Mutual Fund Glossary For Beginners In India: A-Z Explained

If you’re new to investing or looking to grow your savings smartly, mutual funds are one of the best ways to build wealth over time — especially in India, where more and more people are turning to SIPs and long-term investing.

But with so many terms like NAV, AMC, SIP, ELSS, and more floating around, it can feel overwhelming.

That’s why I’ve created this easy-to-understand Mutual fund glossary for beginners in India.

Whether you’re saving up for your child’s education, planning a home purchase, or just want your money to grow faster than a regular savings account — this guide will help you speak the language of mutual funds with confidence.

No jargon. No confusion. Just simple explanations, relatable examples from everyday life in India, and everything you need to know to start investing wisely.

Let’s dive in!

A

1. Absolute Return

Definition: The total return an investment generates over a specific period, without comparing it to any benchmark or market index.

In Simple Terms: It tells you how much money you made or lost in percentage terms from your mutual fund investment — no fancy comparisons, just the actual gain or loss.

In Real World: Imagine you invested ₹20,000 in a mutual fund and after one year, it became ₹24,000. Your absolute return is 20%. That’s all that matters if you’re not worried about whether it beat the Nifty or Sensex.

Relevance: Helps investors understand how their investments are performing in real terms, especially when they are focused on personal goals like saving for a child’s education or buying a car.

Example: You invested in a mid-cap fund and earned 18% over 15 months — that’s your absolute return. Whether the Nifty went up or down doesn’t matter here.

2. Account Statement

Definition: A document that shows all transactions related to your mutual fund investments over a certain period.

In Simple Terms: Just like your bank passbook or mobile banking app shows your deposits and withdrawals, this statement shows your mutual fund buys, sells, dividends, and current holdings.

In Real World: Every month, you get a Consolidated Account Statement (CAS) from CAMS or Karvy that lists all your mutual fund investments across different AMCs — even if you invested through different apps like Paytm Money or Zerodha Coin.

Relevance: Helps you track your investments, monitor performance, and keep a record for tax purposes or financial planning.

Example: After Diwali shopping, you want to know where your money went. Similarly, at the end of every month, your account statement tells you exactly what mutual funds you own and what’s changed.

3. Accrual Basis

Definition: An accounting method where income and expenses are recorded when they are earned or incurred, not when cash is actually received or paid.

In Simple Terms: You count the interest income even before you receive it — like expecting your salary to come on the 5th and planning your budget around it even if it hasn’t hit your account yet.

In Real World: Debt funds use this method to show daily returns. For example, if a bond gives 7% annual interest, the fund will show small gains every day based on that expected income.

Relevance: Makes debt fund returns look smooth instead of jumping only when interest payments come in.

Example: If you invest in a liquid fund, it earns interest daily, even though you may only see it when you redeem. The fund shows that daily earning in its NAV using accrual basis.

4. Accumulation Plan

Definition: A type of investment plan where profits are reinvested into more units instead of being paid out as dividends.

In Simple Terms: Instead of getting money in your pocket, your gains buy more mutual fund units automatically — helping your money grow faster.

In Real World: This is the same as choosing the “Growth Option” in mutual funds. Most long-term investors prefer this because it helps compound wealth over time.

Relevance: Ideal for people who don’t need regular income but want their money to grow steadily.

Example: If you invested ₹1 lakh in a growth plan and earned ₹10,000 in profit, instead of getting ₹10,000 as cash, you’ll get more units worth ₹10,000.

5. Active Fund

Definition: A mutual fund managed by a fund manager who actively selects stocks or bonds with the aim of outperforming a benchmark index.

In Simple Terms: These funds don’t copy the stock market index like Nifty 50. Instead, expert managers pick good stocks trying to beat the market.

In Real World: Funds like “Mirae Asset Large Cap Fund” or “HDFC Equity Fund” are active funds. Their fund managers decide which companies to invest in based on research.

Relevance: Offers potential for higher returns than passive/index funds — but also comes with higher risk and fees.

Example: If you choose an active equity fund, the fund manager might avoid overvalued tech stocks and pick undervalued consumer goods companies instead.

6. Actively Managed Fund

Definition: Same as an active fund — where the fund manager makes decisions to select investments aiming to beat a benchmark.

In Simple Terms: Exactly like the active fund. The fund manager is hands-on, buying and selling regularly to try and give better returns than the market.

In Real World: Many popular equity funds in India are actively managed, including large-cap, mid-cap, and multi-cap funds.

Relevance: These funds charge higher fees due to the expertise involved, but can potentially outperform index funds if the manager is skilled.

Example: You invest in a fund that beats the Nifty by 3% every year — that’s thanks to the fund manager making smart choices.

7. Ad-hoc Withdrawal

Definition: A one-time or occasional withdrawal from a mutual fund, usually done manually and not part of a fixed schedule.

In Simple Terms: When you suddenly need some money and sell a few units of your mutual fund — not regularly, just once in a while.

In Real World: Like taking some money out of your savings piggy bank when there’s a family emergency or an unexpected expense.

Relevance: Gives flexibility to investors who are investing for long-term goals but sometimes need liquidity.

Example: You invested in a SIP for your daughter’s wedding fund, but had to withdraw some money to pay for her college admission — that’s ad-hoc withdrawal.

8. Additional Purchase

Definition: Any extra investment made into a mutual fund scheme beyond the initial or regular investment amount.

In Simple Terms: If you’re already investing monthly via SIP, and then decide to put in a lump sum extra — that’s an additional purchase.

In Real World: Like adding more money to your recurring deposit (RD) whenever you have surplus cash.

Relevance: Helps you increase your investment quickly, especially during bonus season or when you get a windfall.

Example: You invest ₹5,000 every month via SIP, and during Diwali, you add another ₹20,000 as an additional purchase.

9. Adjusted Net Asset Value (NAV)

Definition: The NAV adjusted for expenses, dividends, or other factors that affect the value of each unit.

In Simple Terms: The real price per unit after considering things like taxes, exit loads, or dividend payouts.

In Real World: Sometimes, when a fund pays a dividend, the NAV drops. That drop is shown in the adjusted NAV so investors can see the full picture.

Relevance: Helps investors compare returns accurately over time, especially when there are corporate actions or distributions.

Example: If a fund’s NAV was ₹20 and it gives a ₹2 dividend, the adjusted NAV becomes ₹18 — showing that the drop wasn’t a loss, just a payout.

10. Advisor

Definition: A professional or firm that provides guidance on selecting and managing mutual fund investments.

In Simple Terms: Like a doctor for your money — someone who checks your financial health and suggests what kind of mutual fund suits your needs.

In Real World: Advisors work through banks, brokers, or online platforms like Paytm Money or Upstox.

Relevance: Helps first-time investors avoid mistakes and choose the right funds based on their goals, risk appetite, and time horizon.

Example: If you’re saving for your child’s marriage in 10 years, your advisor might suggest a balanced advantage fund instead of pure equity.

11. Advisory Fee

Definition: A fee charged by a financial advisor for providing investment advice on mutual funds.

In Simple Terms: What you pay the person who helps you choose the best mutual fund for your goal.

In Real World: Some advisors charge a flat fee, others take a percentage of the assets they manage, and some earn commissions from AMCs.

Relevance: Transparency about advisory fees helps investors know how unbiased the advice is.

Example: If your advisor charges ₹5,000 per year to manage your portfolio, that’s your advisory fee.

12. Affiliate

Definition: A company or individual associated with another organization through partnership or business relationship.

In Simple Terms: Think of it as a business partner — like how Flipkart and PhonePe are connected.

In Real World: In mutual funds, affiliates could be companies under the same parent group offering related services.

Relevance: Important to know for transparency, especially if there’s a conflict of interest.

Example: HDFC Mutual Fund and HDFC Bank are affiliates under the same financial group.

13. Aggressive Hybrid Fund

Definition: A hybrid mutual fund that has a higher allocation to equities (usually around 65–80%) and the rest in debt instruments.

In Simple Terms: A mix of risky (equity) and safer (debt) investments, but tilted towards growth — not too safe, not too risky.

In Real World: Good for investors who want decent growth but don’t want to sleepless nights worrying about market crashes.

Relevance: Offers balance between growth and stability, ideal for medium-term goals.

Example: You invest ₹50,000 in an aggressive hybrid fund — ₹35,000 goes into stocks like Reliance and Infosys, and ₹15,000 into government bonds.

14. AIF (Alternative Investment Fund)

Definition: A privately pooled investment vehicle that invests in non-traditional assets such as private equity, venture capital, commodities, or real estate.

In Simple Terms: Not a regular mutual fund — these are for wealthy investors looking to diversify into less common areas like startups or rare metals.

In Real World: Usually meant for HNIs (High Net Worth Individuals), institutions, or corporates. Not available to general retail investors.

Relevance: Offers access to alternative asset classes, often with high risk and high reward.

Example: An AIF might invest in a chain of new restaurants or a tech startup before it goes public.

15. Allocation Ratio

Definition: The percentage of total assets invested in different categories like equity, debt, gold, etc., within a mutual fund.

In Simple Terms: How your money is split between different types of investments inside a fund.

In Real World: A balanced fund might have an allocation ratio of 60:40 between stocks and bonds.

Relevance: Determines the risk and return profile of the fund.

Example: If a fund says it has a 70:30 equity-debt ratio, it means 70% of your money is in stocks and 30% in bonds.

16. Alpha

Definition: A measure of a fund’s performance compared to a benchmark index — indicating how much it has beaten or lagged behind the market.

In Simple Terms: Like scoring above average in school exams — alpha shows if a fund did better than the market or not.

In Real World: A positive alpha means the fund beat the benchmark; negative alpha means it underperformed.

Relevance: Used to evaluate how well a fund manager adds value over the market.

Example: If the Nifty gave 10% returns and your fund gave 13%, the alpha is +3%.

17. AMFI (Association of Mutual Funds in India)

Definition: The industry body that represents all mutual funds registered in India.

In Simple Terms: Like the “university” for all mutual funds — sets rules, educates investors, and promotes healthy practices.

In Real World: AMFI runs investor awareness campaigns and maintains standards for distributors and fund houses.

Relevance: Plays a key role in protecting investor interests and promoting responsible investing.

Example: When you attend a free mutual fund workshop, it’s likely organized by AMFI.

18. AMFI Registered Distributor

Definition: A person or entity authorized by AMFI to sell mutual fund products to investors.

In Simple Terms: Someone who is officially trained and certified to help you buy mutual funds.

In Real World: These include agents, brokers, and digital platforms like Paytm Money or ETMoney.

Relevance: Ensures that those advising or selling mutual funds meet SEBI and AMFI guidelines.

Example: If you open an app and start a SIP, the platform must have an AMFI-registered distributor behind it.

19. AMC (Asset Management Company)

Definition: A financial institution that manages the investments of a mutual fund on behalf of its investors.

In Simple Terms: It’s the company that actually runs your mutual fund — like how a chef runs a restaurant kitchen. You give them money, and they decide where to invest it based on the fund’s goal.

In Real World: In India, big names like HDFC Asset Management, SBI Funds Management, ICICI Prudential Asset Management, and Axis Asset Management are all AMCs. These companies are approved by SEBI (India’s market regulator), and they follow strict rules to protect investor money.

Relevance:

• The AMC decides which stocks or bonds to buy/sell.
• They appoint expert fund managers to make smart decisions.
• They also take care of investor services like issuing account statements, processing SIPs, and handling redemptions.
• Every mutual fund in India must be run by an AMC.

Example:
Let’s say you want to invest ₹5,000 every month in a large-cap fund to grow your money over time. When you choose the “Nippon India Large Cap Fund”, it is actually managed by Nippon Life India Asset Management Limited — that’s the AMC behind the fund. They take your money, pool it with others, and invest it in top big-company stocks like HDFC Bank, Infosys, or ITC.

20. Anchor Investor

Definition: A major investor in a new fund offer (NFO) who commits a large amount upfront, giving confidence to smaller investors.

In Simple Terms: Like the first customer in a new shop — seeing them walk in makes others feel confident to enter.

In Real World: Usually institutional investors or big HNIs who invest early in a new fund.

Relevance: Boosts credibility and helps in building trust among retail investors.

Example: When a new ELSS fund launches, a pension fund invests ₹50 crores — that makes you more confident to invest your ₹50,000.

21. Annual Report

Definition: A yearly document published by mutual funds detailing their performance, portfolio, expenses, and future outlook.

In Simple Terms: Like a school report card — shows how well the fund performed in the past year.

In Real World: Available on the AMC’s website or sent to registered investors.

Relevance: Helps investors assess fund performance, risks, and strategy changes.

Example: If you invested in a fund last year, you can check the annual report to see how many stocks were bought/sold and how the fund fared.

22. Annual Return

Definition: The percentage gain or loss of an investment over one year.

In Simple Terms: How much your money grew or shrank in one year — simple as that.

In Real World: Often used in fund fact sheets and marketing materials.

Relevance: Helps investors compare performance across funds or benchmarks.

Example: If your fund gave you 12% return in one year, that’s your annual return.

23. Annualized Returns

Definition: The average rate of return earned over a period longer than one year, expressed as a yearly rate.

In Simple Terms: If your investment grew unevenly over 3 years, annualized return tells you what it would look like if it grew evenly each year.

In Real World: Useful when comparing returns over different time periods.

Relevance: Shows consistent performance over time, smoothing out fluctuations.

Example: If you invested ₹1 lakh and got ₹1.5 lakh in 3 years, the annualized return is about 14.5%.

24. Applicable NAV

Definition: The NAV used for calculating the number of units allotted or redeemed based on the cut-off time of the transaction.

In Simple Terms: The price you get for your mutual fund units depends on when you submit your request.

In Real World: Transactions before 3 PM usually get the same-day NAV; those after get next business day’s NAV.

Relevance: Impacts how many units you get when you invest or how much you receive when you redeem.

Example: If you invest at 2 PM, you get today’s NAV; if you invest at 4 PM, you get tomorrow’s.

25. Application Form

Definition: A form filled by investors to apply for mutual fund units, either offline or online.

In Simple Terms: Like filling a form to join a gym — except this is to start investing in a mutual fund.

In Real World: Available on AMC websites, broker platforms, or physical forms from RTAs like CAMS or Karvy.

Relevance: Required for KYC compliance and to record investment details.

Example: To start a SIP, you fill an application form online or through your advisor.

26. Arbitrage Fund

Definition: A type of equity-oriented hybrid fund that takes advantage of price differences between cash and derivative markets.

In Simple Terms: Smart traders use mismatches in prices between stock exchanges and futures markets to make low-risk profits.

In Real World: Popular among investors seeking equity-like returns with lower volatility.

Relevance: Tax-efficient, as gains are treated like equity funds.

Example: If a stock trades at ₹100 on NSE and ₹101 on futures market, the fund buys low and sells high for profit.

27. ARN (AMFI Registration Number)

Definition: A unique identification number assigned to mutual fund distributors registered with AMFI.

In Simple Terms: Like an Aadhaar number for mutual fund sellers — proves they are officially certified.

In Real World: All distributors must display their ARN when selling funds.

Relevance: Ensures legitimacy and traceability of advisors.

Example: If you invest through a broker, check their ARN to confirm they are registered.

28. Asset Allocation

Definition: The process of dividing investments among different asset classes like equity, debt, gold, etc., based on goals and risk tolerance.

In Simple Terms: Deciding how much money to keep in stocks, bonds, gold, etc., to balance safety and growth.

In Real World: Crucial for long-term planning — like deciding how much to spend on groceries vs. savings.

Relevance: Helps manage risk and optimize returns according to life stage and goals.

Example: A 30-year-old might keep 70% in equity and 30% in debt, while a retiree may reverse that.

29. Asset Allocation Fund

Definition: A mutual fund that dynamically allocates money across asset classes depending on market conditions.

In Simple Terms: A fund that keeps changing how much it invests in stocks, bonds, or gold based on what’s best at the moment.

In Real World: Also known as dynamic asset allocation funds.

Relevance: Takes the guesswork out of timing the market.

Example: During a market crash, the fund may shift more into bonds to protect your money.

30. Asset Class

Definition: A category of investments that behave similarly in the market — like equity, debt, real estate, or gold.

In Simple Terms: Different types of investments — like fruits in a basket (apples, oranges, bananas).

In Real World: Mutual funds are categorized based on their primary asset class.

Relevance: Knowing asset classes helps in diversifying investments.

Example: Equity funds are for growth, debt funds for safety, and gold funds for hedging inflation.

31. Asset Under Custody

Definition: Securities held by a custodian on behalf of a mutual fund for safekeeping and transaction facilitation.

In Simple Terms: Like keeping your jewelry in a bank locker — the custodian holds the fund’s shares and bonds safely.

In Real World: Custodians like NSDL or CDSL ensure safekeeping and smooth trading.

Relevance: Ensures security and proper handling of fund assets.

Example: When your fund buys shares of Tata Motors, they are kept under custody until sold.

32. Assets Under Management (AUM)

Definition: The total market value of assets managed by a mutual fund or AMC.

In Simple Terms: How big a mutual fund is — think of it like the total weight of all the fish in a pond.

In Real World: Larger AUM often indicates popularity and trust.

Relevance: Can influence a fund’s ability to trade efficiently and manage costs.

Example: A fund with ₹10,000 crore AUM is bigger and more established than one with ₹500 crore.

33. Authorized Person (AP)

Definition: A representative appointed by a mutual fund to assist investors with transactions and KYC processes.

In Simple Terms: Like a local agent who helps you with paperwork and formalities for mutual fund investments.

In Real World: APs operate in tier 2 and tier 3 cities where digital access is limited.

Relevance: Expands mutual fund reach to remote areas.

Example: In a small town, you might go to an AP to complete your KYC or submit cheques.

34. Auto-Debit

Definition: A facility where the mutual fund house automatically deducts SIP amounts from your bank account.

In Simple Terms: Like setting up a reminder for your rent payment — the system takes the money out automatically.

In Real World: Done via ECS or NEFT mandates.

Relevance: Ensures consistency in investments without manual effort.

Example: You set up auto-debit for ₹2,000 every month, and it gets deducted automatically.

