It can be quite a task keeping up with the several jargons in the investment industry. In this article, we have provided the descriptions for all the mutual fund terms that are used frequently.

Adjusted NAV

The Net Asset Value of a fund adjusted for dividends. It reflects the fund's true performance, including any dividends you may have received.

Age of fund

The fund's total time since inception. An older age denotes an even longer track record, from which you can judge its performance history.

Alpha coefficient

Alpha is the excess return generated by a fund above its benchmark. So if it's positive, then well, your investment is doing good. If it is negative, then your fund has not done so well compared to its benchmark.

Annual return

The percentage change in a fund's NAV over one year. This return may or may not include dividends and bonuses that you might receive.

Annualised returns

The returns calculated over a year, even if the investment period is longer or shorter. It provides you with a standardised view of the fund’s performance.

Applicable NAV

The NAV used to process your transactions (buy/sell) in a fund, depending on the cut-off time set by the fund house.

Asset allocation

The strategy of diversifying your portfolio’s investments across various asset classes (e.g., stocks, bonds) to manage risk and align with the fund's objectives.

Asset management company

The mutual fund company responsible for making investment decisions in mutual funds on your behalf.

Average credit quality

The weighted average credit rating of all debt securities in a fund’s portfolio, indicating the creditworthiness of the investments you are exposed to.

Balance maturity tenure

The remaining duration until a close-ended scheme reaches its maturity date, when you can redeem your investment.

Balanced funds

An equity and debt-investing mutual fund to give you a balanced risk-return profile.

Benchmark

A standard (like an index) used to measure the performance of a fund. It serves as a reference point to assess how well your fund is performing.

Beta

Measures the sensitivity of a stock or fund to market movements.

Blue chip stock

Shares of large established companies known for stable earnings and strong financial performance.

Bond

A debt instrument where you lend money to a corporation or government for a fixed period in exchange for periodic interest payments and repayment of the principal amount at maturity.

Bonus

Additional units allocated to you based on your holdings, increasing the number of units without changing the overall value of your investment.

Broker

An intermediary who facilitates buying and selling investments for you.

Brokerage

The fee you pay to a broker for executing your buy or sell orders in investment transactions.

BSE index

Index which reflects the share price of the 30 largest organisations based on Bombay Stock Exchange-BSE snapshot of market performances.

Capital gains

The profit you earn from selling an asset, such as mutual fund units or securities. Gains are classified as short-term or long-term based on the holding period.

Certificates of deposit

Unsecured promissory notes issued by banks, with varying maturities, used to raise short-term funds. These can be part of your debt fund investments.

Close-ended schemes

Mutual funds with a fixed maturity period. You can invest only during the initial issue and exit at maturity or by selling units on a stock exchange if listed.

Commercial paper

Short-term, unsecured debt instruments issued by companies to meet their working capital needs. They are typically included in debt funds you might invest in.

Corpus

The total amount of money pooled together by all investors in mutual funds schemes, including your investment.

Cost of churning

The expenses incurred when buying and selling securities within a fund’s portfolio, which may affect the returns you receive.

Coupon rate

The annual interest rate paid on a debt security, expressed as a percentage of its face value. It indicates how much interest you will earn from the security.

Current load

The fees currently charged by a fund house when you buy or redeem units of a fund.

Current yield

The annual interest of a bond divided by its current market price, expressed as a percentage. This tells you the yield you are earning based on the current price.

Custodian

An entity responsible for holding and safeguarding your fund's securities and other assets.

Cut-off time

The deadline by which your transaction must be completed to be processed at that day's NAV.

Debt/income funds

Mutual funds that primarily invest in fixed-income instruments like corporate bonds and government securities, offering you relatively lower risk.

Discount

When a scheme’s market price is below its NAV, making it available at a discount. This can be an opportunity for you to invest.

Diversification

A risk management strategy where your fund invests in various securities and asset classes to minimise risk by spreading it across.

Dividend tax distribution

A tax levied on a mutual fund when dividends are paid out to the unitholders like you.

Dividend frequency

The periodicity at which dividends are paid by a mutual fund, say monthly or quarterly, in case you have opted for a dividend plan.

Dividend per unit

The total dividend declared by a fund divided by the number of units issued to you as an investor.

Dividend plan

A mutual fund plan that periodically pays out dividends to you based on the fund's profits.

Dividend reinvestment

A plan in which dividends declared by the fund are reinvested to purchase more units of the scheme instead of paying them out to you directly.

Dividend warrant

An instrument issued by companies or fund houses for paying dividends to you as a unitholder.

Dividend yield

The dividend earned per unit of a scheme, expressed as a percentage of its current market price, indicating the income potential of your investment.

Dividends

A portion of the fund's profit is distributed to you periodically. Paying dividends is at the discretion of the fund's management.

Entry load

A fee charged when you buy units of a mutual fund. Entry loads are no longer applicable in India.

