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Asset Allocation
Asset allocation refers to the percentage of the various asset classes held in particular portfolio.
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Asset Management Company
An asset management company is an organization that is a professionally-run investment management outfit. All AMCs are regulated by the Securities and Exchange Board of India (SEBI). An AMC collects and invests funds from investors in portfolios as defined in the investment objective of the Scheme Information Document (SID) on behalf of the Mutual Fund Trust.
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Assets Under Management
Assets Under Management or AUM refers to the total market value of the assets held by the Fund House under its various schemes.
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Balanced Funds
A Scheme that invests in both debt and equity in predetermined asset allocation pattern with equivalent weightage to debt instruments is known as a balanced fund.
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Closed-end Fund
A Closed-end Fund has a fixed tenure or maturity period during which units cannot be bought, sold or traded, except at specific intervals/ period. Units of such schemes will be listed. Investors can purchase / sell such units on the stock exchange.
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Corpus
Same as Asset Under Management.
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Debt funds
A fund that invests in debt instruments like bonds and money market instruments is known as a debt fund. These funds generally aim to provide a steady income to investors, while keeping their capital intact.
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Dividend
Dividend is a payment made to the investors, when their investment in the fund generates income. Dividend is paid only if you have chosen Dividend Payment Option. The payment is made after deduction of taxes and results in fall of NAV to the extent of dividend paid.
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Dividend Plan
A dividend plan is an investment plan wherein investors receive an income/dividend from the investment gains.
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Dividend Re-investment
When the dividend from a particular investment is re-invested as opposed to it being paid out, it is known as dividend re-investment.
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ELSS
An Equity Linked Saving Scheme (ELSS) is a tax saving scheme with a specified lock-in period. Tax saving equity funds have a lock-in period of 3 years. Investment in Equity Linked Saving Scheme is a qualifying investment under Section 80C. Deduction under 80C is available up to a maximum of Rs. 1,00,000 for appropriate investment.
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Entry/Exit Load
Load is the fee charged to an investor while buying or selling units, as a percentage of the schemes NAV. The amount charged by a fund house on purchase of a scheme is known as entry load. Similarly, an exit load is the charge paid to the fund house if an investor chooses to exit the scheme within the specific period. Entry/Exit load is changed as per and in circumstances specified in respective Scheme Information Documents (SID).
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Equity Funds
Equity funds are those which mainly invest in stocks i.e. equity
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Fixed Maturity Plans (FMPs)
FMPs are debt funds that have a fixed maturity date. Such schemes invest in fixed income instruments like bonds, government securities, etc. whose maturity typically coincides with the maturity of the scheme.
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Folio Number
A Folio Number is a number issued by the fund house, akin to the account number given by a bank. An investor can keep track of his holdings with the fund house by quoting his folio number.
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Fund Fact Sheet
A Mutual Fund sends its investors a periodic fund fact sheet, giving review of the performance of the scheme in that period of time. It may also contain other general information and varied facts and market outlook.
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Fund House
A Mutual Fund may also be referred to as a Fund House.
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Fund Manager
A fund manager is an investment professional carrying out the responsibility of investing and managing the schemes funds.
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Fund of funds
A fund of funds refers to those schemes that primarily invest in other mutual funds as opposed to stocks or bonds.
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Gilt funds
Gilt funds are a class of debt funds that invest in government securities and treasury bills.
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Government Securities
Government securities are debt securities, issued by the government. Such issuance can be by Central or State Government. Their maturity period may range from short-term to long-term.
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Growth Plans
Growth plans offered by mutual funds are those where the income earned is reinvested back in the scheme.
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Income fund
Income funds are debt funds that mainly invest in bonds and government securities. They are relatively long and medium term investments which aim to maximize debt returns. Returns are subject to interest rate fluctuations.
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Index Fund
Index Fund is a type of fund that has a portfolio which is built by matching a particular market index. Investing in an index fund is a form of passive investing. Index fund is a type of fund whose portfolio is replicated on the basis of a particular index (e.g. Sensex). The value of individual securities constituting the portfolio of the index fund largely bears the same proportion to the overall portfolio, as borne by that security in that index.
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Liquid funds
Liquid funds invest in short-term debt vehicles like commercial papers and treasury bills, among others. Although these do not yield very high returns, they offer high liquidity.
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Lock-in Period
The Lock-in period is the time period during which the investment amount cannot be withdrawn from the scheme it is invested in.
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Market Risks
Market risks refer to the risks involved with the underlying stocks / securities that a fund invests into. This could lead to a decline in the value of the mutual fund.
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Monthly Income Plans
Monthly income plans are debt based schemes which aim to provide a stable return to investors, on a monthly basis.
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NAV
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New Fund Offer
New Fund Offer (NFO) is the first sale of units of a fund, similar to the issue of new shares.
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No Load Fund
A no load fund is one that does not levy a charge on entry or exit from the fund.
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Scheme Information Document (SID)
A Scheme Information Document (SID) for a New Fund Offer is like prospectus which contains all the information related to a particular fund. It helps potential investors to make an informed decision whether to invest in that particular fund or not.
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PIN (Personal identification number)
Mutual funds assign a personal identification number (PIN) to the investors, with which they can keep a track of their portfolio and/or use it for transactions like online trading.
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Record Date
The record date is the date on which the list of unit holders of a particular fund is finalized. A record date is fixed to decide entitlement for benefits like dividend payment, allocating bonus units, etc. Unit holders appearing in the records of the funds as on Record Date only are entitled to the benefits.
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Redemption / Repurchase price
Redemption/ Repurchase price is the price at which a unit holder sells his units back to the fund. It usually amounts to the NAV minus the exit load.
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Registrars and transfer agents (RTA or R&T)
Registrars and transfer agents are appointed by a mutual fund for the purpose of investor servicing.
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Returns
The return is the percentage gain/income from an investment. In the case of mutual funds, returns are measured by a change in the NAV.
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Rupee Cost Averaging
Rupee Cost Averaging is a process wherein an investor buys more units of the fund at lower prices, and fewer units at higher prices. The cost per unit over time therefore averages out.
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SEBI
Securities and Exchange Board of India or SEBI regulates the capital and securities market. Mutual funds also come under its regulation.
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Sector Funds
Sector funds are basically equity funds which invest in stocks of only specific industry / sector.
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Sharpe Ratio
Sharpe Ratio is a ratio used to measure risk-adjusted performance. This ratio tells us whether a portfolio’s returns are due to efficient investing or just too much risk taking. It is calculated by subtracting the risk-free rate from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns. The Sharpe ratio helps to weed out the good investments from the bad because only the good investments give higher returns without too much risk.
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Systematic Investment plan (SIP)
In SIP, money is invested in any particular mutual fund scheme at regular intervals; this works out best for people with a periodic cash inflow.
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Tracking Error
A tracking error is the negative difference between the returns generated by a fund and the benchmark it tracks. If an index fund has a tracking error of 2%, it means the fund has 2% less or more returns in a particular time frame, than the index it tracks.
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Treasury Bills
Treasury bills are short term debt instruments issued by the government. They don’t carry a default risk but are subject to price fluctuations.
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Trustee
Trustee means the Trustee of the fund which holds the property of the Mutual Fund in trust for the benefit of the unit holders.
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Unit
A unit in a mutual fund scheme indicates one share of the assets of that particular scheme.
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Unit Holder
A person who holds units in a fund is known as a unit holder.
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