35. Auto-Sweep Facility

Definition: A feature that automatically shifts excess money from a savings account to a liquid fund and vice versa.

In Simple Terms: Like a smart ATM that moves your money to a better place when you have extra and brings it back when needed.

In Real World: Banks like SBI and ICICI offer this to customers.

Relevance: Helps earn better returns on idle money without losing liquidity.

Example: If you have ₹1 lakh lying unused in your savings account, the sweep sends it to a liquid fund earning 6%.

36. Automatic Rebalancing

Definition: Automatically adjusting the mix of assets in a portfolio to maintain a target allocation.

In Simple Terms: Like trimming your garden — ensures everything stays in proportion.

In Real World: Offered by some funds or robo-advisors to maintain optimal risk-return balance.

Relevance: Prevents portfolios from becoming too risky or too conservative.

Example: If equity rises to 80%, the system sells some and buys debt to bring it back to 65%.

37. Average Credit Quality

Definition: A measure of the overall creditworthiness of bonds held in a debt fund.

In Simple Terms: Like checking the reliability of people you lend money to — are they trustworthy or risky?

In Real World: Shown as ratings like AA, A, BBB, etc.

Relevance: Indicates the risk level of a debt fund.

Example: A fund with mostly AAA-rated bonds is safer than one with many B-rated bonds.

38. Average Maturity

Definition: The weighted average time to maturity of bonds in a debt fund.

In Simple Terms: On average, how long before the bonds in the fund mature and give back the money.

In Real World: Longer average maturity means more sensitivity to interest rate changes.

Relevance: Helps investors understand the interest rate risk of a debt fund.

Example: A fund with average maturity of 5 years will react more to RBI rate cuts than one with 1 year.

B

1. Back-End Load

Definition: A fee charged when you redeem or sell your mutual fund units, especially in older fund structures.

In Simple Terms: Like a small goodbye gift that goes to the broker or agent when you leave a fund.

In Real World: This used to be common before SEBI made most mutual funds no-load. Some older plans might still carry it.

Relevance: Discourages early exits and protects distributors’ commissions.

Example: If a fund charges 1% back-end load, selling ₹1 lakh worth of units will give you only ₹99,000.

2. Balanced Fund

Definition: A mutual fund that invests in both equity and debt instruments to balance growth and stability.

In Simple Terms: Like a thali meal — has some spicy (equity) and some mild (debt) items for balance.

In Real World: Also called Hybrid Funds. Ideal for moderate-risk investors.

Relevance: Offers steady returns with less volatility than pure equity funds.

Example: You invest in a balanced fund that keeps 65% in stocks like Infosys and 35% in government bonds.

3. Bank Mandate

Definition: A facility where you authorize your bank to allow automatic deductions for SIP investments.

In Simple Terms: Like giving your bank permission to pay your monthly mobile bill automatically.

In Real World: Done via ECS (Electronic Clearing Service) or Auto-debit.

Relevance: Ensures your SIP runs without fail, even if you forget.

Example: Every month, ₹3,000 gets deducted from your SBI account to buy units of a large-cap fund.

4. Banking and PSU Fund

Definition: A sectoral mutual fund that invests primarily in banking and public sector undertaking (PSU) companies.

In Simple Terms: Focuses on banks and big government-backed companies like SBI, ONGC, or LIC.

In Real World: Popular during times of economic revival or when interest rates are falling.

Relevance: High exposure means higher risk but also potential for good returns if the sector does well.

Example: During a rate cut cycle by RBI, these funds often perform well due to improved lending margins.

5. Basket Order

Definition: An order that allows you to invest in multiple funds at once using one transaction.

In Simple Terms: Like ordering multiple items from Swiggy in one go instead of placing separate orders.

In Real World: Available on platforms like Zerodha Coin, Paytm Money, or MF Utility.

Relevance: Saves time and helps in diversifying quickly.

Example: You can invest ₹10,000 across 5 different funds using one basket order.

6. Base NAV

Definition: The initial value of a mutual fund unit when it is launched, usually set at ₹10.

In Simple Terms: Like the base price of a new product — doesn’t include any profit or loss yet.

In Real World: Applicable during New Fund Offers (NFOs).

Relevance: Helps in calculating future gains once the fund starts trading.

Example: You invest in a new fund at ₹10 per unit. After a year, if it’s ₹15, your gain is ₹5 per unit.

7. Basis Point

Definition: A unit used to measure changes in interest rates or mutual fund fees; 1 basis point = 0.01%.

In Simple Terms: Like a millimeter in finance — a tiny unit that adds up when talking about fund costs.

In Real World: Expense ratios and interest rate changes are often quoted in basis points.

Relevance: Helps compare small differences between similar funds.

Example: A fund with an expense ratio of 1.05% is just 5 basis points more expensive than one at 1.00%.

8. B-30 Cities

Definition: A list of 30 major cities in India classified under “B” category based on population and economic activity.

In Simple Terms: Tier 2 cities like Pune, Jaipur, Chandigarh, etc., which are growing financial hubs.

In Real World: Used by AMCs and distributors to target mutual fund awareness campaigns and promotions.

Relevance: Important for market expansion strategies.

Example: A fund house launches a campaign in Ahmedabad (a B-30 city) to attract local investors.

9. Bear Market

Definition: A period when stock prices fall significantly and investor sentiment is negative.

In Simple Terms: Like a rainy season for the stock market — everything looks gloomy and people are scared to invest.

In Real World: Usually defined as a 20% decline from recent highs over two months.

Relevance: Tests investor patience and highlights the importance of long-term investing.

Example: In 2020, markets fell sharply due to the pandemic — a classic bear phase.

10. Benchmark

Definition: A standard index like Nifty 50 or Sensex against which a mutual fund’s performance is measured.

In Simple Terms: Like comparing your exam score with the class topper — tells you how well you did.

In Real World: Funds aim to beat their benchmark indices.

Relevance: Helps evaluate whether a fund is doing better than the market.

Example: If your fund gives 12% return and the Nifty gives 10%, your fund has beaten its benchmark.

11. Beta

Definition: A measure of a fund’s volatility compared to the overall market (its benchmark).

In Simple Terms: Tells you how jumpy your investment is compared to the general market.

In Real World: A beta of 1 means the fund moves with the market; above 1 means more volatile, below 1 means less.

Relevance: Helps assess risk level — aggressive investors may prefer high-beta funds.

Example: A mid-cap fund with beta 1.3 swings more than the Nifty.

12. Bid/Offer Price

Definition:

• Bid Price: What the fund pays you when you redeem units.
• Offer Price: What you pay when you buy units.

In Simple Terms: Think of bid as what you get when selling, and offer as what you pay when buying.

In Real World: Offer price is usually higher than bid because of transaction costs.

Relevance: Helps understand the cost involved in buying/selling units.

Example: If the NAV is ₹20, the offer price might be ₹20.05 and the bid price ₹19.95.

13. Blue-Chip Stocks

Definition: Shares of large, stable, and well-established companies with strong financials.

In Simple Terms: Like trusted neighborhood stores — they’ve been around forever and are reliable.

In Real World: Companies like Tata Consultancy Services, Reliance Industries, and HDFC Bank.

Relevance: Less risky than small or mid-cap stocks.

Example: Your mutual fund might hold Infosys shares as part of its blue-chip strategy.

14. Bluechip Fund

Definition: A mutual fund that mainly invests in blue-chip stocks.

In Simple Terms: A fund that puts your money in the biggest, safest companies in India.

In Real World: Good for conservative investors who want growth with lower risk.

Relevance: Stable returns with less volatility.

Example: Investing in a bluechip fund means your money is mostly in companies like ITC, Kotak Mahindra, and Sun Pharma.

15. Bond

Definition: A debt instrument issued by governments or companies to raise funds, promising to repay the principal with interest.

In Simple Terms: Like giving a loan to someone who promises to pay you back with interest.

In Real World: Debt mutual funds invest heavily in bonds.

Relevance: Provides regular income and safety compared to equities.

Example: When you invest in a gilt fund, you’re indirectly buying government bonds.

16. Bond Fund

Definition: A mutual fund that primarily invests in bonds or fixed-income securities.

In Simple Terms: Like a savings account that gives better returns, but with a little more risk.

In Real World: Includes categories like gilt funds, corporate bond funds, and income funds.

Relevance: Suitable for low-risk investors seeking steady income.

Example: You invest in a corporate bond fund to earn 7% annual returns with minimal risk.

17. Bonus Units

Definition: Additional units given to existing investors free of cost when a fund declares a bonus issue.

In Simple Terms: Like getting extra rice in a packet without paying more — your holding increases, but your total cost stays the same.

In Real World: Increases the number of units without changing the total investment value.

Relevance: Keeps the NAV lower and makes the fund look more affordable.

Example: If you have 100 units at ₹20 each (total ₹2,000), a 1:1 bonus gives you 100 more units at ₹10 NAV.

18. Bonus Units/Bonus Plan

Definition: Same as above — refers to the plan option where investors receive additional units instead of cash dividends.

In Simple Terms: Instead of getting money in your pocket, you get more mutual fund units for free.

In Real World: Popular among long-term investors who prefer compounding.

Relevance: Helps increase holdings without spending more money.

Example: You choose the bonus plan so that instead of getting ₹5,000 in dividends, you get more units worth ₹5,000.

19. Book Closure

Definition: A period during which a mutual fund stops processing transactions to update records.

In Simple Terms: Like closing your diary for a day to write notes neatly — the fund pauses entries to organize data.

In Real World: Happens before dividend payouts or other corporate actions.

Relevance: Investors should know this to avoid delays in transactions.

Example: If book closure is from 1st to 5th of the month, your redemption request will be processed after the 5th.

20. Book Value

Definition: The value of a company’s assets minus its liabilities, shown on the balance sheet.

In Simple Terms: Like checking how much your home is worth after subtracting all debts and loans.

In Real World: Used in evaluating stocks for mutual fund portfolios.

Relevance: Helps assess the financial health of a company.

Example: A fund manager might favor a company whose share price is lower than its book value.

21. Bottom-Up Investing

Definition: An investment strategy that focuses on individual company fundamentals rather than macroeconomic trends.

In Simple Terms: Like judging students by their marks rather than the school’s reputation.

In Real World: Fund managers pick stocks based on company performance, not the industry or economy.

Relevance: Useful for finding undervalued gems in a bad sector.

Example: A fund might invest in a small pharma company showing strong growth despite a weak healthcare sector.

22. Bounced SIP

Definition: A failed SIP transaction due to insufficient funds or technical issues.

In Simple Terms: Like missing your bus because you woke up late — your SIP didn’t go through.

In Real World: Can happen if your bank account has no balance or the mandate isn’t active.

Relevance: May affect your investment discipline and long-term goals.

Example: Your ₹5,000 SIP bounces because your account had only ₹3,000 on the auto-debit date.

23. Broker

Definition: A person or firm registered with SEBI who helps investors buy/sell mutual fund units.

In Simple Terms: Like a real estate agent who helps you buy a house — but for mutual funds.

In Real World: Brokers earn commissions from AMCs for bringing in investors.

Relevance: Helps first-time investors navigate options and processes.

Example: You contact a broker to help you choose between ELSS and index funds.

24. BSE Star MF

Definition: A platform by BSE (Bombay Stock Exchange) for buying and selling mutual funds online.

In Simple Terms: Like a stock exchange for mutual funds — lets you trade them digitally.

In Real World: Competes with platforms like CAMS and Karvy.

Relevance: Offers transparency and ease of access for investors.

Example: You log in to BSE Star MF to check your portfolio and start a new SIP.

25. Bull Market

Definition: A period when stock prices are rising and investor sentiment is positive.

In Simple Terms: Like a summer sale — everyone is excited to shop and prices keep going up.

In Real World: Usually marked by optimism, strong economic indicators, and increased trading.

Relevance: Encourages new investors to enter the market.

Example: In 2021, post-pandemic recovery led to a bull run in Indian stock markets.

26. Buy-and-Hold Strategy

Definition: An investment approach where investors hold onto their mutual fund units for a long time regardless of short-term market movements.

In Simple Terms: Like planting a tree and waiting patiently for it to grow — not worrying about daily weather.

In Real World: Works best with equity funds and SIPs.

Relevance: Minimizes timing risks and leverages compounding.

Example: You invest in a large-cap fund and stay invested for 10 years, ignoring short-term ups and downs.

27. Buy/Sell Spread

Definition: The difference between the price you pay to buy units (offer price) and the amount you receive when you sell (bid price).

In Simple Terms: Like buying gold at one price and selling it at a slightly lower price — the middleman takes a cut.

In Real World: Wider spreads mean higher transaction costs.

Relevance: Impacts returns, especially for frequent traders.

Example: If the spread is ₹0.10 on a ₹20 NAV, you lose 0.5% every time you trade.

C

1. Callable Bonds

Definition: Bonds that can be redeemed or “called back” by the issuer before their maturity date.

In Simple Terms: Like lending ₹1 lakh to a friend for 5 years, but they return the money after 3 years — this is called a callable bond.

In Real World: Companies issue these to manage debt flexibly. Debt funds holding them may see early repayments.

Relevance: Affects returns if bonds are called earlier than expected, especially when interest rates fall.

Example: You invest in a corporate bond fund. One company repays its bonds early because it can borrow at lower rates — this impacts the fund’s yield.

2. CAGR (Compounded Annual Growth Rate)

Definition: The mean annual growth rate of an investment over a period longer than one year, assuming profits are reinvested each year.

In Simple Terms: It tells you how fast your money grew every year on average — even if it didn’t grow smoothly.

In Real World: Used to compare performance of different funds or investments over time.

Relevance: Helps investors understand long-term growth in a simplified way.

Example: If ₹1 lakh grows to ₹1.61 lakh in 5 years, the CAGR is 10% — meaning it grew as if it earned 10% every year consistently.

3. Capital Appreciation

Definition: An increase in the value of an asset or investment over time.

In Simple Terms: When the price of what you bought goes up — like buying gold for ₹3,000/gm and selling it later at ₹3,500/gm.

In Real World: One of the main goals of equity mutual funds.

Relevance: Shows how much your investment has grown in value without considering dividends.

Example: You bought units at ₹20 and now they’re worth ₹25 — that ₹5 difference is capital appreciation.

4. Capital Gain

Definition: Profit made from the sale of an asset such as mutual fund units, stocks, or property.

In Simple Terms: The extra money you make when you sell something for more than what you paid.

In Real World: Taxable under income tax laws — short-term and long-term gains taxed differently.

Relevance: Important for understanding your taxable income and planning redemptions smartly.

Example: You invested ₹50,000 and redeemed for ₹60,000 — your capital gain is ₹10,000.

5. Capital Gains

Definition: Same as above — refers to the profit earned when selling mutual fund units or other assets.

In Simple Terms: Just like making a profit when selling old furniture or jewelry — only here it’s about investments.

In Real World: Divided into short-term and long-term based on holding period.

Relevance: Impacts your tax liability and helps in tax-saving strategies.

Example: If you sell equity fund units within 1 year, it’s short-term capital gain and taxed at 15%.

6. Capital Gains Tax

Definition: Tax levied on the profit earned from the sale of capital assets like mutual funds.

In Simple Terms: Like paying tax on the extra money you made when selling something you owned.

In Real World: Varies between equity and debt funds; also depends on whether it’s short-term or long-term.

Relevance: Influences investment decisions, especially around redemption timing.

Example: Selling equity funds after 1 year makes it long-term, taxed at 10% beyond ₹1 lakh exemption.

7. Capitalization Weighted Index

Definition: An index where companies are weighted based on their market capitalization.

In Simple Terms: Think of a group photo where taller people stand in front — big companies have more say.

In Real World: Nifty 50 and Sensex are examples. Funds tracking these give more weightage to large-cap stocks.

Relevance: Most popular type of index used in index funds and ETFs.

Example: Reliance and HDFC Bank take up a large portion of the Nifty index due to their size.

8. Capital Loss

Definition: A loss incurred when you sell an asset for less than what you paid for it.

In Simple Terms: Like buying a mobile phone for ₹20,000 and selling it later for ₹15,000 — you lost ₹5,000.

In Real World: Can be offset against capital gains to reduce tax liability.

Relevance: Helps in tax planning — carry forward losses for up to 8 years.

Example: If you sold a mutual fund unit at a loss, you can use that to reduce tax on another gain.

9. Capital Market

Definition: A marketplace where buyers and sellers trade financial securities like stocks and bonds.

In Simple Terms: Like a vegetable market, but instead of veggies, people buy/sell shares and bonds.

In Real World: Mutual funds invest in capital markets to generate returns.

Relevance: Understanding this helps you know where your mutual fund money is going.

Example: Your mutual fund buys shares from the capital market just like you would buy groceries from a store.

10. Capital Preservation

Definition: Strategy aimed at protecting the initial amount invested from loss.

In Simple Terms: Keeping your money safe, like storing it in a locker — not growing, but not shrinking either.

In Real World: Focused on low-risk instruments like fixed deposits or government bonds.

Relevance: Good for conservative investors nearing retirement or needing liquidity soon.

Example: You invest in a liquid fund to preserve your ₹5 lakh emergency fund for medical expenses.

11. Capital Protection Fund

Definition: A mutual fund designed to protect the principal investment while offering some upside potential.

In Simple Terms: Like keeping your money in a safe box but still hoping to earn a little extra if things go well.

In Real World: Usually has a fixed tenure and uses derivatives to cap downside risk.

Relevance: Offers peace of mind with limited growth potential.

Example: You invest ₹1 lakh in a 3-year capital protection fund — even if markets crash, you’ll get at least ₹1 lakh back.

12. Capital Protection Funds

Definition: Same as above — plural form.

In Simple Terms: Multiple funds that aim to keep your original money safe while giving some chance of earning returns.

In Real World: Often structured as fixed-term plans using complex strategies.

Relevance: Useful for cautious investors who don’t want to lose their hard-earned savings.

Example: These funds are often compared to bank FDs, but with better upside potential during good market conditions.

13. Capital Risk

Definition: The risk of losing the original amount invested.

