prevailing

NAV are allotted to the investor. This enables him to invest as little as Rs 1000 a month
and take advantage of rupee cost averaging.
Systematic Transfer Program (STP)
A plan that allows the investor to give a mandate to the fund to periodically and
systematically transfer a certain amount from one scheme to another.
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.
Top-down investing
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.
Total return
Return on an investment over a specified period of time, which includes share-price
appreciation, reinvested dividends or interest, and any capital gains.
Transaction costs
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 security with a maturity of one year or less.
Treasury bonds (T-bonds)
A long-term debt instrument with a maturity of 10 years or longer.
Treasury notes (T-notes)
A certificate representing an intermediate-term loan to the government with a maturity
between two to ten years.
Total Assets Under Management
The market value of the total investments of a fund as on a particular date
Total Returns
Returns from an investment calculated taking into account income distribution and
capital appreciation.
Transfer Agent
A firm employed by a mutual fund to maintain unitholder records, including purchases,
sales, and account balances.
Treasury Bill (T-bill)
A debt security issued by the Indian government, having a maturity of less than a year.
Turnover Rate
Based on the corpus, it is the number of times at which the fund buys and sells
securities each year.
Trustee
A person or a group of persons having an overall supervisory authority over the fund

managers. They ensure that the managers keep to the trust deed, that the unit prices
are calculated correctly and the assets of the funds are held safely.
Time Horizon
The period of time one can stay invested (eg. number of years to retirement). Longer
time horizons can reduce volatility risk.
Unit
The interest of the investors in either of the Schemes, which consists of each Unit
representing one undivided share in the assets of the Schemes.
Unit Holder
A person who holds Unit(s) under a Mutual Fund.
Unrealized Gain Or Loss
Increase or decrease in the prices of securities held by the fund.
Value investing
The investment approach which favours buying under-priced stocks that 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.
Volatility
The tendency of an investment or market to rise or fall sharply in price within a shortterm period. Volatility is measured by beta.
Year to Date (YTD)
A time period in a calendar year starting from the first of January and ending on the first
of January.
Yield to Maturity (YTM)
The yield earned by a bond if it is held until its maturity date.
Yield
The annual rate of return on an investment usually expressed as a percentage.
Yield Curve
A graph depicting yield vis-a-vis maturity. If short-term rates are lower than long-term
rates, it is a positive yield curve, if short-term rates are higher, it is a negative or
inverted yield curve. If there is isn't much difference, it is a flat yield curve.
Zero coupon bond
A bond that is sold at a fraction of its face value. It does not, however, provide periodic
interest payments but pays principal upon maturity.

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