Equity linked savings scheme (ELSS)

A type of mutual fund investing in equity shares with a lock-in period of three years, offering you tax benefits under Section 80C of the Income Tax Act.

Ex-dividend date

The date from which a fund's dividend distribution is effective, which reduces the NAV by the dividend amount.

Ex-dividend NAV

The NAV of a fund after accounting for a declared dividend, showing the adjusted value of your investment.

Exit load

A fee charged by a fund house when you redeem units of the fund.

Expense ratio

The percentage of a fund’s assets used for management, administrative, and operational expenses.

Face value

A unit of a scheme originally priced at, say, Rs. 10 in India.

Fund category

The classification by investing in assets such as large-cap, multi-cap, or small-cap equity funds helps to find suitable investments for you.

Fund family

All the schemes managed by a single mutual fund company.

Fund management costs

Charges levied by the AMC for managing a mutual fund, which affects the returns you receive.

Fund manager

An independent professional appointed by the AMC to manage the fund portfolio in line with the stated objectives, with a view of making investments on your behalf.

Gilt funds

Mutual funds that invest in government securities, offering low risk and average returns and are suitable for the risk-averse investor like you.

Gilts/government securities

Debt securities issued by the government carrying minimal risk due to the sovereign guarantee, which can provide stability to the portfolio of the investor.

Growth scheme

A plan in which the capital gained is reinvested to enhance the NAV instead of providing you with a regular dividend.

Guaranteed returns

Returns guaranteed by the fund house, usually available in some fixed-income plans.

Income/debt funds

Funds that primarily invest in fixed-income securities, offering decent returns with low risk, ideal for conservative investors.

Index funds

A kind of mutual fund that is designed to reflect the performance of a particular index, and it helps you invest in a vast market through it.

International funds/emerging market funds

Funds that invest in companies or organisations in emerging markets, offering you exposure to international economies.

Investment management

The analysis and execution of investment plans, ensuring that your investments align with the fund’s objectives.

Investment objective

The primary goal of a mutual fund is to achieve capital appreciation, income generation, or a mix of both.

Investment strategy

The framework that a fund follows while investing the pooled money to achieve its stated objective.

Key information memorandum

An official document that provides essential information about a mutual fund, including its objectives, fees, investment strategy, and risk factors.

Liquid funds/money market funds

Funds that invest in short-term, low-risk money market instruments like treasury bills and commercial papers, offering you liquidity and moderate returns.

Liquidity

The ability of an asset to be quickly converted into cash without a significant loss in value, helping you meet immediate expenses.

Load

A fee charged by a mutual fund at the time of investment (entry load) or redemption (exit load).

Lock-in period

The minimum time during which your investment cannot be redeemed. Common in tax-saving funds like ELSS, it typically lasts for three years.

Management expense ratio

The ratio of a fund's management expenses to its total assets, indicating the cost of managing the fund. A lower ratio usually means higher net returns for you.

Management fee/expense

The charge incurred by the fund for managing its portfolio, often expressed as a percentage of the total assets in the scheme.

Market risk

The risk of losses due to market fluctuations, affecting the price of securities in your fund's portfolio.

Maturity or maturity date

The date when a fund scheme or debt instrument reaches its end, and you receive the invested amount along with any returns.

Minimum additional investment

The smallest amount you can invest to purchase more units in an existing mutual fund scheme.

Minimum subscription

The minimum amount required for your initial investment to purchase units of a mutual fund.

Minimum withdrawal

The smallest amount you can withdraw from a fund when redeeming your investment.

Money market

The market for short-term debt instruments, typically maturing in less than one year. Mutual funds investing in these instruments are known as money market funds.

Money market instruments

Short-term debt instruments such as treasury bills, certificates of deposit, and commercial papers, used by funds to provide liquidity and low-risk returns.

Mutual funds

Investment vehicles that pool money from various investors to invest in diversified securities like stocks, bonds, and money market instruments, managed by professional fund managers.

Net asset value (NAV)

The value of a mutual fund's portfolio after subtracting liabilities, divided by the number of outstanding units. It represents the per-unit value of the fund and is typically calculated daily.

Nifty

An index of 50 large-cap stocks listed on the National Stock Exchange (NSE) in India, serving as a key benchmark for market performance.

No-load mutual fund or no-load scheme

Funds that do not charge any fees for buying (entry) or selling (exit) units, allowing you to invest or redeem without extra costs.

Non-performing investments

Part of a portfolio that fails to make interest payments or repay the principal on time, often found in debt funds.

Objective of investment

The purpose statement released by the fund, outlining the goals and investment avenues.

Offer document or prospectus

An official document provided by mutual funds before launch, detailing the fund's characteristics, objectives, fees, and policies, helping you make informed decisions.

Open-end scheme

A mutual fund scheme that allows you to buy or sell units continually, with no fixed maturity date.

Opening NAV

The first disclosed NAV of a fund after its New Fund Offer (NFO) closes.

Pay-out

The designated day when the fund house pays out securities or funds to the investors.