In Simple Terms: Like investing in a small business with friends — there’s a chance you might lose your money.

In Real World: Higher in equity funds than in debt funds.

Relevance: Helps investors decide how much to invest based on their comfort level.

Example: Investing in a small-cap fund carries higher capital risk than investing in a government bond fund.

14. Carry Forward (Losses)

Definition: The process of carrying forward capital losses to offset future capital gains for tax purposes.

In Simple Terms: Like saving a bad day’s loss so you can balance it out on a good day later.

In Real World: Allowed for both short-term and long-term losses for up to 8 assessment years.

Relevance: Helps reduce overall tax burden.

Example: If you lost ₹20,000 in a stock fund last year, you can use it to reduce tax on gains this year.

15. CAS (Consolidated Account Statement)

Definition: A single statement showing all your mutual fund holdings across multiple AMCs.

In Simple Terms: Like getting one report card for all your subjects instead of separate ones for each subject.

In Real World: Sent monthly by CAMS or Karvy if you’re registered with KRA.

Relevance: Makes it easy to track all your investments in one place.

Example: Every month, you receive a CAS showing all your SIPs and lump sum investments in one PDF.

16. Cash Equivalent

Definition: Highly liquid assets that can be easily converted to cash, like money market instruments.

In Simple Terms: Like having coins instead of jewelry — easy to spend anytime.

In Real World: Liquid funds and overnight funds invest heavily in these.

Relevance: Used by funds to meet redemption requests quickly.

Example: Your mutual fund holds treasury bills and call money as part of its portfolio to maintain liquidity.

17. Cash Flow

Definition: The movement of money into or out of an investment.

In Simple Terms: Like tracking how much money comes in and goes out of your wallet each month.

In Real World: Funds monitor inflows and outflows to manage investments effectively.

Relevance: Helps in managing fund liquidity and strategy.

Example: During Diwali season, many investors redeem funds — creating a cash outflow for the fund.

18. Cash Flow Matching

Definition: A strategy where investments are chosen to match expected future cash needs.

In Simple Terms: Like planning your grocery budget exactly according to your salary cycle — no surprises.

In Real World: Used by pension funds and insurance companies.

Relevance: Ensures timely availability of funds for known future liabilities.

Example: You invest in a bond fund that matures just before your child starts college.

19. Category

Definition: A classification of mutual funds based on asset class, objective, or structure.

In Simple Terms: Like sorting fruits into apples, oranges, and bananas — makes it easier to choose.

In Real World: SEBI has defined categories like Equity, Debt, Hybrid, etc.

Relevance: Helps investors compare similar funds and choose wisely.

Example: All large-cap funds fall under the same category — you can compare their returns side-by-side.

20. CDSL (Central Depository Services (India) Limited)

Definition: One of India’s two major depositories that hold securities in electronic form.

In Simple Terms: Like a digital locker where your mutual fund units are safely stored.

In Real World: Works with NSDL to maintain investor records and enable smooth transactions.

Relevance: Enables dematerialization and seamless trading of securities.

Example: When you invest via demat mode, your units are held in CDSL or NSDL.

21. Certificate of Registration (COR)

Definition: A certificate issued by SEBI to mutual funds confirming registration under SEBI (Mutual Funds) Regulations.

In Simple Terms: Like a school admission letter — confirms the fund is officially recognized.

In Real World: Mandatory for any mutual fund operating in India.

Relevance: Gives investors confidence that the fund is regulated and compliant.

Example: Before investing, check if the AMC has a valid COR from SEBI.

22. Certificate of Units

Definition: A document issued to investors indicating ownership of physical mutual fund units.

In Simple Terms: Like a land deed — proves you own certain units of a mutual fund.

In Real World: Now obsolete due to demat systems.

Relevance: Was used before mutual fund units were digitized.

Example: Older investors might still have paper certificates lying in lockers.

23. Change of Distributor/Broker

Definition: Process of switching your mutual fund investments from one broker/advisor to another.

In Simple Terms: Like changing your mobile network provider — keeps your number but changes the service.

In Real World: Done through RTAs like CAMS or Karvy.

Relevance: Allows investors to move to a better-performing or more transparent advisor.

Example: You switch from Broker A to Broker B because B offers better customer service.

24. Clearing Corporation

Definition: An entity that ensures settlement of trades between buyers and sellers.

In Simple Terms: Like a referee in a cricket match — makes sure both sides follow rules and complete the deal.

In Real World: NSCCL (National Securities Clearing Corporation Ltd.) handles clearing for most trades.

Relevance: Reduces counterparty risk in financial markets.

Example: When you buy units in an ETF, the clearing corporation ensures the transaction settles smoothly.

25. Close-Ended Fund

Definition: A fund with a fixed number of units and a defined maturity period.

In Simple Terms: Like a train that departs once and arrives at a fixed time — no entry/exit until then.

In Real World: Units can be traded on exchanges after listing.

Relevance: Offers stability to fund managers as inflows/outflows are predictable.

Example: You invest in a 3-year close-ended fund — you can’t withdraw until maturity unless you sell on exchange.

26. Closed-End Fund

Definition: Same as above — alternative spelling.

In Simple Terms: No new entries allowed after launch — like a closed gym membership during lockdown.

In Real World: Traded on stock exchanges post-NFO.

Relevance: Prices may trade at premium or discount to NAV.

Example: Some closed-end funds trade at 10% below NAV, offering opportunities for savvy investors.

27. Commercial Paper (CP)

Definition: Short-term unsecured promissory notes issued by companies to raise funds.

In Simple Terms: Like borrowing money from neighbors temporarily — quick and informal.

In Real World: Invested in by liquid funds and ultra-short duration funds.

Relevance: Offers slightly higher returns than T-bills.

Example: A company issues CP to meet working capital needs — your mutual fund buys it for safety and returns.

28. Compounding

Definition: Earning returns on your original investment plus previous earnings.

In Simple Terms: Like planting a mango tree — the fruit you eat today also gives seeds for tomorrow.

In Real World: Key to long-term wealth creation in mutual funds.

Relevance: Time is your best friend when compounding works.

Example: ₹10,000 invested at 12% annually becomes ₹31,058 in 10 years thanks to compounding.

29. Conservative Hybrid Fund

Definition: A hybrid fund that allocates more to debt than equity, aiming for moderate growth with low risk.

In Simple Terms: Like eating mostly dal-chawal with a bit of sabzi — filling and safe.

In Real World: Also called debt-oriented hybrid funds.

Relevance: Ideal for first-time investors or those nearing retirement.

Example: A fund with 80% in bonds and 20% in stocks is considered conservative.

30. Consolidated Account Statement (CAS)

Definition: A single statement showing all your mutual fund holdings across multiple AMCs.

In Simple Terms: Like getting one report card for all your subjects instead of separate ones for each subject.

In Real World: Sent monthly by CAMS or Karvy if you’re registered with KRA.

Relevance: Makes it easy to track all your investments in one place.

Example: Every month, you receive a CAS showing all your SIPs and lump sum investments in one PDF.

31. Consolidation of Units

Definition: Combining multiple folios or investments under a single account for easier tracking.

In Simple Terms: Like merging all your WhatsApp accounts into one — easier to manage and track.

In Real World: Done via RTAs like CAMS or Karvy by submitting a request with KYC documents.

Relevance: Helps investors avoid duplication and streamline their mutual fund holdings.

Example: You invested in the same fund through different brokers — consolidation lets you hold them in one folio.

32. Contingent Deferred Sales Charge (CDSC)

Definition: A fee charged if you redeem units within a specified period, especially in close-ended funds or certain ELSS funds.

In Simple Terms: Like paying a fine for returning a library book late — discourages early exits.

In Real World: Usually decreases over time and disappears after a set period.

Relevance: Protects fund houses from early redemption pressure.

Example: If you withdraw within 1 year, CDSC of 1% may apply; it drops to zero after 2 years.

33. Contingent Load

Definition: A sales charge that applies only under certain conditions — usually when redeemed early.

In Simple Terms: Like a discount that gets canceled if you return an item — you pay extra if you exit before time.

In Real World: Not common in India now due to SEBI’s no-load norms for most funds.

Relevance: Ensures investor commitment and protects distributors’ interests.

Example: A fund charges 1% contingent load if redeemed within 6 months.

34. Contra Fund

Definition: A mutual fund that invests in undervalued stocks that are out of favor but have potential to rebound.

In Simple Terms: Like buying clothes during an off-season sale — they’re cheap now but will rise in value later.

In Real World: Popular among contrarian investors who bet against market trends.

Relevance: Can give high returns if the market corrects its view on those stocks.

Example: A contra fund might buy airline stocks during a pandemic crash, betting on recovery.

35. Cooling-off Period

Definition: A waiting period after KYC submission before an investor can start investing.

In Simple Terms: Like waiting for your new SIM card activation — you’ve registered, but need to wait a bit.

In Real World: Typically lasts 1–2 working days after KYC verification.

Relevance: Prevents misuse of investor data and ensures compliance.

Example: After e-KYC, you can’t transact immediately — you must wait for the cooling-off period to end.

36. Corporate Bond Fund

Definition: A debt fund that primarily invests in bonds issued by corporations.

In Simple Terms: Like lending money to big companies instead of banks — gives better returns than FDs.

In Real World: Riskier than government bond funds but safer than equity funds.

Relevance: Suitable for investors seeking better returns than bank FDs with moderate risk.

Example: You invest in a corporate bond fund that holds bonds of Tata Motors, Adani, and Infosys.

37. Corporate Bonds

Definition: Debt instruments issued by companies to raise capital from investors.

In Simple Terms: Like giving a loan to a company in exchange for regular interest payments.

In Real World: Debt mutual funds invest in these for higher returns than government bonds.

Relevance: Offers better yields than government securities but comes with credit risk.

Example: Your mutual fund buys bonds from Reliance Industries that pay 8% annual interest.

38. Corpus

Definition: The total amount of money invested in a mutual fund by all investors.

In Simple Terms: Think of it as the total pot of money collected from many people for a group trip.

In Real World: Larger corpus often means more stability and lower expense ratio.

Relevance: Impacts liquidity, performance, and fund management strategy.

Example: A large-cap fund with a ₹10,000 crore corpus is more stable than one with ₹100 crore.

39. Cost Inflation Index (CII)

Definition: A tool used to calculate inflation-adjusted capital gains for long-term assets.

In Simple Terms: Like adjusting your salary for inflation — shows real profit after price rises.

In Real World: Published annually by the Income Tax Department.

Relevance: Reduces taxable capital gains on debt funds held more than 3 years.

Example: You bought units at ₹100 in 2018 and sold at ₹150 in 2023 — CII helps adjust purchase cost for inflation.

40. Cost of Investment

Definition: The total amount invested in a mutual fund, including purchase price and any applicable loads.

In Simple Terms: What you actually paid to buy the mutual fund units.

In Real World: Used to calculate capital gains and tax liability.

Relevance: Helps in determining profits when redeeming.

Example: You invested ₹50,000 over 2 years — that’s your cost of investment.

41. Credit Rating

Definition: An assessment of the creditworthiness of a company or instrument.

In Simple Terms: Like a credit score for companies — tells how likely they are to repay loans.

In Real World: Rated by agencies like CRISIL, CARE, and ICRA.

Relevance: Debt funds use this to assess risk before investing.

Example: A bond rated AA is safer than one rated BBB.

42. Credit Risk

Definition: The risk of default by the issuer of a bond or debt instrument.

In Simple Terms: Like lending money to a friend who might not pay back — there’s always some risk.

In Real World: Debt mutual funds face this risk when investing in corporate bonds.

Relevance: Higher in low-rated debt funds.

Example: If a company defaults on interest payment, your fund’s NAV might fall.

43. Credit Risk Fund

Definition: A debt fund that takes on higher credit risk to earn better returns.

In Simple Terms: Like choosing a higher-interest loan because the borrower is riskier.

In Real World: Invests in low-rated corporate bonds.

Relevance: Offers higher yield but carries risk of default.

Example: A credit risk fund may invest in bonds rated A or BBB, offering 8–9% returns.

44. CRISIL Fund Ranking

Definition: Ratings given by CRISIL to evaluate the performance and consistency of mutual funds.

In Simple Terms: Like school grades — tells you how good a fund is compared to others.

In Real World: Rankings range from 1 to 5, with 1 being the best.

Relevance: Helps investors compare similar funds.

Example: A fund with a CRISIL rank of 1 has consistently performed well over 3–5 years.

45. Cum-Dividend

Definition: A security or fund that includes the right to receive an upcoming dividend.

In Simple Terms: Like buying a house just before rent is due — you get the benefit even though someone else earned it earlier.

In Real World: When a fund declares a dividend, units bought before the record date are cum-dividend.

Relevance: Affects NAV and investor decisions around dividend dates.

Example: If you buy units before the ex-dividend date, you’ll get the dividend payout.

46. Custodian

Definition: A financial institution responsible for holding and safeguarding a fund’s securities.

In Simple Terms: Like a bank locker — keeps your investments safe and helps transfer them smoothly.

In Real World: Major custodians include NSDL and CDSL.

Relevance: Plays a key role in settlement and record-keeping.

Example: When your fund sells shares, the custodian handles the actual transfer.

47. Cut-off Time

Definition: The time before which transactions must be received to get that day’s NAV.

In Simple Terms: Like booking a train ticket before the last booking window closes — otherwise, you get the next day’s seat.

In Real World: Most mutual funds follow a cut-off time of 3:00 PM.

Relevance: Impacts the number of units you get when investing or redeeming.

Example: If you submit a purchase request at 2:59 PM, you get that day’s NAV; after 3 PM, it’s next business day.

D

1. Daily NAV

Definition: The Net Asset Value of a mutual fund calculated at the end of each business day.

In Simple Terms: Like checking the price of gold every evening — it tells you what your mutual fund unit is worth today.

In Real World: Published by AMCs and RTAs like CAMS or Karvy on their websites and apps.

Relevance: Determines how many units you get when investing or how much money you receive when redeeming.

Example: If the daily NAV of your fund is ₹25, and you invest ₹5,000, you’ll get 200 units.

2. Daily SIP

Definition: A type of SIP where investments are made every working day instead of monthly.

In Simple Terms: Like saving a small amount every day in a piggy bank — only here, it’s invested in mutual funds.

In Real World: Not commonly used; most investors prefer weekly or monthly SIPs.

Relevance: Helps in rupee-cost averaging over very short periods.

Example: You invest ₹100 every day in an equity fund through daily SIP — this averages out market fluctuations more than a monthly SIP.

3. Debt Fund

Definition: A mutual fund that primarily invests in fixed income instruments like bonds, treasury bills, and money market securities.

In Simple Terms: Like putting your money in a high-interest savings account — gives regular, stable returns.

In Real World: Ideal for conservative investors or those needing regular income.

Relevance: Lower risk compared to equity funds; suitable for short-term goals.

Example: You invest ₹2 lakh in a liquid fund to earn better interest than a savings account while keeping your money safe.

4. Debt Oriented Hybrid Fund

Definition: A hybrid fund that allocates a larger portion (65–80%) to debt and the rest to equity.

In Simple Terms: Like eating mostly dal-chawal with a small serving of sabzi — safer than balanced funds.

In Real World: Also called Conservative Hybrid Funds.

Relevance: Offers moderate growth with low volatility.

Example: A fund with 70% in government bonds and 30% in stocks is a debt-oriented hybrid fund.

5. Debt Securities

Definition: Financial instruments issued by governments or companies that promise to repay principal with interest.

In Simple Terms: Like giving a loan to someone who promises to pay back with interest.

In Real World: Includes bonds, debentures, T-bills, and commercial papers.

Relevance: Debt funds invest heavily in these for stable returns.

Example: Your mutual fund buys bonds from Tata Capital or Reliance Industries as part of its portfolio.

6. Debt-to-Equity Ratio

Definition: A financial metric showing the proportion of debt to equity in a company’s capital structure.

In Simple Terms: Like comparing how much salt vs. sugar you added to a recipe — shows how a company is funded.

In Real World: Used by fund managers to assess credit risk before investing in corporate bonds.

Relevance: Higher ratio means higher risk; lower ratio indicates stability.

Example: A company with a debt-to-equity ratio of 0.5 has half as much debt as equity.

7. Deep Discount Bonds

Definition: Bonds sold at a large discount to face value and redeemed at par upon maturity.

In Simple Terms: Like buying a gift card for ₹80 that’s worth ₹100 — you make a profit when it matures.

In Real World: Popular in older schemes; rarely issued now.

Relevance: Returns come entirely from the difference between purchase price and redemption value.

Example: You buy a bond for ₹500 that will be redeemed for ₹1,000 after 10 years — your gain is ₹500.

8. Default Risk

Definition: The risk that a bond issuer fails to pay interest or return principal on time.

In Simple Terms: Like lending money to a friend who might not pay you back — there’s always some risk.

In Real World: Debt funds avoid low-rated bonds to reduce default risk.

Relevance: Impacts the safety and returns of debt mutual funds.

Example: A bond rated BBB has higher default risk than one rated AA.

9. Demat Account

Definition: An account where mutual fund units are held in electronic form.

In Simple Terms: Like a digital locker for your mutual fund investments — no physical certificates needed.

In Real World: Required for direct plans since 2020 and for holding ETFs or shares.

Relevance: Makes investing easier and faster, especially for frequent transactions.

Example: You hold all your mutual fund units in demat mode linked to your Zerodha or Upstox account.

10. Demat Mode

Definition: Holding mutual fund units in electronic format through a demat account.

In Simple Terms: Instead of paper units, everything is stored digitally — just like WhatsApp messages.

In Real World: Mandatory for direct plans and preferred by tech-savvy investors.

Relevance: Ensures safety and ease of transfer.

Example: You can sell your fund units anytime online because they’re in demat mode.

11. Dematerialization (Demat)

Definition: The process of converting physical mutual fund units into electronic form.

In Simple Terms: Like turning paper photos into digital ones — easier to manage and store.

In Real World: Done via DP (Depository Participant) like NSDL or CDSL.

Relevance: Eliminates risks of theft, loss, and forgery.

Example: You convert old paper certificates into digital units so you can trade them online.

