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Balanced Funds: A class of mutual fund that aims at allocating the total assets with it in the
portfolio mix of debt and equity instruments.
Bear Market: It is a period in capital market when investors are on a selling spree and the share
prices are going down.
Benchmark: It is a standard against which a scheme's performance can be compared. For
example, the performance of a large cap oriented equity fund can be benchmarked against BSE
Sensex.
Beta: It is the measure of the relative sensitivity of a stock or mutual fund to the market. The
market is assigned a beta of 1. The higher the beta, the more sensitive the stock or fund is
considered to be relative to the market as a whole. In other words, funds with beta more than 1
will react more to any fluctuations (whether upward or downward) in market than funds with
beta less than 1.
Blue Chip Stock: Stock of a major corporation with a long, fairly stable record of earnings and
dividend payments and with good expected future growth.
Bond: A debt security issued with an interest-bearing promise to pay a specified sum of money
due on a specific date in the future (maturity date).
Bonus: Bonus is an 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.
Broker: A broker is an intermediary who guides the investors on one or more investment
avenues available to an investor and facilitates the process of investment.
Brokerage: It is the fee payable to a broker for acting as an intermediary in a transaction
(normally a buy transaction). For example, brokerage is paid by a fund to a broker for getting
fresh investments from investors.
BSE Sensitive Index: 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. It is usually considered as the benchmark index for performance evaluation of equity
funds.
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.
Capital Gains: The profit gained on sale of securities and certain other capital assets (including
units of mutual funds) are called capital gains. The gains can be classified into 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 12 months or more are long-term gains.
Dividend: Mutual fund dividends are paid out of income from the scheme's investments and can
be announced out of the realised gains only.
Dividend Distribution Tax: A tax payable by a debt oriented mutual fund before dividend is
distributed to the unit holders. There is no such tax applicable on equity oriented schemes.
Dividend Frequency: The time period of dividend payout of a scheme. This is especially valid
in the case of an income/debt schemes like monthly income plans that normally have a regularity
in such distributions.
Dividend History: The 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.
Dividend Plan: In a dividend plan, the fund distributes its accumulated income from time to
time as and when the dividend is declared.
Dividend Reinvestment: In a dividend reinvestment plan, the dividend is reinvested in the
scheme itself and is not paid out to the investors. i.e. instead of receiving dividend in cash, the
unit holders receive units allotted to them at the Ex-dividend NAV.
Dividend Warrant: It is an instrument issued by companies/ mutual funds to an investor for the
purpose of payment of dividends.
Dividend Yield: It refers to the dividend earned per unit of a scheme at the prevailing per unit
price.
Entry Load: It is the load charged by the fund when one invests into the fund. It increases the
price of the units to more than the NAV and is expressed as a percentage of NAV.
Equity Schemes: In these schemes more than 65% of the investments are invested in equity
shares of various companies.
Ex-Dividend Date: It is the effective date of a dividend distribution. When the dividend is paid,
the NAV of the fund drops by the amount of the dividend.
Ex-Dividend NAV: The NAV declared post record date is the ex-dividend NAV.
Exit Load: It is the load charged by the fund when one redeems the units from the fund. It
reduces the price of the units to less than the NAV and is expressed as a percentage of NAV.
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.
Money Market Instruments: Refers to Commercial Papers, Treasury Bills, GOI Securities etc.
with an unexpired maturity less than or up to one year, Call Money, Certificates of Deposit and
any other instrument specified by the Reserve Bank of India.
Mutual Funds: An investment company that pools money from its unitholders 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.
Net asset value (NAV): The value of fund's portfolio at market value less current liabilities
divided by the number of units outstanding. Net asset value is normally computed daily or
weekly and can be found in the financial section of the daily newspaper.
Nifty: An index of prices of a group of fifty stocks listed on the NSE.
Nominee: The person(s) to whom the assets should be distributed upon the death of the account
holder.
Non Performing Investments: Part of the portfolio investment of a debt fund which is not
making interest payment or principal amount repayments in time.
Offer Document: It is the official document issued by mutual funds prior to the launch of a fund
describing the characteristics of the proposed fund to all its prospective investors. It contains
information required by SEBI pertaining to issues such as investment objective and policies,
services, and fees.
Offering Period: The period during which the initial offer to subscribe for the units of a scheme
is open.