Performance

Returns accrued from an investment in a fund, which could be in the form of capital appreciation, dividends, and bonuses.

Portfolio

The cumulative holding of investments owned by a fund, which include various securities and asset types.

Portfolio managers

The AMC deems to appoint the portfolio manager of a scheme who oversees the effective management of a portfolio to achieve the objectives of the fund. The manager shall make decisions on investments based on the goals of the funds.

Premium

It is said that the market price of a fund's unit trades at a premium if it is more than its actual NAV.

Prospectus

A public prospectus presenting the details of the fund, including investment strategy and profile of the fund manager, to guide prospective investors.

Purchase price or offering price

The price at which you can buy units of a mutual fund, usually the NAV plus any applicable sales charges.

Rating

A symbol indicating the creditworthiness of debt instruments in the fund's portfolio, assessing the risk of timely repayment.

Record date

The date by which you must be registered as a unitholder to receive any future dividends or capital gains distribution.

Recurring investment facility

An arrangement where you can make regular investments in a mutual fund, often with automatic reinvestment of dividends.

Redemption fee

A fee charged when you redeem your investment from a mutual fund.

Redemption of units

The process of selling your units back to the fund, at a price linked to the scheme's current NAV.

Redemption price

The price at which open-ended schemes repurchase units or close-ended schemes redeem units upon maturity, determined using the NAV.

Risk-adjusted returns

The returns expected from an investment after accounting for the risk involved, used to compare different investment options.

Risk-free

Investments with a guaranteed assurance of returns, usually government-backed securities, considered free of credit risk.

R-squared

A statistical measure that determines the percentage of fund returns explained by its benchmark. The higher the R-squared value, the more closely the fund tracks its benchmark.

Scheme information document (SID)

An official document, by way of informing you through which you can choose to invest, detailing the nature, objectives, policies and fees of a mutual fund scheme.

Scheme objective

What a fund intends to achieve, as mentioned in its official documents.

Sector allocation

The investment of the fund in different sectors of the economy, such as IT, finance, or health care.

Sector funds

Mutual funds that invest in a specific sector of the economy, such as pharmaceuticals or technology. They do come with higher risks and the returns are potentially much higher than that of regular mutual funds.

Security

An instrument, either debt or equity, in which a person invests, including stocks, bonds, and debentures.

Sharpe ratio

Measures the risk-adjusted returns of a fund by comparing excess returns over the risk-free rate to the standard deviation of the fund's returns. A higher ratio indicates better risk-adjusted performance.

Sponsors

Entities that establish a mutual fund and apply to SEBI for registration, contributing a minimum of 40% of the AMC's net worth.

Standard deviation

A statistic that measures the variability of a fund's returns. A lower standard deviation indicates more consistent performance.

Systematic investment plan (SIP)

A program that allows you to invest a fixed amount regularly in a mutual fund, providing a disciplined approach to investing.

Systematic transfer program (STP)

A facility that lets you transfer a specific amount from one scheme to another at regular intervals.

Systematic withdrawal plan (SWP)

A plan enabling you to withdraw a fixed amount from your mutual fund investment at regular intervals.

Total assets under management (AUM)

The total market value of all investments managed by a fund as of a specific date.

Total return

Return on investment that accounts for capital appreciation, dividends interest, and individual taxes.

Trust

This refers to an agreement made legally, holding mutual fund assets for the purpose of investors' management.

Trustee

A person or group with supervisory authority over the fund manager; thus, the fund is managed in accordance with the deed and objectives.

Turnover

The extent to which a fund's portfolio changes during a year. High turnover can indicate more frequent buying and selling of securities.

Turnover rate

A measure of the fund's trading activity, calculated by dividing total purchases or sales by the fund's net assets during a period.

Unit

A share of a mutual fund's assets, representing an investor's ownership in the scheme.

Unitholder

An individual or entity holding units in a mutual fund scheme.

Unit trust

A fixed-portfolio bond fund where shares ("units") are sold at the fund's inception and remain unchanged until maturity.

Value stocks

Those stocks which by various valuation methods appear to be undervalued and trade at much lower P/E and P/B than the market average.

Yield

The income generated from an investment, given as a percentage of the NAV or the market price.

Yield curve

A graphic depiction of the yield-maturity relationship in fixed-income securities.

Yield to maturity (YTM)

All the returns expected if held to maturity, counting purchase price, redemption value, coupon payments, and payment frequency on a bond.

• While mutual fund jargon can be confusing at times, it is important to do your research to ensure you can make smart investment decisions.
• From account statement to zero-coupon bond, there are several mutual fund terms that you should be aware of as an investor.
• Being aware of mutual fund jargon would help you choose the right mutual fund schemes for yourself.

If you are investing in mutual funds, being well informed about all the associated terminologies would help you go a long way. The Bajaj Finserv Mutual Fund Platform can additionally help you compare mutual funds by using a mutual fund calculator.