12. Depository Participant (DP)

Definition: An agent of a depository (like NSDL or CDSL) that helps investors open and maintain demat accounts.

In Simple Terms: Like a postman who delivers your mail — a DP handles your digital investment records.

In Real World: Brokers like Zerodha, ICICI Direct, or HDFC Securities act as DPs.

Relevance: Enables seamless trading and settlement of securities.

Example: When you buy units of an ETF, your DP updates your demat account instantly.

13. Derivative Exposure

Definition: The use of futures, options, or other derivatives by mutual funds to hedge or enhance returns.

In Simple Terms: Like using weather forecasts to decide when to plant crops — protects against losses.

In Real World: Allowed only up to SEBI-prescribed limits.

Relevance: Helps manage risk and stabilize returns.

Example: A dynamic bond fund uses interest rate futures to protect itself from falling bond prices.

14. Direct Plan

Definition: A mutual fund plan offered directly by the AMC without involving any broker or intermediary.

In Simple Terms: Like buying vegetables from a farmer instead of a shop — cuts out the middleman.

In Real World: Has a lower expense ratio than regular plans.

Relevance: Better for long-term investors who want to save on fees.

Example: You invest directly in “HDFC Equity Fund – Direct Plan” via the AMC’s website.

15. Disinvestment

Definition: Selling off holdings in a mutual fund or selling government stakes in public sector companies.

In Simple Terms: Like selling furniture from your house — taking out what you previously put in.

In Real World: Happens when investors redeem units or governments sell stake in PSUs.

Relevance: Can impact fund performance if done in bulk.

Example: You redeem ₹50,000 from your ELSS fund after 3 years — that’s disinvestment.

16. Distribution Channel

Definition: The method through which mutual fund products are sold to investors.

In Simple Terms: Like choosing where to buy groceries — from a local kirana store, a supermarket, or online.

In Real World: Includes banks, brokers, distributors, and online platforms.

Relevance: Impacts investor experience, cost, and convenience.

Example: You invest through Paytm Money (online) or through your bank branch (offline).

17. Diversification

Definition: Spreading investments across different asset classes, sectors, or companies to reduce risk.

In Simple Terms: Like not putting all your eggs in one basket — spreads risk.

In Real World: Mutual funds diversify to avoid heavy losses from any single stock or sector.

Relevance: One of the basic principles of smart investing.

Example: A diversified equity fund holds stocks of IT, banking, pharma, and consumer goods companies.

18. Dividend

Definition: A portion of profits distributed to investors periodically by a mutual fund.

In Simple Terms: Like getting rent from a property you own — but here, it comes from your mutual fund gains.

In Real World: Offered as a payout option in many funds.

Relevance: Provides regular income but doesn’t increase wealth like growth plans do.

Example: Your mutual fund declares a dividend of ₹1 per unit — you get cash credited to your bank.

19. Dividend Distribution Tax (DDT)

Definition: A tax levied on dividends paid by mutual funds (abolished in FY 2020–21).

In Simple Terms: Like paying GST when you buy something — a tax on the dividend you received.

In Real World: Investors had to pay DDT even though they didn’t choose to take the dividend.

Relevance: Made dividend plans less attractive due to double taxation.

Example: If a fund paid ₹1,000 as dividend, you paid tax on it even if you reinvested the amount.

20. Dividend Option

Definition: A mutual fund plan where profits are paid out to investors regularly as dividends.

In Simple Terms: Like getting your salary monthly — instead of waiting until retirement.

In Real World: Suitable for retirees or those needing regular income.

Relevance: Helps in managing household expenses or passive income needs.

Example: You invest in a monthly dividend plan to get ₹2,000 every month for living costs.

21. Dividend Payout Option

Definition: A feature that allows investors to receive dividends directly in their bank account.

In Simple Terms: Like getting your salary credited to your bank — automatic and hassle-free.

In Real World: Most common way of receiving dividends from mutual funds.

Relevance: Offers liquidity and predictable cash flow.

Example: Your fund pays ₹5,000 in dividends, which gets credited to your SBI savings account.

22. Dividend Reinvestment

Definition: Using dividend payouts to automatically buy more units of the same fund.

In Simple Terms: Like getting bonus sweets during Diwali — extra units without spending more money.

In Real World: Known as IDCW (Income Distribution cum Capital Withdrawal) since 2021.

Relevance: Helps grow your holdings without additional investment.

Example: You opt for dividend reinvestment — your ₹5,000 dividend buys more units of the same fund.

23. Dividend Reinvestment Option

Definition: A plan where dividends are automatically converted into additional units instead of being paid out.

In Simple Terms: Like getting extra rice in a packet instead of a discount — your holdings grow without extra effort.

In Real World: Similar to growth option but still taxed like dividend option.

Relevance: Helps compound wealth over time.

Example: You get 100 extra units as dividend reinvestment instead of ₹5,000 in cash.

24. Dividend Stripping

Definition: Buying units just before a dividend is declared to benefit from tax advantages.

In Simple Terms: Like buying a fruit just before it ripens — to enjoy the sweetness at a cheaper price.

In Real World: Used by investors to minimize tax by booking a capital loss.

Relevance: Now regulated by SEBI to prevent misuse.

Example: You buy units before a dividend declaration and sell them afterward at a slight loss to offset gains.

25. Dividend Yield

Definition: A ratio showing how much a company pays in dividends relative to its share price.

In Simple Terms: Like calculating how much rent you get compared to the cost of a property.

In Real World: Funds investing in high-dividend-yield stocks are known as Dividend Yield Funds.

Relevance: Helps investors identify consistent income-generating stocks.

Example: A company trading at ₹100 pays ₹5 annual dividend — its yield is 5%.

26. Dividend Yield Fund

Definition: A mutual fund that invests in stocks that give regular and high dividends.

In Simple Terms: Like investing in rental properties that pay good monthly rent.

In Real World: Popular among retired investors looking for steady income.

Relevance: Offers both capital appreciation and dividend income.

Example: This fund invests in companies like ONGC, BPCL, and Power Grid — all known for high dividend payouts.

27. Drawdown

Definition: The decline from a peak value in the net asset value of a fund.

In Simple Terms: Like watching your savings drop after a big withdrawal — temporary fall in value.

In Real World: Measured to understand downside risk and recovery time.

Relevance: Important for assessing how risky a fund is during market crashes.

Example: If a fund drops from ₹100 to ₹80, it’s said to have a 20% drawdown.

28. Drawdown Period

Definition: The time during which the value of a fund falls from its peak to trough.

In Simple Terms: Like a rainy season — a period when things go downhill before improving again.

In Real World: Used to measure how long a fund stays down before recovering.

Relevance: Helps investors prepare mentally and financially for market downturns.

Example: During the 2020 pandemic, many equity funds had a drawdown period of 2–3 months.

29. Duration

Definition: A measure of a bond fund’s sensitivity to interest rate changes.

In Simple Terms: Like predicting how much a swing moves when you push it harder — longer swings move more.

In Real World: Long-duration funds are affected more by RBI interest rate changes.

Relevance: Helps investors choose funds based on interest rate outlook.

Example: A gilt fund with average duration of 7 years will fall sharply if interest rates rise.

30. Dynamic Asset Allocation

Definition: A strategy where the fund dynamically shifts between equity and debt based on market conditions.

In Simple Terms: Like changing your travel route based on traffic — flexible and responsive.

In Real World: Also known as Balanced Advantage Funds.

Relevance: Helps manage risk without manual intervention.

Example: In a falling market, the fund may shift 80% to debt and 20% to equity to protect capital.

31. Dynamic Asset Allocation Fund

Definition: A fund that actively adjusts its asset allocation based on market valuations and economic indicators.

In Simple Terms: Like adjusting your diet based on how active you are — more carbs when busy, fewer when resting.

In Real World: Uses rules-based or discretionary strategies to balance equity and debt exposure.

Relevance: Reduces market timing risk for investors.

Example: The fund may shift to 90% equity during market lows and 50% equity during highs.

32. Dynamic Bond Fund

Definition: A debt fund that changes its portfolio mix depending on interest rate expectations.

In Simple Terms: Like switching between hot tea and cold drinks based on the weather — adapts to environment.

In Real World: Adjusts maturity and credit quality based on interest rate movements.

Relevance: Helps maximize returns and reduce interest rate risk.

Example: When the RBI cuts rates, the fund may increase exposure to long-term bonds.

E

1. Effective Yield

Definition: The actual return earned by a mutual fund on its debt holdings, considering interest income and reinvestment gains.

In Simple Terms: Like calculating how much milk you actually get from your cow after feeding and maintenance — it’s the real earning power.

In Real World: Used by debt funds to show investors how well they are managing fixed-income investments.

Relevance: Helps investors understand the true performance of debt schemes.

Example: A liquid fund claims to give 6% returns — but its effective yield might be slightly lower due to costs and reinvestment rates.

2. ELSS (Equity Linked Savings Scheme)

Definition: A category of equity mutual funds that offer tax deductions under Section 80C of the Income Tax Act.

In Simple Terms: Like saving money in a piggy bank that also gives you tax benefits — and grows faster than FDs.

In Real World: Comes with a 3-year lock-in period and offers market-linked returns.

Relevance: Popular among salaried individuals for saving taxes while investing in equities.

Example: You invest ₹1.5 lakh in an ELSS fund this year — you save ₹46,800 in taxes (based on 31.2% tax slab).

3. Emerging Market Fund

Definition: A mutual fund that invests in companies located in emerging economies like Brazil, Russia, India, China, or South Africa.

In Simple Terms: Like investing in small towns where growth is happening fast — more risk, more reward.

In Real World: Also known as Emerging Markets Funds (plural form).

Relevance: Offers diversification beyond India and potential for high returns.

Example: You invest in an international fund focused on Asia-Pacific countries — it rises sharply when India or Indonesia’s economy grows.

4. Emerging Markets Fund

Definition: Same as above — refers to funds investing in developing economies.

In Simple Terms: Think of it as investing in startups instead of big companies — higher growth potential but also more volatility.

In Real World: These funds are often part of global or international portfolios offered by AMCs.

Relevance: Good for investors who want exposure to fast-growing global markets.

Example: Your fund may hold stocks from Indian IT firms or Indonesian consumer goods companies.

5. Entry Load (Now abolished in India)

Definition: A fee charged when purchasing mutual fund units (abolished in India in 2009).

In Simple Terms: Like paying a small entry fee at a fair before buying anything.

In Real World: Earlier, investors paid up to 2% extra when entering some mutual funds.

Relevance: No longer applies — now most mutual funds are no-load.

Example: If you invested ₹1 lakh earlier, you might have paid ₹1,000 as entry load — not anymore.

6. ETF (Exchange Traded Fund)

Definition: A fund that tracks an index like Nifty 50 or Sensex and is traded on stock exchanges like shares.

In Simple Terms: Like buying gold coins that move in price every second — you can buy/sell anytime during market hours.

In Real World: Can include index ETFs, gold ETFs, or sectoral ETFs.

Relevance: Low-cost, flexible, and ideal for passive investors.

Example: You buy 1 unit of “Nifty BeES” ETF which mirrors the Nifty 50 index — it goes up and down with the market.

7. Equal Weight Index Fund

Definition: A type of index fund where each company in the index gets equal weight, regardless of size.

In Simple Terms: Like giving every student in class the same marks, whether they scored high or low — everyone is treated equally.

In Real World: Unlike regular index funds that favor large-cap stocks, these treat all constituents equally.

Relevance: Gives more exposure to mid and small caps within the index.

Example: An equal weight Nifty 50 fund gives smaller companies like IDFC First Bank or IndusInd Bank the same importance as Reliance or Infosys.

8. Equity Fund

Definition: A mutual fund that primarily invests in stocks of listed companies.

In Simple Terms: Like owning tiny parts of big companies — such as Infosys, Tata Motors, or HDFC Bank.

In Real World: High-risk, high-return option for long-term wealth creation.

Relevance: Ideal for long-term goals like retirement or children’s education.

Example: You invest ₹10,000 monthly in a large-cap fund — over 10 years, it grows to ₹18–20 lakhs depending on returns.

9. Equity Linked Savings Scheme (ELSS)

Definition: A tax-saving mutual fund that invests mostly in equity and allows deduction under Section 80C.

In Simple Terms: Like getting a discount on your taxes for saving money smartly — only better because it grows faster than FDs.

In Real World: Has a mandatory 3-year lock-in period.

Relevance: Combines tax planning with wealth creation.

Example: You invest ₹50,000 in an ELSS fund — you save tax and grow your money with the stock market.

10. Equity Savings Fund

Definition: A hybrid fund that mixes equity, arbitrage, and debt to balance growth and safety.

In Simple Terms: Like eating both spicy and mild food together — a mix of risk and stability.

In Real World: Often used for short to medium-term goals.

Relevance: Offers moderate returns with lower volatility than pure equity funds.

Example: You invest ₹2 lakh in an equity savings fund — it gives around 8–10% annual returns with less risk.

11. Ethical Fund

Definition: A fund that invests only in companies meeting certain ethical or environmental standards.

In Simple Terms: Like choosing to eat organic food — you avoid harmful ingredients and support good causes.

In Real World: Also called ESG (Environmental, Social, Governance) funds.

Relevance: Appeals to investors who care about sustainability and responsible investing.

Example: Your fund avoids tobacco or liquor companies and focuses on clean energy or water conservation firms.

12. Ex-Dividend

Definition: A security or fund that no longer carries the right to receive an upcoming dividend.

In Simple Terms: Like buying a house after rent is due — you miss the benefit until next time.

In Real World: NAV drops once the dividend is paid out — so new buyers don’t get it.

Relevance: Important to know if you’re investing just for dividend payouts.

Example: If you buy units after the ex-dividend date, you won’t get the dividend declared by the fund.

13. Ex-Dividend Date

Definition: The cutoff date set by the fund to determine who will receive the declared dividend.

In Simple Terms: Like booking a train ticket before the train departs — if you’re late, you miss the journey.

In Real World: Investors must own units before this date to get the dividend.

Relevance: Impacts timing decisions for those seeking dividend income.

Example: A fund declares a dividend with an ex-date of 25th March — you must own units before this date.

14. Exchange Traded Fund (ETF)

Definition: A fund that tracks an index or commodity and is traded on stock exchanges like a share.

In Simple Terms: Like buying a mini version of the stock market — one unit represents many stocks.

In Real World: Includes Nifty 50 ETFs, Gold ETFs, and International ETFs.

Relevance: Offers diversification and liquidity — you can trade it anytime during market hours.

Example: You invest in a Gold ETF through Zerodha — it moves with gold prices without holding physical gold.

15. Exit Load

Definition: A fee charged when you redeem units before a specified period.

In Simple Terms: Like paying a fine for returning a library book late — discourages early withdrawal.

In Real World: Varies across funds — usually decreases over time and disappears after 1 year.

Relevance: Helps fund houses manage inflows and outflows.

Example: A fund charges 1% exit load if redeemed within 6 months — so ₹1 lakh redemption becomes ₹99,000.

16. Exit NAV

Definition: The Net Asset Value used to calculate redemption proceeds.

In Simple Terms: Like checking how much your old furniture is worth when selling it — what you get when you leave the fund.

In Real World: May differ slightly from the published NAV based on transaction timing.

Relevance: Determines how much cash you receive when you sell your units.

Example: You redeem 1,000 units at Exit NAV of ₹25 — you get ₹25,000 minus any applicable exit load.

17. Expense Ratio

Definition: The percentage of a fund’s assets used to cover operating expenses like management fees, administrative costs, and distribution charges.

In Simple Terms: Like paying a small service charge for restaurant delivery — it eats into your returns a little.

In Real World: Direct plans have lower expense ratios than regular plans.

Relevance: Even a 0.5% difference matters over the long term.

Example: A fund with 1.5% expense ratio reduces your returns by ₹1,500 per ₹1 lakh invested every year.

18. Exposure Limit

Definition: The maximum percentage of assets a fund can invest in a single stock, sector, or asset class.

In Simple Terms: Like setting a budget limit for grocery shopping — you can’t overspend on one item.

In Real World: SEBI sets limits to prevent over-concentration.

Relevance: Protects investors from too much risk in one area.

Example: A large-cap fund cannot invest more than 10% in a single stock.

F

1. Face Value

Definition: The nominal or base value of a mutual fund unit as assigned at the time of launch.

In Simple Terms: Like the printed price tag on a new product — doesn’t change even if the market price does.

In Real World: Typically set at ₹10 per unit in most mutual funds.

Relevance: Used internally by AMCs; not directly relevant to investors since actual value is determined by NAV.

Example: If you invest in a New Fund Offer (NFO), each unit will have a face value of ₹10, though it may trade at higher NAV later.

2. Fact Sheet

Definition: A document published by AMCs that gives key details about a fund’s performance, portfolio, and strategy.

In Simple Terms: Like a health report card for your mutual fund — tells you how it’s doing.

In Real World: Published monthly or quarterly by AMCs like HDFC, SBI, and ICICI Prudential.

Relevance: Helps investors understand fund performance, risk levels, and asset allocation.

Example: You check the fact sheet of “Mirae Asset Large Cap Fund” to see which stocks it holds and how it performed last quarter.

3. Fair Market Value

Definition: The estimated value of a security based on current market conditions.

In Simple Terms: What someone would reasonably pay for an item today — not what it cost earlier or might cost later.

In Real World: Used by mutual funds to value unlisted or illiquid securities in their portfolio.

Relevance: Ensures accurate NAV calculation when exact prices are not available.

Example: Your fund holds shares of a pre-IPO company — fair market valuation helps determine its worth.

4. FMP (Fixed Maturity Plan)

Definition: A close-ended debt fund with a fixed tenure, investing in instruments that mature around the same time.

In Simple Terms: Like booking a fixed deposit for a specific period — you know exactly when your money comes back.

In Real World: Popular among conservative investors seeking predictable returns.

Relevance: Offers stable returns with low volatility and clear maturity date.

Example: You invest ₹50,000 in a 1-year FMP — after one year, you get your money back with interest.

5. Financial Goal

Definition: A target amount you want to achieve through investments over a set time frame.

