| Advisor
|
|
The organization employed by a mutual fund to give professional advice on the
fund's investments and to supervise the management of its assets.
|
| |
| Asked/Offering Price
|
|
It is the price at which the units of a mutual fund are offered for sale on the
Stock Exchange. It means the current net asset value (NAV) per share plus entry
load/sales charge, if any.
|
| |
| Asset Allocation |
|
Some mutual funds spread the risk in their portfolio by diversifying their
investment between a wide range of securities, thus giving a great advantage to
the small investors, something which they can hardly afford to do. This could
range from investments in Indian and international stocks, government and
private bond, or even gold bullion. The choice of selecting how much to invest
where is called Asset Allocation. Some funds keep the proportion of allocation
between different investments constant while others vary it, depending on the
market situation and their investment objectives.
|
| |
| Asset Management Company (AMC) |
|
An AMC is a corporate entity, which manages a Mutual Fund scheme and markets
the scheme. It is separate from the trustees who own the scheme. In return for
its services, it is paid a management fee out of the corpus of the mutual fund.
|
| |
| Automatic Reinvestment
|
It is an arrangement made with the investor wherein the accrued interest or
dividend on his investment is automatically added to his principal amount in
order to earn more interest on it.
|
 Top |
|
|
| |
| Back-end load/exit load |
|
An investor selling his open-ended scheme units back to the Mutual Fund
receives the NAV minus a small deduction, which is called the back-end or exit
load. This is a charge levied on the investor especially for premature
withdrawals. All Mutual Funds don't charge this load. As per the SEBI
guidelines, a Mutual Fund is allowed to charge a maximum of 7% of the NAV as a
load.
|
| |
| Banker to the Fund
|
|
These are the banks that offer their services to the mutual fund for their
operations. This would entail collection of funds at its launch and
subsequently as well as for its daily operations.
|
| |
| Bond Fund |
|
These are mutual funds which invest only in debt instruments like bonds and
debentures, keeping an eye on guaranteed and safe though slightly lower
returns. |
| |
| Balanced Fund |
|
This is a Mutual Fund scheme investing about half its corpus in debt and the
other half in equity. This helps balance the risk and return for the scheme. |
| |
| Capital Appreciation Plan |
|
This is also referred to as the Growth scheme. Instead of distributing
dividends declared by the Mutual Fund, it is reinvested in the scheme thus
increasing the Net Asset Value (NAV). |
| |
| Capital Growth |
|
When the market value of the securities of a mutual fund increases, so does the
Net Asset Value (NAV) of its units. This is called capital growth, which is the
specific objective of most mutual funds. |
| |
| Certificate of Deposit |
|
It is a document from a bank which says that money is deposited with them at a
certain guaranteed rate of interest for a certain period of time. Mutual funds
use this kind of investment for their money market schemes because they have a
very high liquidity. |
| Top |
|
|
| |
| Commercial paper
|
|
When a company wants to borrow for a short-term from the market, it gives the
lending party a unsecured promissory note, an IOU called the Commercial Paper
(CP). Like other money market instruments, it is issued at a discount. This
means that it receives a lesser amount than what is mentioned in the CP, the
difference being the interest that it pays back on redemption. Since it is not
attached to any security, the RBI has laid down certain conditions for the
issue of CPs, wherein the issuing company has to have certain credit ratings,
minimum tangible net worth, asset classifications etc, in order to avoid a
situation of defaulted payments. |
| |
| Confirm Date
|
|
The date the fund processes your transaction, when you purchase units. |
| |
| Contingent Deferred Sales Charge |
|
All that this high-sounding term means that it is basically an exit charge
/back-end load imposed by certain funds which gets progressively reduced, the
longer the subscriber stays in the fund. |
| |
| Custodian |
|
It is an independent party which keeps custody of the share certificates and
securities bought by the mutual fund for its investors. It has no authority to
sell or deal in them, but can only release or accept them as per the
instructions of the Asset Management Company (AMC). |
| |
| Daily Dividend Fund
|
|
This term applies to funds that declare their income dividends on a daily basis
and reinvest or distribute monthly. |
| Top |
|
|
| |
| Diversification |
|
It means placing money in a wide range of investments. It is this feature of a
