Resources
Glossary
Plain-language explanations of the investing terms you'll come across in fund documents, statements and our conversations.
A
- AMC (Asset Management Company)
- The company that launches and manages mutual fund schemes. It pools money from investors and its fund managers invest it according to each scheme's stated objective.
- AMFI
- The Association of Mutual Funds in India, the industry body for mutual funds. It registers mutual fund distributors and issues their ARN.
- ARN (AMFI Registration Number)
- A unique number issued by AMFI to a registered mutual fund distributor. You can verify a distributor's ARN on the AMFI website.
- Asset Allocation
- How your money is divided across asset classes such as equity, debt and gold. It is shaped by your goals, time horizon and comfort with risk, and has a large effect on long-term outcomes.
- AUM (Assets Under Management)
- The total market value of the investments a fund or fund house manages on behalf of its investors.
B
- Benchmark
- A market index, such as the Nifty 50, that a fund's performance is compared against to judge how well it has done.
C
- CAGR (Compound Annual Growth Rate)
- The steady yearly rate at which an investment would have grown from its starting value to its ending value. Best suited to single, one-time investments.
- Compounding
- Earning returns on your past returns as well as on your original investment. The effect grows stronger the longer you stay invested.
D
- Debt Fund
- A mutual fund that invests mainly in fixed-income instruments such as government securities, corporate bonds and money market instruments. Usually less volatile than equity, but not risk-free.
- Direct Plan and Regular Plan
- Two versions of the same scheme. A direct plan is bought straight from the fund house. A regular plan is bought through a distributor, includes distributor commission, and so has a slightly higher expense ratio.
- Diversification
- Spreading investments across companies, sectors and asset classes so that a fall in any one of them has a smaller impact on your overall portfolio.
E
- ELSS (Equity Linked Savings Scheme)
- An equity mutual fund with a three-year lock-in. Investments may qualify for a tax deduction under Section 80C under the old tax regime.
- Equity Fund
- A mutual fund that invests mainly in company shares. It aims for long-term growth and can move up and down sharply in the short term.
- Exit Load
- A fee some schemes charge if you redeem units before a set period. It is deducted from the redemption value and is disclosed in the scheme documents.
- Expense Ratio
- The yearly cost of running a fund, shown as a percentage of its assets. It is deducted from the fund's NAV, so returns you see are already net of it.
F
- Folio Number
- An account number a fund house gives you to track your holdings, transactions and statements with that fund house.
G
- Goal-based Investing
- Planning investments around specific goals such as education, a home or retirement, with an amount and timeline for each, instead of picking products first.
H
- Hybrid Fund
- A mutual fund that invests in a mix of asset classes, typically equity and debt, to balance growth with stability.
I
- Index Fund
- A passively managed fund that aims to track a market index, such as the Nifty 50, by holding the same securities in the same proportions.
K
- KYC (Know Your Customer)
- A one-time identity and address verification required before investing in mutual funds. It is completed using documents such as PAN and Aadhaar.
L
- Large, Mid and Small Cap
- Categories of companies by market value. Large caps are the biggest and usually most stable, small caps are the smallest and usually most volatile, and mid caps sit in between.
- Lock-in Period
- A fixed period during which an investment cannot be redeemed, such as the three-year lock-in on ELSS funds.
- Lumpsum
- Investing a larger amount in one go, as opposed to spreading it out over time through a SIP.
N
- Nominee
- The person you name to receive your investments in the event of your death. Keeping nominations up to date makes the transfer simpler for your family.
- NPS (National Pension System)
- A government-backed, long-term retirement savings scheme regulated by the PFRDA. Contributions are invested in a mix of equity, corporate bonds and government securities.
P
- PMS (Portfolio Management Services)
- A SEBI-regulated service where a professional manager runs a portfolio of securities held directly in your name. It has a high minimum investment and suits experienced investors.
- Portfolio Review
- A periodic check of your investments against your goals, looking at allocation, overlap between funds, performance and costs.
R
- Rebalancing
- Bringing your portfolio back to its target asset allocation after market movements have shifted it, by trimming what has grown and adding to what has lagged.
- Redemption
- Selling your mutual fund units back to the fund house. The money is paid out at the applicable NAV, less any exit load.
- Riskometer
- A SEBI-mandated label on every mutual fund that shows its risk level on a scale from Low to Very High.
S
- SEBI
- The Securities and Exchange Board of India, the regulator for securities markets, mutual funds and portfolio managers in India.
- SIF (Specialised Investment Fund)
- A SEBI-regulated category that sits between mutual funds and PMS. It allows more flexible strategies than mutual funds and has a higher minimum investment.
- SIP (Systematic Investment Plan)
- Investing a fixed amount in a mutual fund at regular intervals, usually monthly. It builds discipline and spreads your purchases across market ups and downs.
- Step-up SIP
- A SIP where the instalment increases by a set amount or percentage each year, usually in line with growth in income.
- STP (Systematic Transfer Plan)
- Moving a fixed amount at regular intervals from one scheme to another within the same fund house, often from a debt fund into an equity fund.
- SWP (Systematic Withdrawal Plan)
- Withdrawing a fixed amount from a mutual fund at regular intervals, often used to create a steady income in retirement.
T
- Term Insurance
- Pure life cover that pays a fixed sum to your nominee if you die during the policy term. It has no investment component, which keeps premiums low.
U
- Units
- Your share of a mutual fund. The number of units you receive equals the amount invested divided by the NAV.
X
- XIRR
- An annualised return that accounts for the timing of each cash flow. It is the right way to measure returns on SIPs and investments made over time.