In Simple Terms: Like saving up for a Diwali gift or your child’s school fees — a clear reason why you’re investing.

In Real World: Helps decide which fund to choose and how much to invest.

Relevance: Guides investment decisions and keeps you disciplined.

Example: Your goal is to save ₹10 lakh in 5 years for a car — so you start a SIP in a large-cap fund.

6. Financial Year (FY)

Definition: A 12-month accounting period used for taxation purposes, running from April 1 to March 31 in India.

In Simple Terms: Like your school year — starts in April and ends in March every year for tax and financial planning.

In Real World: Used to calculate capital gains, tax deductions, and financial reporting.

Relevance: Important for tracking investment timelines and tax-saving opportunities.

Example: You invest in ELSS before March 31 to claim tax deduction for that FY.

7. Fixed Income

Definition: Investments that provide regular, predictable returns — such as bonds, debentures, or deposits.

In Simple Terms: Like getting rent from a property — steady and reliable income.

In Real World: Debt mutual funds invest heavily in fixed income instruments.

Relevance: Ideal for retirees or conservative investors who need regular cash flow.

Example: A pensioner invests in a corporate bond fund to get monthly interest income.

8. Fixed Income Securities

Definition: Instruments that offer fixed interest payments and return of principal at maturity — like bonds or T-bills.

In Simple Terms: Think of it like a loan you give to a company or government — they pay you back with interest.

In Real World: Invested in by debt funds to generate stable returns.

Relevance: Low-risk assets that help reduce overall fund volatility.

Example: Your liquid fund invests in treasury bills and commercial papers — both are fixed income securities.

9. Fixed Maturity Plan (FMP)

Definition: A type of closed-end debt fund with a defined maturity period, investing in matched-maturity instruments.

In Simple Terms: Like buying a train ticket with a fixed destination — you know exactly when you’ll reach.

In Real World: Tax-efficient if held until maturity; often used for short-term goals.

Relevance: Predictable returns with minimal market fluctuation.

Example: You invest in a 3-year FMP — it matures on a fixed date with a known yield.

10. Fixed Return Fund

Definition: A fund that promises a fixed return to investors, usually under guaranteed return schemes (now rare).

In Simple Terms: Like a bank FD — you know exactly how much you’ll earn upfront.

In Real World: SEBI now restricts such funds due to risks involved for AMCs.

Relevance: Rarely available, but still exists in some older plans.

Example: An old investor has a fund that guarantees 8% annual returns — that’s a fixed return fund.

11. Flexi Cap Fund

Definition: A mutual fund that invests across large-cap, mid-cap, and small-cap stocks without restriction.

In Simple Terms: Like eating a mix of dal, sabzi, and rice — covers all bases for balanced growth.

In Real World: Formerly called multi-cap funds; now renamed post SEBI regulation.

Relevance: Offers diversification and potential for high returns.

Example: You invest in a flexi cap fund — it holds Reliance (large), Tata Motors (mid), and Dixon Technologies (small).

12. Floor Level

Definition: Minimum limit below which a fund cannot fall in terms of asset allocation or exposure.

In Simple Terms: Like setting a minimum savings rule — no matter what, you won’t go below a certain level.

In Real World: Sometimes used in dynamic asset allocation funds to protect equity exposure.

Relevance: Helps maintain balance between risk and reward.

Example: A hybrid fund sets a floor level of 40% in debt — even during market crashes, it won’t drop below this.

13. Floating Rate Fund

Definition: A debt fund that invests in instruments whose interest rates change periodically.

In Simple Terms: Like a mobile bill that changes every month depending on usage — interest income varies with market rates.

In Real World: Gains popularity when interest rates are expected to rise.

Relevance: Protects against rising interest rate risk.

Example: When RBI increases repo rate, floating rate funds benefit as their returns also rise.

14. Floating Rate Instruments

Definition: Debt instruments where the interest rate adjusts periodically based on a benchmark.

In Simple Terms: Like a variable-rate home loan — the interest you earn or pay goes up/down with market trends.

In Real World: Includes floating rate bonds and loans.

Relevance: Used by debt funds to hedge against interest rate fluctuations.

Example: Your mutual fund holds floating rate bonds linked to MCLR — as rates rise, your fund earns more.

15. Focused Fund

Definition: An equity fund that invests in a limited number of stocks (usually 25–30) for better focus.

In Simple Terms: Like focusing on just a few subjects instead of trying to study everything — depth over breadth.

In Real World: Higher risk than diversified equity funds due to lower diversification.

Relevance: For investors who trust the fund manager’s stock-picking ability.

Example: A focused fund may hold only 30 stocks, including Infosys, ITC, and Divis Labs.

16. Folio Number

Definition: A unique identification number assigned to your mutual fund account with an AMC.

In Simple Terms: Like your PAN card number — identifies your mutual fund account with a specific fund house.

In Real World: Appears on your CAS and transaction records.

Relevance: Needed while redeeming units or transferring holdings.

Example: If you invest with multiple AMCs, each will assign a different folio number.

17. Foreign Portfolio Investor (FPI)

Definition: Entities registered with SEBI to invest in Indian financial markets on behalf of overseas clients.

In Simple Terms: Like a foreign friend investing in Indian stocks and bonds through a local guide.

In Real World: Includes international funds, pension funds, and hedge funds.

Relevance: Plays a big role in influencing market flows and sentiment.

Example: Your mutual fund may hold stocks bought by FPIs during a market rally.

18. Forward Pricing

Definition: Using future-dated NAV for transactions received after cut-off time.

In Simple Terms: Like booking a flight today but flying tomorrow — the price you get depends on the next day’s rate.

In Real World: Applicable to late submissions; ensures fairness in pricing.

Relevance: Impacts how many units you get when investing after 3 PM.

Example: You submit a purchase request at 3:10 PM — you get the next business day’s NAV.

19. Front-End Load

Definition: A fee charged at the time of purchasing mutual fund units (now abolished in India).

In Simple Terms: Like paying a cover charge at a party before entering — reduces the number of units you get.

In Real World: Was common before 2009; replaced by exit loads and trail commissions.

Relevance: Not applicable anymore in India, but still exists in some global funds.

Example: Earlier, ₹1 lakh investment could turn into ₹98,000 due to 2% front-end load.

20. Fund Category

Definition: Classification of mutual funds based on asset class, objective, or structure.

In Simple Terms: Like sorting fruits into apples, bananas, and oranges — makes it easier to choose.

In Real World: SEBI defines categories like Equity, Debt, Hybrid, etc., to bring uniformity.

Relevance: Helps compare similar funds and pick the right one for your goal.

Example: All large-cap funds fall under the same category — making it easy to compare returns and risks.

21. Fund Fact Sheet

Definition: A summary document showing a fund’s performance, portfolio, and risk metrics.

In Simple Terms: Like a movie trailer — gives a quick preview of what the fund offers.

In Real World: Available on AMC websites and apps like CAMS or Paytm Money.

Relevance: Saves time for investors looking for a snapshot before diving deep.

Example: You read the fund fact sheet to check if a scheme is suitable for your retirement plan.

22. Fund Flow Analysis

Definition: Tracking the inflow and outflow of money into a mutual fund.

In Simple Terms: Like checking how much money comes in and goes out of your wallet — shows spending habits.

In Real World: Used by analysts and fund managers to gauge investor sentiment.

Relevance: Helps assess fund stability and investor confidence.

Example: If a fund sees consistent inflows, it may indicate strong investor trust.

23. Fund House

Definition: A general term for an Asset Management Company (AMC) that manages mutual fund schemes.

In Simple Terms: Like a factory that produces mutual funds — where all the action happens.

In Real World: Examples include DSP Mutual Fund, Nippon India, and Axis Mutual Fund.

Relevance: Investors often choose funds based on reputation of the fund house.

Example: You choose a fund managed by SBI Funds because you trust the brand.

24. Fund Manager

Definition: A professional responsible for managing a mutual fund’s portfolio and making investment decisions.

In Simple Terms: Like a cricket team captain — decides which players to field and when.

In Real World: Fund managers work for AMCs and are evaluated based on performance.

Relevance: Their expertise and strategy significantly impact fund returns.

Example: Mr. Rajeev Thakur is the fund manager of “HDFC Equity Fund”.

25. Fund of Funds (FoF)

Definition: A mutual fund that invests in other mutual funds instead of directly in stocks or bonds.

In Simple Terms: Like buying a thali plate that already has multiple dishes — you’re investing in funds within funds.

In Real World: Often used to access international markets via overseas ETFs.

Relevance: May have higher expense ratio due to layered costs.

Example: You invest in a FoF that tracks US tech ETFs — gaining indirect access to Apple or Tesla.

26. Fund Rating

Definition: An evaluation given by agencies like CRISIL or Morningstar to assess a fund’s past performance and consistency.

In Simple Terms: Like getting grades in school — tells you how well the fund did compared to others.

In Real World: Ratings range from 1 to 5 stars; higher ratings mean better performance.

Relevance: Helps investors choose funds with proven track records.

Example: A fund with a 5-star Morningstar rating has consistently outperformed peers.

27. Fund Transfer (Inter-scheme)

Definition: Moving investments from one mutual fund scheme to another within the same AMC.

In Simple Terms: Like shifting money from your savings account to a fixed deposit — stays with the same bank.

In Real World: Done via STP (Systematic Transfer Plan) or manual transfer.

Relevance: Helps rebalance portfolios without selling and re-investing.

Example: You transfer ₹20,000 from a debt fund to an equity fund as your risk appetite increases.

28. Fundamental Analysis

Definition: Evaluating companies based on financial statements, business model, and industry outlook.

In Simple Terms: Like judging a student based on exam results and behavior — not just looks.

In Real World: Used by active fund managers to select good stocks.

Relevance: Helps identify undervalued companies with long-term growth potential.

Example: A fund manager analyzes Infosys’ quarterly earnings before deciding to buy more shares.

G

1. Gains (Capital Gains)

Definition: The profit earned from selling units of a mutual fund at a higher price than the purchase price.

In Simple Terms: It’s like buying something for less and selling it for more — just like when you sell old electronics on OLX or Flipkart for a profit.

In Real World: If you bought mutual fund units at ₹20 each and sold them later at ₹35, your capital gain is ₹15 per unit.

Relevance: Capital gains are taxed differently based on how long you held the investment — short-term (less than 1 year) or long-term (more than 1 year).

Example: Suppose you invested ₹10,000 in a fund during Diwali last year and redeemed it now for ₹13,000. You made a capital gain of ₹3,000.

2. Gilt Fund

Definition: A type of mutual fund that invests only in government securities (bonds), which are considered very safe.

In Simple Terms: Like lending money to the government through bonds — it’s one of the safest investments available.

In Real World: These funds are ideal for people who don’t want risk but still want better returns than fixed deposits.

Relevance: Since the government backs these securities, the risk of default is almost zero.

Example: Your uncle might choose a gilt fund instead of a bank FD to get slightly better returns while keeping his retirement savings safe.

3. Goal-Based Investing

Definition: Investing with a specific financial goal in mind, such as buying a car, funding education, or saving for a wedding.

In Simple Terms: Saving up systematically for something you really want — not just randomly putting money aside.

In Real World: Many Indians use this approach to plan for milestones like their child’s college, a new home, or a foreign trip.

Relevance: Helps keep your investments focused and disciplined over time.

Example: If you’re newly married and planning for your child’s future, you might start a monthly SIP in a mutual fund to build an education corpus.

4. Gold Fund

Definition: A mutual fund that invests in gold-related assets like gold ETFs or companies involved in gold mining.

In Simple Terms: It’s a way to invest in gold without physically buying jewelry or coins.

In Real World: Popular among Indians who traditionally value gold but want a more liquid and safer form of holding it.

Relevance: Offers diversification and protection against inflation, much like physical gold.

Example: Instead of storing gold coins at home, you can invest in a gold fund through your mobile app and track its growth easily.

5. Government Securities

Definition: Bonds issued by the central or state governments to raise funds, often used by mutual funds for safe investments.

In Simple Terms: These are loans given to the government — they pay back with interest after a set period.

In Real World: They’re the backbone of gilt funds and are seen as extremely safe because the government guarantees repayment.

Relevance: Used by conservative investors and funds to minimize risk.

Example: When you buy a Post Office Savings Bond, it’s similar to investing in government securities — safe and steady.

6. Graded Exit Load

Definition: A fee charged by mutual funds that decreases over time if you redeem your investment before a certain period.

In Simple Terms: Think of it like early cancellation charges — the longer you stay invested, the less you pay if you leave early.

In Real World: Encourages investors to stay invested for the long term rather than pulling out quickly.

Relevance: Funds use this to discourage frequent redemptions and maintain stability.

Example: A fund may charge 1% exit load if you withdraw within 6 months, but 0.5% if withdrawn between 6–12 months, and nothing after that.

7. Green Fund

Definition: A mutual fund that focuses on environmentally friendly companies or green technologies.

In Simple Terms: Investing in companies that care about the environment — solar energy, electric vehicles, sustainable agriculture, etc.

In Real World: With growing awareness about climate change, many young Indian investors prefer green funds.

Relevance: Aligns your values with your investments — good for the planet and potentially profitable.

Example: Investing in a fund that supports startups making biodegradable packaging materials or solar power plants.

8. Gross Expense Ratio

Definition: The total percentage of a fund’s assets used to cover operating expenses like management fees, administrative costs, etc.

In Simple Terms: It’s the cost of running the fund — like paying a shopkeeper a small commission to manage your investments.

In Real World: Lower expense ratios mean more returns for you — so it’s important to compare funds.

Relevance: High expense ratios can eat into your profits over time.

Example: If a fund has a gross expense ratio of 1.5%, then ₹1.50 of every ₹100 invested goes toward managing the fund.

9. Gross Redemption Value

Definition: The amount you receive when you redeem your mutual fund units before deducting any taxes or charges.

In Simple Terms: The total money you get back when you sell your fund units, before any deductions.

In Real World: This is the raw amount you see on your statement before final calculations.

Relevance: Helps investors understand how much their investment is worth at redemption.

Example: If you redeem 100 units priced at ₹25 each, your gross redemption value is ₹2,500.

10. Gross Return

Definition: The return earned on a mutual fund investment before deducting expenses like fund management fees or taxes.

In Simple Terms: The total profit a fund makes before any costs are subtracted — like seeing your salary before tax.

In Real World: Useful for comparing the performance of different funds.

Relevance: Gives an idea of how well the fund is doing before operational costs.

Example: If a fund earns 12% return annually but charges 1.5% in fees, the gross return is 12%, while the net return is 10.5%.

11. Group SIP

Definition: A Systematic Investment Plan (SIP) where a group of people pool money together to invest jointly in a mutual fund.

In Simple Terms: Like chipping in with friends or family to invest together, like a joint piggy bank.

In Real World: Some communities or groups use this model to encourage collective savings and investment habits.

Relevance: Promotes financial literacy and discipline through shared responsibility.

Example: A few friends decide to contribute ₹1,000 each month into a common SIP account to invest in a growth fund together.

12. Growth Fund

Definition: A mutual fund that primarily invests in stocks of companies expected to grow rapidly.

In Simple Terms: Investing in fast-growing businesses — think of supporting a startup that could become the next big thing.

In Real World: Popular among younger investors looking to build wealth over the long term.

Relevance: Offers high returns but comes with higher risk due to market volatility.

Example: Investing in a fund that includes companies like Reliance Jio or Zomato during their early growth phase.

13. Growth Option

Definition: A plan in a mutual fund where profits are reinvested automatically instead of being paid out as dividends.

In Simple Terms: Letting your profits work harder for you — like planting seeds again to grow more trees.

In Real World: Preferred by investors aiming for long-term wealth creation.

Relevance: Helps compound your investment over time.

Example: If you choose the growth option in a fund and earn ₹2,000 in profit, those ₹2,000 will be used to buy more units automatically.

14. Growth-Oriented Scheme

Definition: A mutual fund scheme designed to generate capital appreciation (increase in value) rather than regular income.

In Simple Terms: Focused on increasing your money over time, not giving you monthly income.

In Real World: Ideal for salaried professionals or young earners building wealth for the future.

Relevance: Matches long-term goals like retirement, property purchase, or children’s education.

Example: A young IT professional in Bengaluru chooses a growth-oriented scheme to build a retirement fund over 30 years.

15. Guaranteed Return Fund

Definition: A mutual fund that promises a minimum return to investors, usually backed by the AMC.

In Simple Terms: Like a fixed deposit where the company assures you’ll get at least a certain return, no matter what.

In Real World: Rare nowadays, but some older schemes still exist; AMCs have to declare and fulfill such guarantees.

Relevance: Offers peace of mind but may come with restrictions or limited upside.

Example: An investor chooses a guaranteed return fund offering 6% annual return, ensuring they get at least that even if the market dips.

16. Guaranteed Return Schemes

Definition: Mutual fund schemes where the Asset Management Company (AMC) guarantees a minimum return to investors.

In Simple Terms: The AMC promises that you’ll get at least a certain return — like a fixed deposit but offered by a fund house.

In Real World: These were more common earlier; today, SEBI restricts such schemes unless clearly backed by the AMC.

Relevance: Provides safety for conservative investors, though returns may lag behind market-linked options.

Example: A retired teacher might opt for a guaranteed return scheme to ensure a predictable income stream without worrying about market ups and downs.

H

1. HDFC Mutual Fund (as example AMC)

Definition: One of India’s leading Asset Management Companies (AMCs) that manages mutual fund schemes on behalf of investors.

In Simple Terms: Think of it like a trusted manager who invests your money in stocks, bonds, or other assets to help you grow wealth.

In Real World: HDFC Mutual Fund is backed by the well-known HDFC Group, which many Indians trust for banking, insurance, and investments.

Relevance: As an AMC, HDFC Mutual Fund decides how funds are invested, appoints fund managers, and ensures investor interests are protected.

Example: If you invest in “HDFC Equity Fund”, your money is being managed by HDFC Asset Management Company Pvt. Ltd.

2. Hedge

Definition: A strategy used to reduce or offset the risk of adverse price movements in investments.

