Mutual Fund basic terms

1.Fund manager: The person who manages the mutual fund scheme is called fund manager.

 

2.NFO(New Fund Offering): When a new mutual fund is launched for subscription by investors it is calleded NFO.

 

3.NAV: It stands for NET ASSSET VALUE. It represents the market value of single mutual fund unit. It is calculated by dividing net asset value of mutual fund with no of units sold to investors. NAV is calculated on every market trading day.

 

4.Expense ratio: It is ratio of total fund management cost to total fund assets.Lower expense ratio is preferred .If  fund has 2% expense ratio and total returns are 10% then actual returns will be reduced to 8%.

 

5.SIP(Systematic investment plan): In SIP a fixed amount is invested at regular intervals in mutual fund scheme.

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Also Read : How does mutual fund SIP work ?

 

6.SWP(Systematic withdrawal plan): In SWP a fixed amount is withdrawn(redeemed) from mutual fund scheme. Basically it reverse of SIP.

 

7.STP(Systematic transfer plan): In STP a fixed amount/units are transferred from one mutul fund scheme to another.

 

8.Corpus: It is value of total money invested by all investors in mutual fund scheme.

 

9.Dividend plan: In dividend plan, at regular intervals the mutual fund scheme makes a payout to investor in form of dividends to the investor.NAV of the mutual fund scheme after dividend declaration.

 

10.Dividend re-investment plan: In dividend re-investment plan, dividend paid is reinvested into the mutual fund scheme.

 

11.Growth plan: In growth plan no pay-out is made to the investor, all the profits is reinvested into the scheme. As a result NAV keeps on increasing.

 

12.Regular plan: If investment is done through any distributor, then it is invested in a regular plan of mutual fund scheme.

 

13.Direct plan: If investment is done directly with fund house without any distributor, then it is invested in direct plan of mutual fund scheme.Returns are better in direct plan as fund house does not have to any commission to distributor.

 

14.KYC Process(Know you customer): It is process for verification of identity and address, financial status, occupation  other other information about investor.KYC is mandatory for all mutual fund investments.

 

15.KRA(KYC Rating Agency): These are the agencies registered with SEBI which handle KYC registeration.

 

16.Annualized return: It is average return each year for given period of time.A fund having 10% annualized return over five years indicates average 10% returns per year.

 

17.CAGR(Compounded Annual Growth Rate): It year on year return generated over a period of time.

 

18.Absolute return: It is simple return generated over a period of time.

 

19.ELSS: Equity linked saving  scheme are the type of mutual funds in which you can invest to get tax deduction.

 

 Different types of mutual funds