mutual fund that makes it so desirable for the small investor since it also
minimizes his risk and guarantees safe returns. |
| |
| Exchange Privilege / Switching
Privilege
|
|
This is also known as the "lateral shift", a facility given by some mutual
funds to its investors which enables them to switch their investments from one
scheme to another. For example, if the stock market is on a high, they can
switch over from a debt fund to an equity fund. If, on the other hand, they
anticipate a fall, they can transfer their funds to a safer income fund. |
| |
| Ex-Dividend Date |
|
Ex-dividend refers to the Net Asset Value (NAV) not including the right to
receive the next dividend. As such, the ex-dividend date is the date on which
the NAV reflects the dividend. If you buy a Mutual Fund unit on the ex-dividend
date, you are not entitled to the dividend. |
| |
| Expense Ratio |
|
The ratio of total expenses to net assets of the fund. Expenses include
management fees, the cost of shareholder mailings and other administrative
expenses. The ratio is listed in a fund's prospectus. Since it is the small
investors who have to ultimately bear the cost of running the mutual fund
therefore at the outset, one has to see that the fund expenses are not too
high, or if they are, they should be offset by a good performance. |
| |
| Fund Manager |
|
They are highly skilled professionals who are appointed by the Asset Management
Company (AMC) in order to effectively manage the investments of the mutual
fund. |
| |
| Income / Dividend
|
|
It is a method of distributing income where dividend is paid to the investor at
regular intervals, which may be monthly, quarterly, half yearly or yearly. |
| Top |
|
|
| |
| Investment Objective
|
|
This reflects how and where a Mutual Fund plans to invest its funds collected
from the subscriber. This is announced at the time of its launch. |
| |
| Initial Public Offering (IPO)
|
|
When a Mutual Fund is set up it launches its schemes by offering units to the
public at the face value. This is the first time the Mutual Fund issues its
units and is called the Initial Public Offering (IPO). |
| |
| Listing |
|
It means that the units of that fund can be bought or sold on the Stock
Exchange. Listing of mutual funds provides liquidity - it gives the investor an
exit option before maturity of the scheme. This provision is compulsory for
close-ended schemes of Mutual Funds. |
| |
| Load |
|
It is a charge that the mutual fund levies on the investor at the time of
entering the scheme or exiting from it. |
| |
| Load Fund |
|
Load Fund is one that charges a commission for entry or exit. That is, each
time you buy or sell units in the fund, a commission will be payable. This is
charged for the marketing cost, administration cost, etc. of the fund.
Typically entry and exit loads range from 1% to 2%. |
| |
| Lock-in period
|
|
This is a period during which units of a Mutual Fund scheme cannot be sold or
transferred by the investor. This usually is the case in Tax-saving schemes,
which have a three-year lock-in under section 88 of the Income tax Act. It also
exists in a scheme, which allows exemption from payment of capital gains tax
from sale of Mutual Funds units under section 54EC of the Income tax Act. |
| Top |
|
|
| |
| Management Fee
|
|
The Asset Management Company (AMC) that manages and markets the Mutual Fund
scheme charges a fee to the corpus of the scheme for its efforts. This fee can
range between 1% and 1.25% of the scheme's corpus. This fee is payable
irrespective of the performance of the scheme. |
| |
| Market Price
|
|
This is the price at which the units of the close-ended scheme are quoted on
the stock exchange where the units are listed. |
| |
| Mutual Fund
|
|
A Mutual Fund is a trust by entity set up under the Indian Trusts Act. This
entity owns all the assets/securities on behalf of the investors and appoints
an AMC to manage the scheme corpus. |
| |
| Net Asset Value (NAV)
|
|
This shows the actual market value of the units of a Mutual Fund scheme. It is
calculated by dividing the total market value of all the investments of the
scheme by the number of outstanding units of that scheme. This is used as a
yardstick to calculate the performance of the scheme. Outstanding units are the
total number of units issued by the fund to its investors. |
| |
| Payable Date
|
|
The date on which distributions are paid to shareholders who do not want to
reinvest them. This date can be anywhere from one week to one month after the
Record Date. |
| |
| Portfolio Turnover Rate
|
|
The rate at which the fund's portfolio securities are changed each year. If a
fund's assets total Rs.10 crore and the fund bought and sold Rs.10 crore worth
of securities that year, its portfolio turnover rate would be 100%.