In Simple Terms: Like buying insurance for your investment — if something goes wrong, you don’t lose everything.

In Real World: Used by large funds to protect against market crashes or currency fluctuations.

Relevance: Helps protect portfolios during volatile times, especially for international investments.

Example: An Indian mutual fund investing in U.S. stocks might hedge against rupee depreciation to avoid losses.

3. Hedge Fund

Definition: A type of private investment fund that uses complex strategies to generate high returns while managing risks.

In Simple Terms: It’s like a very advanced investment club where only rich people can join, and they try to beat the market using smart tactics.

In Real World: Not widely available in India to retail investors; mostly used by HNIs and institutional investors.

Relevance: These funds are highly flexible but come with high fees and risks.

Example: A group of NRIs pool money into a hedge fund based in Singapore to diversify their global investments.

4. Hedge Ratio

Definition: The percentage of an investment portfolio that is hedged to protect against potential losses.

In Simple Terms: How much of your investment is covered by insurance — not all of it, just part of it.

In Real World: Used by mutual funds to decide how much to protect when investing in risky markets like foreign equities.

Relevance: Helps balance between protection and growth potential.

Example: A fund investing in U.S. tech stocks may hedge 50% of its exposure to the dollar, so it doesn’t lose too much if the rupee strengthens.

5. Hedging

Definition: The act of protecting your investments from unexpected losses due to market swings or currency changes.

In Simple Terms: It’s like locking in a price today so you’re not surprised tomorrow — similar to fixing a rate with a vegetable vendor before harvest.

In Real World: Indian mutual funds often hedge when investing abroad to avoid losses from exchange rate fluctuations.

Relevance: Offers stability to investors during uncertain economic conditions.

Example: A mutual fund investing in crude oil futures might hedge against falling prices to protect investors.

6. High Net-Worth Individual (HNI)

Definition: A person with a large amount of investable assets, typically above ₹2 crore in India.

In Simple Terms: Someone who has enough money to invest in exclusive products not open to regular investors.

In Real World: Many mutual fund companies offer special schemes called Alternative Investment Funds (AIFs) for HNIs.

Relevance: HNIs have access to more complex and higher-risk investment options.

Example: A successful business owner in Ahmedabad with ₹5 crore in savings could be classified as an HNI and invest in customized fund plans.

7. High Watermark

Definition: A performance benchmark used in some mutual funds and alternative investments to calculate performance fees.

In Simple Terms: Like setting a height mark on a wall — the fund must cross that level before charging extra fees for performance.

In Real World: Commonly used in performance-linked funds to ensure fees are charged only when new profits are made.

Relevance: Prevents double-charging for the same level of profit.

Example: If a fund reaches a net asset value (NAV) of ₹150, then falls and rises again, it must go above ₹150 before charging performance fees again.

8. High-Risk Fund

Definition: A mutual fund that invests in volatile assets like small-cap stocks or emerging markets, offering high returns but with higher chances of loss.

In Simple Terms: It’s like riding a rollercoaster — thrilling, but not for everyone.

In Real World: Popular among young professionals or entrepreneurs willing to take risks for better long-term gains.

Relevance: Suitable for investors with a high-risk appetite and long investment horizon.

Example: A tech startup founder in Hyderabad chooses a high-risk equity fund to grow his wealth faster over 10 years.

9. High-Yield Bonds

Definition: Bonds issued by companies with lower credit ratings, offering higher interest rates to attract investors.

In Simple Terms: These are like loans given to risky businesses that promise higher returns to compensate for the danger.

In Real World: Some debt funds in India include high-yield bonds to boost returns, but they carry default risk.

Relevance: Can increase returns but also expose investors to possible defaults.

Example: A company facing financial trouble offers 10% interest to borrow money — attractive, but there’s a chance it won’t pay back.

10. Holding Pattern

Definition: The distribution of ownership in a mutual fund, showing how much is held by individuals, institutions, etc.

In Simple Terms: Like checking who owns what share of a group project — some might own big parts, others small.

In Real World: Helps understand whether a fund is popular among retail investors or mainly held by big players like banks.

Relevance: Gives insight into the fund’s stability and investor confidence.

Example: If a fund shows that 80% is owned by institutions, it suggests professional investors believe in it.

11. Holding Period

Definition: The length of time an investor holds onto mutual fund units before redeeming them.

In Simple Terms: How long you keep your money invested — like how many months you’ve been saving up for your next gadget.

In Real World: Determines whether gains are short-term or long-term, affecting tax treatment.

Relevance: Impacts both taxation and the exit load charged by the fund.

Example: If you invested in a fund during Navratri and redeemed it after Diwali, your holding period is about 2 months.

12. Hurdle Rate

Definition: A minimum return that a mutual fund must achieve before charging performance-based fees.

In Simple Terms: Like setting a baseline — unless the fund beats this target, it doesn’t charge extra for doing well.

In Real World: Used in certain specialized funds, especially Alternative Investment Funds (AIFs), to align incentives.

Relevance: Ensures that performance fees are only charged when real value is added.

Example: A fund sets a hurdle rate of 8%. If it earns 12%, the extra 4% may be subject to a performance fee.

13. Hybrid Fund

Definition: A mutual fund that invests in a mix of equity and debt instruments to balance risk and returns.

In Simple Terms: Like having a balanced thali — part spicy (equity), part mild (debt), giving you the best of both worlds.

In Real World: Ideal for moderate-risk investors who want steady growth without extreme ups and downs.

Relevance: Offers diversification within a single fund, suitable for various investor profiles.

Example: A school teacher in Pune chooses a hybrid fund to grow her savings steadily while keeping risks low.

I

1. Ideal SIP Amount

Definition: The amount you choose to invest regularly through a Systematic Investment Plan (SIP).

In Simple Terms: It’s how much money you want to put into your mutual fund every month — like setting aside money for monthly groceries or school fees.

In Real World: Many Indians start with small SIPs like ₹500–₹1,000 and increase over time as income grows.

Relevance: Helps build wealth steadily without putting pressure on monthly budgets.

Example: A young teacher in Jaipur starts a SIP of ₹2,000/month to save for her wedding after five years.

2. IDCW (Income Distribution cum Capital Withdrawal)

Definition: A plan where the mutual fund distributes part of its earnings to investors periodically.

In Simple Terms: Like getting regular pocket money from your investment — some of it is profit, and some is your own money being returned.

In Real World: Popular among retirees who need a steady income from their investments.

Relevance: Reduces the total value of your investment over time since part of your capital is withdrawn.

Example: An investor gets ₹3,000 every quarter from his IDCW plan to cover medical expenses.

3. Implied Volatility

Definition: A measure of how much the price of an asset is expected to change in the future based on market expectations.

In Simple Terms: Think of it like predicting how shaky the road will be tomorrow — helps guess how risky an investment might get.

In Real World: Used by fund managers to assess risk before investing in volatile stocks or markets.

Relevance: Higher implied volatility means higher uncertainty and potential for big swings in returns.

Example: If a pharma stock becomes more volatile due to regulatory news, the fund may reduce exposure to protect investors.

4. Inception Date (of a Fund)

Definition: The date when a mutual fund was launched and became open for public investment.

In Simple Terms: Like the birthday of the fund — when it officially started accepting money from investors.

In Real World: Investors check this to see how old or experienced a fund is before investing.

Relevance: Newer funds may not have enough performance history, making them harder to evaluate.

Example: You look at a fund’s inception date and find out it started in 2020 — so it’s only been around for a few years.

5. Income Distribution cum Capital Withdrawal (IDCW) Option

Definition: A mutual fund plan that gives investors periodic payouts, which include both profits and a return of invested capital.

In Simple Terms: It’s like getting a monthly gift from your savings — part of it is your own money back, and part is profit.

In Real World: Often chosen by senior citizens needing regular income from their investments.

Relevance: While it offers cash flow, your original investment slowly reduces over time.

Example: Your grandmother invests ₹2 lakh in an IDCW plan and receives ₹5,000 every month to help with household expenses.

6. Indian Trusts Act

Definition: A law that governs how trusts are formed and managed in India, including mutual fund trusts.

In Simple Terms: It’s the rulebook that ensures mutual funds work fairly and protect investors’ money.

In Real World: Mutual funds in India are set up as trusts under this Act to ensure transparency and legal protection.

Relevance: Provides a legal framework for how AMCs manage funds and safeguard investor interests.

Example: When you invest in a mutual fund, your money goes into a trust governed by this Act — just like how a family trust protects ancestral property.

7. Index Fund

Definition: A mutual fund that replicates the performance of a stock market index like Nifty 50 or Sensex.

In Simple Terms: It’s like buying a mini version of the whole market — if the market goes up, so does your fund.

In Real World: Popular among passive investors who don’t want to pick individual stocks.

Relevance: Offers broad market exposure with low costs and minimal management.

Example: A salaried person in Lucknow invests in an index fund tracking Nifty 50 to grow his retirement savings steadily.

8. Indexation Benefit

Definition: A tax benefit that adjusts the purchase price of an investment for inflation while calculating long-term capital gains.

In Simple Terms: Like saying, “You bought gold for ₹10,000 in 2015, but because prices rose, we’ll treat it as ₹13,000 now.”

In Real World: Available for debt funds held over three years, helping reduce tax on real gains.

Relevance: Makes long-term debt fund investments more tax-efficient.

Example: If you invested ₹1 lakh in a debt fund and redeemed ₹1.5 lakh after 4 years, indexation can lower the taxable gain.

9. Inflation

Definition: The rate at which prices for goods and services rise over time, reducing purchasing power.

In Simple Terms: Like realizing that what cost ₹10 last year now costs ₹12 — your money buys less.

In Real World: One reason why keeping all your money in a savings account isn’t smart — it loses value over time.

Relevance: Investors must beat inflation to truly grow their wealth.

Example: If your fixed deposit earns 5% interest but inflation is 6%, your real return is negative — you’re losing money.

10. Inflation-Indexed Bonds

Definition: Bonds whose returns are linked to inflation, protecting investors from rising prices.

In Simple Terms: These bonds adjust your returns automatically with inflation — like locking in today’s prices for the future.

In Real World: Offered by the government and sometimes included in debt mutual funds.

Relevance: Helps preserve the real value of your money during high inflation periods.

Example: You buy a bond that gives 2% + inflation. If inflation is 6%, your return is effectively 8%.

11. Inflation Risk

Definition: The risk that rising prices (inflation) will erode the real value of investment returns.

In Simple Terms: Even if your money grows, it might not be enough to keep up with rising living costs.

In Real World: Fixed deposits and bonds often carry inflation risk, especially in times of high inflation.

Relevance: Important to consider when choosing between different types of investments.

Example: If your FD gives 4% return and inflation is 6%, your money is actually shrinking in value.

12. Infrastructure Debt Fund (IDF)

Definition: A type of fund that invests in infrastructure projects like roads, airports, and power plants.

In Simple Terms: Like funding the construction of highways or bridges through your investments.

In Real World: Aimed at providing long-term financing for critical national development projects.

Relevance: Offers stable returns and supports economic growth.

Example: A pension fund invests in an IDF to earn steady income from highway toll collections.

13. Initial Public Offer (IPO) (for mutual funds – refers to NFO)

Definition: In mutual funds, IPO refers to New Fund Offer (NFO) — when a new fund is launched and opens for investment.

In Simple Terms: It’s like buying shares in a new restaurant opening in your town — you’re in at the start.

In Real World: New funds are offered at face value (usually ₹10/unit), and people invest early hoping for good returns.

Relevance: No performance history available, so it’s a bit like betting on a new cricket player.

Example: You hear about a new green energy fund launching — you invest during the NFO period to get in early.

14. Instant Redemption

Definition: A feature that allows investors to redeem their mutual fund units quickly and receive money within minutes or hours.

In Simple Terms: Like withdrawing cash instantly from an ATM instead of waiting for a cheque to clear.

In Real World: Available for certain liquid funds and ETFs, offering emergency liquidity to investors.

Relevance: Useful for urgent needs like hospital bills or travel plans.

Example: You need money urgently for your sister’s college fees and use instant redemption to get it in minutes.

15. Institutional Investor

Definition: An organization that invests large amounts of money on behalf of others — such as banks, insurance companies, or pension funds.

In Simple Terms: Big players who move large sums of money — kind of like bulk buyers in a marketplace.

In Real World: They influence market trends and often hold significant stakes in mutual funds.

Relevance: Their buying/selling decisions can impact fund performance and NAV.

Example: LIC or State Bank of India investing crores in a large-cap equity fund.

16. Interest Rate Risk

Definition: The risk that changes in interest rates will affect the value of debt securities in a mutual fund.

In Simple Terms: Like watching your fixed deposit lose appeal when the bank suddenly raises FD rates.

In Real World: Debt funds are sensitive to RBI policy changes — rates go up, bond prices fall, and vice versa.

Relevance: Important for those investing in long-term debt or gilt funds.

Example: If you invested in a long-term bond fund and RBI raises rates, your fund’s value may drop temporarily.

17. Interim Dividend

Definition: A dividend paid by a mutual fund before the end of its financial year or full performance cycle.

In Simple Terms: Like getting a bonus mid-year from your investment — not the final payout.

In Real World: Funds may declare interim dividends if they make good profits midway through the year.

Relevance: Gives investors a chance to enjoy returns before the full term.

Example: A fund declares an interim dividend of ₹2 per unit in September, even though the full-year results are yet to come.

18. Interval Fund

Definition: A hybrid of open-ended and close-ended mutual funds — it allows investments and redemptions only at specific intervals.

In Simple Terms: Like a bus that stops only at fixed stations — you can get in or out only during certain times.

In Real World: Not very common in India but used for niche strategies like real estate or private equity.

Relevance: Balances flexibility and stability for fund management.

Example: A fund allows redemptions only once every six months, giving investors a window to exit.

19. Intraday NAV (for ETFs)

Definition: The changing Net Asset Value of an ETF during trading hours, similar to stock prices.

In Simple Terms: Like watching gold prices fluctuate during the day — the value keeps changing.

In Real World: Traders track intraday NAV to decide the best time to buy or sell ETF units.

Relevance: Helps in timing trades for better returns.

Example: You check the live NAV of a Nifty ETF at 11 AM and decide to buy because it’s lower than usual.

20. Intra-Day NAV Fluctuation

Definition: The variation in the value of a mutual fund or ETF unit during a single trading day.

In Simple Terms: Like seeing the petrol price change multiple times in a day — it’s not fixed.

In Real World: Common in ETFs and actively traded funds; influenced by market demand and supply.

Relevance: Important for traders looking to maximize gains through timely transactions.

Example: An investor watches intra-day fluctuations to decide when to sell for maximum profit.

21. Inverse ETF

Definition: An exchange-traded fund designed to move in the opposite direction of a market index.

In Simple Terms: Like betting that the market will fall — you win when others lose.

In Real World: Used by sophisticated investors to hedge or speculate against market declines.

Relevance: High-risk, short-term tool — not for beginners.

Example: If the Nifty falls by 2%, an inverse ETF might rise by 2%, giving you a positive return.

22. Investment Horizon

Definition: The length of time you plan to stay invested in a mutual fund before needing the money.

In Simple Terms: How long you’re willing to leave your money parked — like planning when to open a locked box.

In Real World: Determines whether you should choose equity, debt, or hybrid funds.

Relevance: Short horizon = safer options; long horizon = more aggressive options.

Example: You plan to buy a car in 3 years, so you choose a conservative hybrid fund with a 3-year horizon.

23. Investment Manager

Definition: A professional responsible for making investment decisions for a mutual fund.

In Simple Terms: Like a captain steering the ship — they decide where to invest and when to exit.

In Real World: Fund managers work for AMCs and are key to a fund’s performance.

Relevance: Their expertise directly impacts your returns.

Example: A fund manager decides to invest in renewable energy stocks based on market research.

24. Investment Objective

Definition: The goal a mutual fund aims to achieve — like capital appreciation, income generation, or safety of capital.

In Simple Terms: What the fund wants to do with your money — grow it fast, give you regular income, or keep it safe.

In Real World: Clearly mentioned in the fund’s document so investors know what to expect.

Relevance: Helps match your personal goals with the right fund.

Example: If your goal is to buy a house in 10 years, you choose a fund with a “capital appreciation” objective.

25. Investment Plan

Definition: A structured approach outlining how, when, and where to invest money.

In Simple Terms: Like a roadmap for your journey — tells you how to reach your destination (financial goal).

In Real World: Many investors create plans using SIPs, lump sums, and asset allocation.

Relevance: Keeps your investments disciplined and goal-focused.

Example: A couple creates an investment plan to save for their child’s education, marriage, and their retirement.

26. ISIN (International Securities Identification Number)

Definition: A unique 12-character alphanumeric code assigned to each security, including mutual fund schemes.

In Simple Terms: Like an Aadhaar number for mutual funds — no two funds have the same ISIN.

In Real World: Used globally to identify and track securities accurately.

Relevance: Helps avoid confusion when buying or selling mutual fund units.

Example: When transferring your mutual fund holdings, the ISIN ensures the correct fund is identified.

27. ITR (Income Tax Return – for reporting gains)

Definition: A form filed with the income tax department to report your income, including capital gains from mutual funds.

In Simple Terms: Like submitting a yearly progress report to the government about how much money you made.

In Real World: Mandatory if you’ve sold mutual funds and made gains above a certain limit.

Relevance: Ensures compliance with tax laws and avoids penalties.

Example: After redeeming your mutual fund and making a profit of ₹2 lakh, you report it in your ITR and pay taxes accordingly.

J

1. J-Curve

Definition: A pattern where an investment initially shows losses or slow growth but eventually gains value over time.

In Simple Terms: Like planting a sapling — nothing seems to happen for months, then suddenly it starts growing fast.

In Real World: Often seen in private equity funds or new SIPs that start during market downturns.

Relevance: Encourages patience — early dips don’t always mean failure.

Example: You started investing in a tech fund in 2020 during the lockdown; it dropped first, but by 2021 it shot up sharply.

2. Joint Account Mandate

Definition: Instructions given to a bank or mutual fund regarding how transactions should be handled in a joint account.