Offshore Funds: The funds set up abroad to channelise foreign investments in the Indian capital
markets.
Open-End Scheme: Scheme of a mutual fund where purchase or sale of units is allowed on a
continued basis.
Opening NAV: The NAV disclosed by the fund for the first time after the closure of an NFO.
Opportunity Risk: The risk that a better opportunity may present itself after you have already
committed your money elsewhere.
Payout: Pay-out day is the designated day on which securities and funds are paid out to the
members by the clearing house of the Exchange.
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.
Redemption Price: The price at which open-ended schemes repurchase their units and closeended schemes redeem their units on maturity. Such prices are NAV related.
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.
Repurchase: Buying back/ cancellation of the units by a fund on an ongoing basis or for a
specified period or on maturity of a scheme. The investor is paid a consideration linked to the
NAV of the scheme
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.
Repurchase price: The price of a unit (net of exit load) that the fund offers the investor to
redeem his investment.
Risk Adjusted Returns: The expected returns from an investment depend upon the risk
involved in the investment. For the purpose of comparing returns from investments involving
varying levels of risk, the returns are adjusted for the level of risk before comparison. Such
returns (reduced for the level of risk involved) are called risk-adjusted returns.
Risk-Free: Absence of credit risk in a security. Usually Government or Government guaranteed
securities are only considered to be risk free.
Repatriate: The act of legally returning to the country of origin. Often used in connection with
currency conversion, when foreign currency is brought into the home country and converted to
the local currency.
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.
Sector Allocation: It refers to the portion of assets of a fund which is invested in a particular
well-defined segment of the economy, like Information Technology, pharmaceuticals, utilities,
media, telecommunications, etc.
Sector Funds: Sector Funds are mutual funds that are established to focus and invest in the
stocks of specific sectors of the economy, such as pharmaceuticals, chemicals, or information
technology. This is normally specified in the offer document of the funds.
Security: Generally, an instrument evidencing debt of or equity in a corporation in which a
person invests. The term includes notes, stocks, bonds, debentures or other forms of negotiable
and non-negotiable evidences of indebtedness or ownership.
Sponsor: A sponsor is the person who, acting alone or in combination with another body or
corporate, establishes a mutual fund and applies to SEBI for its registration. The sponsor is also
closely associated with the AMC. According to SEBI regulations, the sponsor has to contribute a
minimum of 40% of the net worth of the AMC.
Systematic Investment Plan (SIP): 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.
1,000 a month and take advantage of rupee cost averaging.
Systematic Transfer Plan (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.
Systematic Withdrawal Plan (SWP): A plan offered with some schemes under which postdated 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.
Total Assets Under Management: The market value of the total investments of a fund as on a
particular date.
Total Return: Return on an investment, taking into account capital appreciation, dividends or
interest, and individual tax considerations adjusted for present value and expressed on an
annualised basis.
Trust: A legal arrangement under which property and assets may be held and managed for the
benefit of another person. Mutual funds in India are registered under the Trusts Act.
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.
Unit: A Unit represents one undivided share in the assets of the Schemes.
Unit Trust: A special type of fund, usually a bond fund, that has a fixed portfolio, shares or
"units" are sold when the fund is formed, and the portfolio remains fixed until the maturity of the
underlying securities.
Unitholder: A person who holds Unit(s) under a Mutual Fund.
Yield: Distributions from investment income, usually expressed as a percentage of net asset
value or market price. Unlike total return, yield is a single component of investment income and
does not include capital gains distributions or capital appreciation of underlying shares.
Yield Curve: The Yield Curve gives the relationship at a given point in time between yields on a
group of fixed-income securities with varying maturities viz. treasury bills, notes, and bonds. The
curve typically slopes upward since longer maturities normally have higher yields, although it
can be flat or even inverted.
Yield To Maturity: Used to determine the rate of return an investor will receive if a long-term,
interest-bearing investment, such as a bond is held to its maturity date. It takes into account
purchase price, redemption value, time to maturity, coupon yield and the time between interest
payments.
Zero-Coupon Bond: A bond where no periodic interest payments are made. The investor
purchases the bond at a discounted price and receives one payment at maturity. The maturity
value an investor receives is equal to the principal invested plus interest earned compounded
semi-annually at the original rate to maturity. Interest income from zero-coupon bonds is subject
to taxes annually even though no payments will be made.