Mutual Fund Glossary: Common Terms in Plain English

Mutual fund: a pool of money from many investors, managed by professionals and invested in shares, bonds or other assets. See what is a mutual fund.

SIP: systematic investment plan, investing a fixed amount every month. See SIP investment.

Lump sum: investing a large amount at once. See lump sum investment.

Units: what you own in a fund. Your money buys units at the day price.

NAV: net asset value, the price of one unit, calculated daily. See what is NAV.

AMC: asset management company, the firm that runs the fund. See what is an AMC.

Fund manager: the person who decides what the fund buys and sells. See fund manager.

Registrar (RTA): the agency that keeps records of who owns which units.

Custodian: a separate entity that holds the fund assets safely.

SEBI: the market regulator. AMFI: the industry body that registers distributors. See who regulates mutual funds.

ARN: the registration number of a mutual fund distributor.

Keep it open when you read a statement or fact sheet. When a word is unclear, look it up here, then follow the link if you want the full explanation. Over time, most of these terms will become familiar.

Expense ratio: the yearly cost of running the fund, taken from the fund. See expense ratio.

Exit load: a charge for selling within a set period. See exit load.

Direct plan: bought without a distributor, lower cost. Regular plan: through a distributor, slightly higher cost. See direct versus regular.

Stamp duty: a small government charge on purchases.

Absolute return: total gain as a percentage, without considering time.

CAGR: a smoothed yearly growth rate between two values. See what is CAGR.

XIRR: the yearly return when money goes in on many dates, the right measure for a SIP. See what is XIRR.

Rolling returns: returns over many overlapping periods, showing consistency. See rolling returns.

Benchmark: the index a fund is compared against. See benchmark.

Riskometer: a label rating a fund risk from low to very high. See riskometer.

Standard deviation: how much returns have swung. Sharpe ratio: return per unit of swing. See Sharpe ratio.

Beta and alpha: swing compared with the benchmark, and return beyond what the risk suggests. See alpha and beta.

YTM and duration: debt fund yield and rate sensitivity. See YTM and duration.

Equity fund: invests mainly in shares. Debt fund: invests in bonds. Hybrid fund: mixes both. See SEBI fund categories.

Large cap, mid cap, small cap: funds grouped by company size. See large, mid and small cap.

Index fund and ETF: funds that copy an index. See index funds.

ELSS: a tax-saving equity fund with a three-year lock-in. See ELSS.

Liquid fund: a very short-term debt fund. See liquid funds.

Growth option: gains stay invested. IDCW option: income may be paid out. See growth versus IDCW.

Open-ended: you can buy and sell any working day. Close-ended: locked until maturity. See open versus close-ended.

NFO: new fund offer, the launch of a new scheme. See NFO.

SIP: money in every month. SWP: money out every month. STP: money moved between funds in steps.

See SIP versus SWP and SIP versus STP.

Step-up SIP: a SIP that rises every year. See step-up SIP.

Folio: your account number with a fund house. See folio.

KYC: identity verification required to invest. See KYC and KYC status.

CAS: consolidated account statement, showing all folios. See CAS.

Nominee: the person who receives units if you die. See nomination.

Mandate: bank permission for automatic SIP debits. See SIP autopay.

Joint holding: a folio held by up to three people. See joint holding.

Transmission: transferring units to a nominee or heir after a death. See money steps after losing a spouse.

Minor folio: a folio in a child name managed by a guardian. See mutual funds for minors.

Redemption: selling units for money. See redemption.

Switch: moving from one scheme to another in the same fund house. See switching.

Cut-off time: the time that decides which day NAV you get. See cut-off time.

Lock-in: a period when units cannot be sold. See lock-in period.

Nifty and Sensex: the two main market indices tracking large Indian companies. See what Nifty and Sensex are.

Bull market: a period of rising prices. Bear market: a period of falling prices.

Volatility: how much prices move up and down. See risk and volatility.

Correction: a fall in prices after a rise, often used for moderate declines.

Fact sheet: a monthly summary of a fund holdings and numbers. See fact sheet.

SID: scheme information document, the detailed rules of a fund. See SID.

Capital gains statement: a yearly list of sales and gains. See capital gains statement.

Capital gains: profit made when you sell units for more than you paid. Short-term and long-term: categories based on how long you held the units, which affect tax. We do not quote rates; see mutual fund taxation.

Dividend or IDCW: income distributed by a fund in the IDCW option. It reduces the NAV by the amount paid.

Clubbing: a tax rule where income from money gifted to a spouse or minor may be added to the giver income.

If you see a word that is not here, or a term on your statement does not make sense, ask. There are no silly questions in investing, only expensive misunderstandings.

Our page on common mutual fund mistakes covers the errors that confusion often leads to. If you want help reading your own statement, get in touch.