In Simple Terms: It’s like agreeing on house rules when sharing a locker or savings account with someone else.

In Real World: Helps avoid confusion about who can operate the account and under what conditions.

Relevance: Important for family investments or business partners investing together.

Example: Two sisters invest jointly in a mutual fund and set a mandate that both must approve any redemption.

3. Joint Holder

Definition: A co-investor in a mutual fund account who shares ownership with another investor.

In Simple Terms: Like having a shared bank account — both names are on the investment.

In Real World: Common among spouses, parents and children, or siblings investing together.

Relevance: Ensures smooth transfer of assets in case of death or disability.

Example: A husband and wife open a mutual fund account as joint holders so either can manage it easily.

4. Joint Holding

Definition: When two or more people own units of a mutual fund together.

In Simple Terms: Think of it like jointly owning a piece of land or a small shop with relatives or friends.

In Real World: Used in family planning, estate management, or group investments.

Relevance: Offers flexibility in operation and succession planning.

Example: A father and son invest in a mutual fund with joint holding to build wealth together.

5. Jumpstart SIP (step-up SIP)

Definition: A type of SIP where the investment amount increases automatically at regular intervals.

In Simple Terms: Like increasing your monthly milk delivery as your family grows — your SIP also grows with you.

In Real World: Popular among salaried professionals expecting annual hikes or bonuses.

Relevance: Helps beat inflation and reach larger goals faster without extra effort.

Example: You start a ₹2,000/month SIP and choose to increase it by ₹500 every year.

6. Junk Bonds

Definition: Bonds issued by companies with low credit ratings, offering high interest rates to attract investors.

In Simple Terms: Like lending money to someone who might not repay — they promise more interest to take the risk.

In Real World: Sometimes found in debt mutual funds looking to boost returns.

Relevance: Higher returns come with higher risk of default.

Example: A small FMCG company struggling financially offers 12% interest to borrow money — tempting, but risky.

7. Jurisdiction Risk

Definition: The risk arising from changes in laws, taxes, or regulations in a country where a fund invests.

In Simple Terms: Like starting a business in another state and suddenly facing new rules or taxes you didn’t expect.

In Real World: Especially relevant for international funds or global ETFs.

Relevance: Can affect returns unexpectedly.

Example: An Indian mutual fund invested in China faces jurisdiction risk if new trade policies restrict access.

8. Justified Valuation

Definition: A stock or fund’s price that is considered fair based on its earnings, growth potential, and other factors.

In Simple Terms: Like checking if the price of a saree matches its quality — not too cheap, not overpriced.

In Real World: Fund managers use this to decide whether to buy or sell a stock.

Relevance: Helps avoid overpaying and ensures better long-term returns.

Example: A fund manager says a telecom stock trading at ₹150 is justified if it has strong future earnings potential.

K

1. K-Fintech (RTA)

Definition: A Registrar and Transfer Agent (RTA) in India that handles investor records and transactions for mutual funds.

In Simple Terms: Like a post office that keeps track of who owns what shares or mutual fund units.

In Real World: Companies like CAMS, Karvy, and K-Fintech help process SIPs, redemptions, and KYC.

Relevance: Plays a critical behind-the-scenes role in managing your investments.

Example: When you invest through Paytm Money or Zerodha, K-Fintech may handle the back-end processing.

2. Key Information Memorandum (KIM)

Definition: A document containing all essential details about a mutual fund scheme, especially during its launch (NFO).

In Simple Terms: Like reading the menu before ordering food — tells you exactly what you’re getting into.

In Real World: Mandatory for all NFOs and available online or through distributors.

Relevance: Helps investors make informed decisions before investing.

Example: Before investing in a new green energy fund, you check the KIM to understand its risks and strategy.

3. Key Risk Indicator

Definition: A metric used to measure and monitor the level of risk associated with a mutual fund.

In Simple Terms: Like a dashboard warning light in a car — tells you if something risky is happening.

In Real World: Used by fund houses to alert investors about potential issues like high volatility or sector concentration.

Relevance: Helps investors stay aware of possible threats to their capital.

Example: A key risk indicator might show that a fund is heavily exposed to real estate — which could be risky during a slowdown.

4. KIM (Key Information Memorandum)

Definition: Same as above — a detailed document giving investors key information about a mutual fund scheme.

In Simple Terms: A short guidebook that explains everything important about the fund before you invest.

In Real World: Must be read carefully before investing in any new fund.

Relevance: Contains info like expense ratio, minimum investment, exit load, and risk profile.

Example: If you’re unsure about a fund’s tax treatment, you check the KIM for clarity.

5. Know Your Distributor (KYD)

Definition: A process to verify the identity and credentials of a mutual fund distributor.

In Simple Terms: Like checking the ID of someone selling you medicine — ensuring they are authorized.

In Real World: Protects investors from fraud by confirming the legitimacy of agents or platforms.

Relevance: Ensures transparency and trust in the distribution chain.

Example: Before buying a fund through a local agent, you confirm their KYD status via the AMC website.

6. KRA (KYC Registration Agency)

Definition: An agency authorized to collect and maintain KYC (Know Your Customer) details of investors.

In Simple Terms: Like a central database that keeps everyone’s ID and address proof safe and updated.

In Real World: CDSL Ventures Ltd (CVL) and DotEx are KRAs in India handling KYC for mutual funds.

Relevance: Once KYC is done with a KRA, you can invest across all mutual funds seamlessly.

Example: After completing KYC with CVL, you can invest in any AMC without re-submitting documents.

7. KYC (Know Your Customer)

Definition: A mandatory verification process to confirm the identity and address of investors.

In Simple Terms: Like showing your Aadhaar card to open a mobile SIM — proving who you are.

In Real World: Done once and valid across all financial investments like mutual funds, stocks, and insurance.

Relevance: Prevents misuse of financial systems and ensures safety.

Example: You complete KYC online using Aadhaar e-sign to start investing in mutual funds.

8. KYC Compliance

Definition: Adherence to regulatory requirements related to customer identification and verification.

In Simple Terms: Making sure your documents are up-to-date and verified properly.

In Real World: Required by SEBI and RBI to prevent money laundering and ensure clean investing.

Relevance: Without compliance, you can’t invest or redeem from mutual funds.

Example: If your KYC isn’t compliant, your SIP won’t get processed until you update your address.

9. KYC Compliance Status

Definition: A status indicating whether an investor’s KYC formalities have been completed and verified.

In Simple Terms: Like a green tick on WhatsApp — shows your profile is fully set up and verified.

In Real World: You can check your KYC status online via the KRA website or through your broker.

Relevance: Determines whether you can proceed with investments or need to submit additional documents.

Example: You log in to CAMS and see your KYC Compliance Status is “Verified” — meaning you’re ready to invest.

L

1. Laddering Strategy

Definition: An investment approach where money is invested in multiple instruments with different maturity dates.

In Simple Terms: Like buying milk for a week — some packets last 1 day, others 3 days, and some 7 days — so you never run out.

In Real World: Used in fixed income investments to manage interest rate risk and ensure regular access to funds.

Relevance: Helps investors balance returns and liquidity without locking all money at once.

Example: You invest ₹50,000 in debt funds with maturities of 1, 3, and 5 years to spread out when your money comes back.

2. Large & Mid Cap Fund

Definition: A mutual fund that invests mostly in large-cap (big companies) and mid-cap (medium-sized companies).

In Simple Terms: It’s like investing in both big brands (like Reliance or Infosys) and growing businesses (like Nykaa or PB Fintech).

In Real World: Offers a mix of stability and growth — popular among investors who want balanced exposure.

Relevance: SEBI mandates that these funds must invest at least 35% in large caps and 35% in mid caps.

Example: Your friend invests in this type of fund because it gives safety from large companies and growth from mid-sized ones.

3. Large-Cap Fund

Definition: A mutual fund that invests mainly in the stocks of large, well-established companies.

In Simple Terms: Like putting your money into market leaders — Tata, HDFC Bank, ITC — which are known and trusted.

In Real World: These funds are less risky compared to small or mid-cap funds and preferred by cautious investors.

Relevance: Suitable for long-term wealth building with relatively lower volatility.

Example: A government employee chooses a large-cap fund to grow retirement savings steadily.

4. Last NAV

Definition: The most recent Net Asset Value (NAV) of a mutual fund scheme.

In Simple Terms: Like checking the current price of gold per gram before buying or selling.

In Real World: Investors use it to know how much their units are worth on any given day.

Relevance: Determines the value of your investment during purchase or redemption.

Example: You check the “Last NAV” of your fund on Google before redeeming to see how much money you’ll get.

5. Leverage

Definition: Borrowing money to increase the size of an investment in hopes of getting higher returns.

In Simple Terms: Like taking a loan to expand your shop — hoping more business will cover the cost of the loan.

In Real World: Not common in regular retail mutual funds; used more in hedge funds or ETFs.

Relevance: Increases both potential gains and risks.

Example: A fund borrows ₹1 crore to invest ₹2 crore in tech stocks, hoping they’ll rise faster than the cost of borrowing.

6. Liability Matching

Definition: An investment strategy where assets are chosen to match future liabilities or expenses.

In Simple Terms: Like saving up exactly the right amount each month to pay school fees next year.

In Real World: Used by pension funds and insurance companies to meet future payouts.

Relevance: Ensures that funds are available when needed, reducing timing risk.

Example: A mutual fund creates a portfolio that matures when your child turns 18 and needs college money.

7. Limit Order

Definition: An instruction to buy or sell mutual fund units at a specific price or better.

In Simple Terms: Like telling your vegetable vendor, “I’ll only buy tomatoes if they’re ₹20/kg or less.”

In Real World: Commonly used in ETFs and exchange-traded funds traded on stock exchanges.

Relevance: Gives control over the price at which you transact.

Example: You place a limit order to sell your ETF units only if the price hits ₹120 or more.

8. Liquid Fund

Definition: A type of mutual fund that invests in very short-term instruments like treasury bills and certificates of deposit.

In Simple Terms: Like keeping emergency cash in a safe locker — easily accessible and low risk.

In Real World: Ideal for parking surplus money for a few days or weeks.

Relevance: Offers better returns than a savings account with high liquidity.

Example: A small business owner uses a liquid fund to park festival season sales until he decides what to do next.

9. Liquidity

Definition: How quickly and easily an investment can be converted into cash without losing value.

In Simple Terms: Like having money in your wallet vs. locked in a fixed deposit — one is easy to spend, the other isn’t.

In Real World: Liquid funds and ETFs are highly liquid; real estate or long-term bonds are not.

Relevance: Important for managing unexpected expenses or sudden opportunities.

Example: If you need ₹50,000 for a medical emergency, you can redeem your liquid fund instantly.

10. Liquidity Risk

Definition: The risk that you may not be able to sell your investment quickly when needed.

In Simple Terms: Like trying to sell an old car fast — no buyers, even though it works fine.

In Real World: More common in illiquid assets like small-cap stocks or private debt.

Relevance: Can cause delays or losses if you need money urgently.

Example: A fund heavily invested in small startups might struggle to sell those shares quickly.

11. Listed Debt Securities

Definition: Bonds or debentures that are traded on a stock exchange.

In Simple Terms: Like owning a bond but being able to sell it anytime on the stock market — just like shares.

In Real World: Some debt mutual funds invest in listed securities for flexibility.

Relevance: Adds liquidity to otherwise illiquid debt instruments.

Example: You own a corporate bond listed on NSE and can sell it anytime instead of waiting till maturity.

12. Load (Entry/Exit)

Definition: A fee charged by a mutual fund when you buy (entry load) or sell (exit load) units.

In Simple Terms: Like paying a small commission to a broker when buying jewelry — adds to your cost or reduces your profit.

In Real World: Entry loads are now banned in India, but exit loads still apply to discourage early withdrawal.

Relevance: Impacts your net returns — always check before investing.

Example: A fund charges 1% exit load if you redeem within 6 months — so you lose ₹1,000 on a ₹1 lakh redemption.

13. Load (Sales Load)

Definition: Same as above — a fee paid to distributors or agents for helping you invest.

In Simple Terms: Like giving a tip to someone who helped you find a good deal — except it’s built into the investment.

In Real World: Most mutual funds in India are now “no-load” thanks to SEBI rules.

Relevance: Sales load affects your total return and should be considered while choosing a fund.

Example: Older schemes used to charge sales load, but newer ones don’t, making them cheaper to invest in.

14. Load Fund

Definition: A mutual fund that charges a load (fee) when buying or selling units.

In Simple Terms: Like buying shoes with a service charge — the same shoe costs a bit more because of the extra fee.

In Real World: Rare nowadays, as SEBI has pushed for no-load funds to benefit retail investors.

Relevance: Load funds tend to have lower net returns due to additional charges.

Example: You avoid a load fund because it charges 1.5% extra fee, making it costlier than similar no-load options.

15. Loan Against MF Units

Definition: Taking a loan using your mutual fund units as collateral.

In Simple Terms: Like pledging your gold to take a loan from the bank — your fund stays invested, but you get cash.

In Real World: Offered by banks and NBFCs to investors needing quick money without selling their holdings.

Relevance: Lets you access funds without breaking your long-term investment plan.

Example: You take a loan against your equity fund to pay for your daughter’s wedding without selling your units.

16. Lock-in Period

Definition: A period during which you cannot redeem or sell your investment.

In Simple Terms: Like booking a movie ticket — once booked, you can’t cancel or change it before the show starts.

In Real World: Applies to ELSS (tax-saving funds), which have a 3-year lock-in.

Relevance: Encourages long-term investing and tax planning.

Example: You invest in an ELSS fund under Section 80C — you can’t withdraw the money for 3 years.

17. Long Duration Fund

Definition: A debt fund that invests in bonds with longer maturities, typically more than 7 years.

In Simple Terms: Like lending money to someone for a long time — they pay more interest, but you wait longer to get your money back.

In Real World: Sensitive to interest rate changes — prices fall when rates rise.

Relevance: Suitable for investors who expect interest rates to fall.

Example: A retired person invests in a long-duration fund when RBI cuts rates to earn higher interest.

18. Long-Term Capital Gains (LTCG)

Definition: Profit earned from selling mutual fund units held for more than 1 year (equity) or 3 years (debt).

In Simple Terms: Like selling a piece of land after many years and paying less tax because you held it long.

In Real World: Taxed at a lower rate to encourage long-term investing.

Relevance: LTCG on equity funds up to ₹1 lakh is tax-free; beyond that, 10% tax applies.

Example: You sold your equity fund after 2 years and made ₹1.5 lakh profit — only ₹50,000 taxed at 10%.

19. Low Duration Fund

Definition: A debt fund that invests in short-term instruments with maturities between 6–12 months.

In Simple Terms: Like keeping your money in a FD for a few months — safe, predictable, and ready soon.

In Real World: Less affected by interest rate changes compared to long-term debt funds.

Relevance: Good for short-term goals and emergency funds.

Example: You park ₹2 lakh in a low-duration fund before buying a car in 6 months.

20. Lump Sum Investment

Definition: Investing a large amount of money in one go rather than in installments.

In Simple Terms: Like buying all your Diwali gifts in one shopping trip instead of spreading it out.

In Real World: Best when you have a windfall or lump sum from a bonus, inheritance, or property sale.

Relevance: Timing the market matters — entering at a high can affect returns.

Example: You receive ₹5 lakh from a bonus and invest it all in a diversified equity fund at once.

21. Lumpsum Investment

Definition: Same as above — investing a single, large amount at one time.

In Simple Terms: Putting all your eggs in one basket today, instead of adding them one by one over time.

In Real World: Popular during festive seasons when people get bonuses or sell assets.

Relevance: Works best when markets are low or expected to rise.

Example: After selling your old car, you invest the entire ₹3 lakh in a hybrid fund for steady growth.

M

1. Macaulay Duration

Definition: A measure of how long it takes for a bond investment to recover its cost through interest payments.

In Simple Terms: Like figuring out how many months of rent you need from a property before you get back what you paid for it.

In Real World: Used by debt fund managers to assess interest rate sensitivity of bonds.

Relevance: Longer duration means higher risk when interest rates change.

Example: If a bond has a Macaulay Duration of 5 years, it will take about that long to recover your investment at current interest rates.

2. Management Fee

Definition: The fee charged by an Asset Management Company (AMC) for managing a mutual fund.

In Simple Terms: Like paying a cook a small fee for preparing meals every day — they manage your money instead of food.

In Real World: Part of the expense ratio investors pay annually, whether the fund performs well or not.

Relevance: Lower fees mean more returns go to the investor.

Example: You invest ₹1 lakh in a fund with a 1.5% management fee — ₹1,500 goes toward managing the fund each year.

3. Mandate (SIP Mandate)

Definition: An instruction given to your bank to allow automatic deductions for your SIP investments.

In Simple Terms: Like giving your maid permission to come every morning without asking again — your SIP runs automatically.

In Real World: Set up once and works like a standing order or auto-debit.

Relevance: Ensures discipline in investing without missing any SIP installments.

Example: You set up a SIP mandate so ₹5,000 is deducted every month from your account into your mutual fund.

4. Mandate Form

Definition: A physical or digital form used to register your SIP auto-debit instructions with your bank.

In Simple Terms: Like filling a form to activate your mobile recharge plan — tells your bank to process regular SIP payments.

In Real World: Submitted to RTAs like CAMS or Karvy when starting a new SIP.

Relevance: Needed to automate your investment journey.

Example: You fill a mandate form while signing up for a monthly SIP on your phone app.

5. Mark-to-Market (MTM)

Definition: The process of valuing assets based on their current market price rather than purchase price.

In Simple Terms: Like checking today’s gold rate instead of what you paid last Diwali — shows real-time value.

In Real World: Done daily for mutual funds to calculate NAV accurately.

Relevance: Helps track performance and risks in real time.

Example: Your fund manager marks your stock holdings to current prices every day to show updated portfolio value.

6. Market Capitalization

Definition: The total market value of a company’s outstanding shares.

In Simple Terms: Like guessing how much a shop is worth based on how many people buy from it and how much it earns.

In Real World: Companies are classified as large-cap, mid-cap, or small-cap based on this.