Aggressively managed funds generally have higher portfolio turnover rates than
do conservative funds that invest for the long term. Note that a high portfolio
turnover often adds up to the fund's expenses. |
| Top |
|
|
| |
| Prospectus |
|
A prospectus is an information document published by the mutual fund, which
states its investment objectives, details of its operation, information on its
board and management and other useful facts. |
| |
| Record Date
|
|
It is the date when a shareholder is registered in order to qualify for
dividend. This becomes necessary because the units of the mutual funds are
constantly changing hands. It becomes imperative to identify who is the right
owner at the time of giving dividends and other benefits. |
| |
| Redemption |
|
It means repayment of a loan or debt. A close-ended scheme has a fixed tenure
after which it returns the money and income it has earned to its investors.
This is called redemption. In case of an open-ended scheme, an investor can
apply for redemption anytime after the scheme re-opens for subscriptions after
the Initial Public Offering (IPO). |
| |
| Redemption Fee/Redemption charge
|
|
A fee charged by some funds for redeeming, or buying back units. |
| |
| Redemption Price
|
|
It is a price at which a Mutual Fund scheme redeems its units to the investor
on maturity (in case of a close-ended scheme) on application for redemption (in
case of an open-ended scheme). |
| |
| Reinvestment Date
|
|
The date on which a Mutual Fund scheme's dividend and/or capital gains will be
reinvested (if requested) in additional units of the scheme. |
| |
| Reinvestment Option
|
|
A service that most mutual funds offer whereby a unit holder's dividends and
capital gains distributions are automatically reinvested in additional units. |
| Top |
|
|
| |
| Repurchase |
|
In case of an open-ended scheme, repurchase is when an investor applies to the
Fund for his money back and in the case of a close-ended scheme, it implies for
a fund which provides for a facility to buy-back units before the end of the
tenure of the scheme. |
| |
| Re-sale
|
|
An open-ended scheme allows new investors to buy its units even after the
Initial Public Offering (IPO) is over. However, the sale is made at NAV-based
price and not at face value, as in the initial offering. This is termed as
re-sale. |
| |
| Rupee cost-averaging
|
|
It is a simple way of optimizing one's earnings by systematic investment, where
you put a fixed amount every month or so to buy units regardless of what their
Net Asset Value (NAV) is. This automatically ensures that you get more units
when the price is down and less when they are up and saves you the trouble of
tracking and timing your entry and exit into the market. |
| |
| Sponsors |
|
They are the people who establish the Mutual Fund Trust and its Asset
Management Company (AMC). They are the shareholders of the AMC and earn
dividends from the profits earned by them. |
| |
| Systematic Withdrawal Plans
|
|
This is a facility allowed by most open-ended mutual funds whereby the investor
puts in a lump sum as investment and then receives income from it in the form
of automatic withdrawals. |
| |
| Tax Saving Schemes / Equity
Linked Saving Schemes (ELSS)
|
|
Certain tax rebates are given by the Government in order to boost stock markets
and encourage savings, particularly for the Equity schemes of Mutual Funds.
Under Section 88 of the Income Tax Act, an investor receives a tax rebate up to
Rs.2,000 on the amount invested in a tax saving scheme of a Mutual Fund
provided this fund compulsorily invests up to 85% of its corpus in equity
shares. The investor has to stay locked-in in this scheme for a period of 3
years. Considering the nature of investments, these schemes normally carry a
high risk, which is compensated with potential higher returns, possible from
stock markets. |
| Top |
|
|
| |
| Trust |
|
Literally it means management of money or property for someone. Here it means
an organization that sets up a mutual fund - a pool of money, which it collects
from the public, and invests it stocks and securities for them under a Trust
Deed. |
| |
| Units |
|
Units are issued by a Mutual Fund scheme to investors indicating their
investment in the Scheme. Units are like equity shares with a face value of
Rs.10 each. |
| |
| Yield |
|
The return earned on an investment, usually expressed as a percentage. There
are specific measures of yield to deal with different securities and
situations. |
| |
| Zero Coupon Bond
|
|
This is a bond that does not pay you any interest on your investment. Instead,
it mentions a certain amount, called the face value that is much higher than
your investment, which you will receive at the time of its maturity. |
|