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Mutual Fund terminologies you must know as a Investor

mutual fund terminologies, mutual fund terms



For all those who are very new to mutual funds - here are the list of terminologies you must be aware of as an investor. These terms are used very frequently across the mutual fund industry and you might find them when you are researching for the best funds -


AMC - This is the asset management company that manages your invested money. Few examples of registered AMC's in india are Reliance Nippon, Kotak, Motilal Oswal, Mirae Asset etc.

NAV - This is the net asset value & describes the price of a unit of fund. A new NFO (described below) is priced at Rs 10 & the NAV appreciates or depreciates based on the funds performance.


Exit Load - Fund houses usually collect some amount from the investor when they exit the scheme - exit load. This varies for different fund houses & also depend on the type of fund (Equity, Debt, Arbitrage etc.) invested in.


AUM - Asset Under Management refers to the total amount of money being managed by the fund.


ELSS - Tax saving mutual funds are referred to as Equity Linked saving scheme. These provide tax benefits under Section 80C & currently as of FY 2018-19 have a lock in period of 3 years.


NFO - This term is used for a new mutual fund scheme and is called as new fund offering.


Arbitrage Funds - These funds take advantage of the price difference in the cash & derivatives market. Read more about arbitrage funds - What are Arbitrage Funds? Returns, Risks, Taxation


Debt Funds - Debt funds are funds which invest in fixed income securities like treasuries & bonds. Usually it is recommended to have debt funds as part of your diversified portfolio,


Large, Midcap, Smallcap Funds - These funds are categorized based on the market capitalization of the equities that they hold. Large cap companies are well established entities & are less volatile than mid & small cap. However, the growth potential of mid & small cap is high.



Liquid Funds - These funds do not have a lock in period or exit load and invest in short term securities.

Open-ended Funds - These funds are constantly buying & selling in the market. And investors have the choice to enter or exit at the time of their convenience

Closed-ended Funds - These types of funds can be purchased as part of an NFO & have a fixed maturity cycle. 


Lump-sum Investment - When an investor invests amount in a single go - it is referred to as lump-sum investment.


Systematic Investment Plan - This is an investment strategy where an investor invests fixed amount after every month, quarter, semi annually or yearly. This helps investor to lower the risk of investment during market volatility and works on the principle of cost averaging. Read more SIP - The magical recipe for financial success.


Systematic Transfer Plan - This is an investment strategy where an investor invests lump-sum amount & transfers fixed or variable amount to other schemes on a predefined date.


Systematic Withdrawal Plan - This is an investment strategy where an investor invests lump-sum in a scheme & withdraws a fixed variable amount on a predefined date.



Mutual funds as an investment instrument has been gaining popularity over the years, thanks to the wide range of options available and the ease of KYC process. To know more about them, check out The Mutual Funds Sahi Hai campaign, launched by The Association of Mutual Funds in India (AMFI) at www.mutualfundssahihai.com

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