Relevance: Helps investors understand the size and stability of companies in a fund.

Example: Infosys and Reliance are large-cap companies; a local textile mill might be a small-cap.

7. Market Order

Definition: An instruction to buy or sell mutual fund units at the current market price.

In Simple Terms: Like buying vegetables at whatever price the vendor says — no negotiation, just immediate action.

In Real World: Used in ETFs and close-ended funds traded on exchanges.

Relevance: Fast execution but doesn’t guarantee price.

Example: You place a market order to buy an ETF during trading hours and get the current live price.

8. Market Risk Premium

Definition: The extra return investors expect for taking on additional risk compared to a risk-free investment.

In Simple Terms: Like getting paid extra for walking across a busy road instead of a quiet one — more danger, more reward.

In Real World: Equity funds offer higher premiums than debt funds due to volatility.

Relevance: Guides investors in choosing between safer and riskier funds.

Example: You accept market risk premium by investing in equity funds instead of fixed deposits.

9. Market Timing

Definition: Trying to predict the best time to enter or exit the market to maximize profits.

In Simple Terms: Like trying to guess when the vegetable prices will be lowest or highest — tricky and often unreliable.

In Real World: Discouraged by experts who recommend staying invested over timing the market.

Relevance: Can lead to missed opportunities or losses if predictions go wrong.

Example: You wait to invest because you think the market will fall — but it keeps rising instead.

10. Maturity

Definition: The date when a bond or fixed income instrument ends and the principal is returned.

In Simple Terms: Like the expiry date on a fixed deposit — after this, you get your money back.

In Real World: Debt mutual funds hold instruments with varying maturities to manage risk and returns.

Relevance: Determines liquidity and interest rate exposure.

Example: You invest in a bond maturing in 2028 — you’ll get your money back then.

11. Maturity (of a Fund)

Definition: The end date of a close-ended mutual fund scheme when investors can redeem their units.

In Simple Terms: Like the final day of a movie screening — after that, you can’t watch it unless it comes back.

In Real World: Not applicable to open-ended funds which allow redemptions anytime.

Relevance: Investors must plan to exit or switch before maturity.

Example: You invest in a 5-year closed-end fund — you can only redeem it after 5 years.

12. Maturity (of a Security)

Definition: Same as above — the point at which a security like a bond stops earning interest and the issuer repays the amount.

In Simple Terms: Like a loan ending — the borrower pays back what they owe.

In Real World: Funds track maturity dates to manage cash flows and reinvestment.

Relevance: Helps in planning for future liquidity needs.

Example: A government bond matures in 2027 — you’ll get your original investment plus interest back then.

13. Medium Duration Fund

Definition: A debt fund that invests in securities with maturities typically between 3–5 years.

In Simple Terms: Like putting your money in a FD for 3–5 years — not too short, not too long.

In Real World: Balances interest rate risk and returns better than short-term funds.

Relevance: Suitable for medium-term goals like saving for a down payment.

Example: You invest in a medium-duration fund to save for a house down payment in 4 years.

14. Medium Term Plan

Definition: A mutual fund designed for investors with a 3–5 year investment horizon.

In Simple Terms: Like saving for a vacation that’s 3 years away — not too soon, not too far.

In Real World: Often includes hybrid or debt funds balancing safety and growth.

Relevance: Matches goals like education, car purchase, or business setup.

Example: A young professional starts a medium-term plan to save for a wedding in 4 years.

15. Micro-Cap Fund

Definition: A mutual fund that invests in very small companies with low market capitalization.

In Simple Terms: Like supporting tiny roadside stalls instead of big malls — high potential, but risky.

In Real World: Rare in India and usually part of aggressive small-cap funds.

Relevance: Offers high growth but with unpredictable outcomes.

Example: A fund buys shares of a startup selling handmade crafts online — small now, could become big.

16. Mid Cap Fund

Definition: A mutual fund that invests primarily in medium-sized companies.

In Simple Terms: Like backing growing businesses — not yet giants, but showing promise.

In Real World: Popular among investors seeking growth beyond large caps.

Relevance: Higher risk than large-cap funds but lower than small-cap funds.

Example: You invest in a mid-cap fund to grow wealth faster than large-cap funds.

17. Minimum Application Amount

Definition: The smallest amount needed to start investing in a mutual fund.

In Simple Terms: Like needing a minimum entry ticket to join a fair — you can’t go in below that.

In Real World: Varies by fund — some start at ₹100, others may require ₹5,000.

Relevance: Makes mutual funds accessible to all kinds of investors.

Example: You start investing with just ₹500 in a fund that allows small initial investments.

18. Minimum Holding Period

Definition: The shortest time you must stay invested before redeeming units without penalties.

In Simple Terms: Like a gym membership — you have to keep it for at least 3 months before canceling.

In Real World: May apply to certain schemes or special offers.

Relevance: Prevents frequent withdrawals and protects fund stability.

Example: A fund requires a minimum holding period of 6 months before allowing redemption.

19. Minimum Investment

Definition: The least amount you can invest in a mutual fund, either lump sum or via SIP.

In Simple Terms: Like needing to buy at least one packet of biscuits — you can’t buy half.

In Real World: Encourages small investors to participate in the market.

Relevance: Lowers barriers to entry for first-time investors.

Example: You start a SIP with just ₹100/month in a beginner-friendly mutual fund.

20. Minimum Redemption Amount

Definition: The smallest number of units or value you can redeem from a mutual fund.

In Simple Terms: Like having to withdraw at least ₹500 from your piggy bank — you can’t take less.

In Real World: Some funds specify a minimum to avoid frequent small redemptions.

Relevance: Keeps fund operations smooth and efficient.

Example: A fund asks for a minimum redemption of ₹1,000 — you can’t withdraw just ₹500.

21. Modified Duration

Definition: A measure of how sensitive a bond’s price is to changes in interest rates.

In Simple Terms: Like knowing how much your fixed deposit will lose value if the bank suddenly lowers FD rates.

In Real World: Used by debt fund managers to adjust portfolios during rate changes.

Relevance: Helps estimate impact of interest rate shifts on your investment.

Example: A fund with high modified duration might drop sharply if RBI raises interest rates.

22. Money Market Fund

Definition: A mutual fund that invests in ultra-short-term instruments like treasury bills and commercial paper.

In Simple Terms: Like keeping emergency cash in a safe wallet — always ready and secure.

In Real World: Similar to liquid funds, ideal for parking surplus money.

Relevance: Offers better returns than savings accounts with instant access.

Example: You park festival season sales proceeds in a money market fund until you decide where to invest next.

23. Money Market Instruments

Definition: Short-term debt instruments like T-bills, CDs, and repos that mature in less than a year.

In Simple Terms: Like borrowing or lending money for a few days or weeks — quick and safe.

In Real World: Used by banks and mutual funds for liquidity management.

Relevance: Provides stable returns with minimal risk.

Example: A fund buys 91-day government T-bills to earn safe returns for investors.

24. Monthly Average AUM

Definition: The average value of assets under management (AUM) in a mutual fund over a month.

In Simple Terms: Like calculating how much money was parked in a locker on average each day during the month.

In Real World: Used to compute expenses and performance metrics.

Relevance: Impacts the calculation of expense ratios and fund efficiency.

Example: A fund reports monthly average AUM of ₹1,000 crores — used to calculate annual management costs.

25. Monthly Income Plan (MIP)

Definition: A type of hybrid mutual fund that aims to provide regular income through periodic payouts.

In Simple Terms: Like renting out a flat to get monthly rent — steady income from your investment.

In Real World: Preferred by retirees or those needing regular cash flow.

Relevance: Combines debt and equity for balance between safety and growth.

Example: A retired teacher invests in an MIP to get ₹10,000/month for household expenses.

26. Monthly SIP

Definition: A Systematic Investment Plan where you invest a fixed amount every month.

In Simple Terms: Like saving ₹1,000 every month for Diwali — regular, disciplined, and grows over time.

In Real World: Most common way Indians invest in mutual funds.

Relevance: Builds wealth slowly and consistently, even with small amounts.

Example: A working woman sets up a ₹2,000/month SIP to build her own corpus over 10 years.

27. Morningstar Rating

Definition: A star-based rating system that evaluates mutual funds based on past performance and risk.

In Simple Terms: Like giving stars to restaurants — 5-star means top performer, 1-star means not so good.

In Real World: Used globally to compare funds, though not official or guaranteed.

Relevance: Helps retail investors make informed choices, but should not be the only factor.

Example: You look for 4- or 5-star rated funds before deciding where to invest.

28. Multi-Asset Allocation Fund

Definition: A mutual fund that invests in multiple asset classes like equity, debt, and gold.

In Simple Terms: Like having a thali with rice, dal, sabzi, and pickle — balanced mix of everything.

In Real World: Designed to reduce risk through diversification.

Relevance: Automatically adjusts allocation based on market conditions.

Example: A fund allocates 50% to stocks, 30% to bonds, and 20% to gold to spread risk.

29. Multi-Cap Fund

Definition: A mutual fund that invests across large-cap, mid-cap, and small-cap stocks.

In Simple Terms: Like investing in both big brands and upcoming startups — mixing stability and growth.

In Real World: SEBI mandates that these funds must invest at least 25% in each cap category.

Relevance: Offers broad market exposure and flexibility.

Example: You choose a multi-cap fund to benefit from all types of companies in one basket.

30. Mutual Fund

Definition: A pool of money collected from many investors to invest in stocks, bonds, or other securities.

In Simple Terms: Like joining a group chit fund — everyone puts in money, and it’s managed professionally.

In Real World: Available in various types — equity, debt, hybrid — to suit different goals.

Relevance: Offers diversification, professional management, and accessibility.

Example: You invest ₹5,000/month in a mutual fund to grow your savings for your child’s future.

31. Mutual Fund Distributor

Definition: A person or entity that helps investors buy and sell mutual funds.

In Simple Terms: Like a travel agent who books flights for you — they help you invest.

In Real World: Includes banks, brokers, and online platforms like Paytm Money or Zerodha.

Relevance: Must be registered with AMFI and follow SEBI guidelines.

Example: You consult a certified distributor to find the right mutual fund for your retirement goal.

N

1. National Securities Depository Limited (NSDL)

Definition: One of India’s main depositories that holds securities like shares and mutual funds in electronic form.

In Simple Terms: Think of it like a digital locker where your investments are stored safely — just like how you store documents on Google Drive.

In Real World: Works alongside CDSL to maintain records of who owns what in the stock and mutual fund markets.

Relevance: Ensures smooth buying and selling of units without physical certificates.

Example: When you buy ETFs or shares through your broker, they’re stored in your demat account linked to NSDL.

2. NAV (Net Asset Value)

Definition: The price at which one unit of a mutual fund is bought or sold.

In Simple Terms: Like the price tag on a packet of biscuits — tells you how much each unit costs on a given day.

In Real World: Calculated daily after market close based on the value of the fund’s assets.

Relevance: Determines how many units you get when you invest and how much money you receive when you redeem.

Example: If a fund’s NAV is ₹20, you’ll get 50 units for every ₹1,000 invested.

3. NAV Applicability

Definition: The NAV used to calculate the number of units you get when investing or redeeming.

In Simple Terms: Like knowing whether today’s rate or tomorrow’s rate will be used when buying gold.

In Real World: Depends on when you submit your transaction before the cut-off time.

Relevance: Impacts how many units you get — better to invest early for same-day NAV.

Example: You invest ₹10,000 before 3 PM — you get units at that day’s NAV; after 3 PM, next day’s NAV applies.

4. NAV Cut-off Time

Definition: The time by which an investment must be made to get that day’s NAV.

In Simple Terms: Like ordering food before the kitchen closes — if you’re late, you get tomorrow’s menu instead.

In Real World: Typically 3 PM for most mutual funds — after that, transactions use next business day’s NAV.

Relevance: Helps manage fund operations smoothly and fairly.

Example: You send money at 3:10 PM — your investment gets recorded the next day with the updated NAV.

5. NAV Disclosure

Definition: Publishing the daily NAV of a mutual fund so investors can track performance.

In Simple Terms: Like checking the newspaper for vegetable prices — helps you know what your fund is worth.

In Real World: Funds publish NAVs on their websites and AMFI portal every business day.

Relevance: Enables transparency and informed decision-making.

Example: You check the AMC’s website to see today’s NAV before deciding to redeem.

6. Negative Carry

Definition: When the cost of holding an asset is higher than the returns it generates.

In Simple Terms: Like paying rent for a house you don’t live in — you lose money even if nothing happens.

In Real World: Can happen in debt funds when interest rates fall and the fund holds high-cost bonds.

Relevance: Reduces overall returns and should be monitored.

Example: A fund pays more in management fees than it earns from its bond holdings — causing negative carry.

7. Net Asset Value per Unit

Definition: The value of one unit of a mutual fund after deducting expenses and liabilities.

In Simple Terms: Like dividing a cake among friends — this is your slice’s actual worth.

In Real World: Same as NAV — determines how much your investment is worth.

Relevance: Used to calculate gains or losses on your investment.

Example: If you have 100 units at ₹25 NAV per unit, your total value is ₹2,500.

8. Net Exposure

Definition: The total amount of risk a fund has in the market at any given time.

In Simple Terms: Like knowing how much money you’ve bet in a cricket match — tells you how much you could win or lose.

In Real World: Measured in percentage terms — equity funds often have 95–100% net exposure.

Relevance: Helps assess how aggressive or conservative a fund is.

Example: A fund with 80% net exposure is less risky than one fully invested in stocks.

9. Net Returns

Definition: The profit earned on an investment after deducting all charges and taxes.

In Simple Terms: Like getting your salary after tax — this is the real money you keep.

In Real World: Shown in fact sheets and investor statements.

Relevance: Gives a clear picture of how well your investment performed.

Example: Your fund gave 12% return but charged 1.5% in fees — your net return is 10.5%.

10. Net Yield

Definition: The effective return earned on an investment after subtracting costs and losses.

In Simple Terms: Like calculating how much milk you actually get after some spills — not the total poured, just what remains.

In Real World: Used to compare different investment options accurately.

Relevance: Helps investors choose funds with better post-cost returns.

Example: A bond gives 8% interest, but after defaults and fees, net yield is 6.5%.

11. New Fund Offer (NFO)

Definition: The first-time launch of a new mutual fund scheme open for public investment.

In Simple Terms: Like launching a new restaurant — you can join in during the opening week.

In Real World: Available at face value (usually ₹10/unit), with no performance history.

Relevance: Riskier than existing funds since there’s no track record.

Example: A new climate fund launches as an NFO — you invest early hoping it grows well.

12. Nominee

Definition: A person you name to receive your mutual fund units in case of your death.

In Simple Terms: Like writing a will for your jewelry — telling who gets it after you.

In Real World: Must be registered with your folio details.

Relevance: Ensures smooth transfer of assets without legal hassle.

Example: You nominate your wife as the nominee so she inherits your mutual fund investments.

13. Nomination

Definition: The process of appointing a nominee for your mutual fund investments.

In Simple Terms: Like giving your landlord a backup contact in case something happens to you.

In Real World: Done once during KYC or later via form submission.

Relevance: Protects family interests and simplifies inheritance.

Example: You update nomination details after marriage to include your spouse.

14. Non-Performing Asset (NPA)

Definition: A loan or debt instrument that is not generating income due to default.

In Simple Terms: Like lending money to a friend who doesn’t repay — you’re not earning anything back.

In Real World: Can affect debt funds that hold such instruments.

Relevance: High NPAs increase risk and reduce returns.

Example: A fund holding bonds from a bankrupt company may show poor performance.

15. Non-Resident Indian (NRI)

Definition: An Indian citizen living abroad for work, residence, or other reasons.

In Simple Terms: Like your cousin working in Dubai — still Indian by origin but living overseas.

In Real World: NRIs can invest in Indian mutual funds under FEMA and SEBI rules.

Relevance: Special accounts and processes apply for NRI investments.

Example: Your uncle in Canada invests in Indian mutual funds using his NRE account.

16. Non-Resident Indian (NRI) Investor

Definition: An NRI who invests in Indian mutual funds or other financial instruments.

In Simple Terms: Like sending money home to grow it safely while living abroad.

In Real World: Must follow KYC norms and use specific bank accounts like NRE or NRO.

Relevance: Offers a way to stay financially connected to India.

Example: An NRI investor uses his NRE account to invest in equity funds for long-term growth.

17. Non-Resident Indian (NRI) Investments

Definition: Investments made by NRIs in Indian financial products including mutual funds.

In Simple Terms: Like planting seeds in your ancestral farm while living in another country.

In Real World: Regulated by RBI and SEBI to ensure compliance.

Relevance: Helps NRIs diversify portfolios and support family financially.

Example: An NRI sends money to invest in SIPs for their child studying in India.

18. Non-Volatile Assets

Definition: Investments that do not fluctuate much in value — considered stable and safe.

In Simple Terms: Like having a fixed deposit — you know exactly how much you’ll get back.

In Real World: Includes government bonds, large-cap stocks, and money market instruments.

Relevance: Used in conservative portfolios to minimize risk.

Example: A retired teacher prefers non-volatile assets like gilt funds to protect savings.

19. No-Load Fund

Definition: A mutual fund that does not charge any entry or exit load.

In Simple Terms: Like buying shoes without extra service charges — what you pay is only for the product.

In Real World: Most retail mutual funds in India are now no-load thanks to SEBI rules.

Relevance: Makes investing cheaper and more transparent.

Example: You invest ₹1 lakh in a no-load fund — no extra fees deducted at purchase or sale.

20. Notice Period (for Redemptions)

Definition: The time between requesting redemption and receiving the money.

In Simple Terms: Like telling your maid a week in advance that you won’t need her services anymore.

In Real World: Applies to certain institutional or specialized funds.

Relevance: Ensures proper planning and liquidity management for the fund.

Example: A fund requires 7 days’ notice before processing redemptions over ₹1 crore.

21. NRE (Non Resident External Rupee Account)

Definition: A bank account held by NRIs in India to park foreign currency earnings converted into rupees.

In Simple Terms: Like a special locker for NRIs to store money earned abroad in rupees.

In Real World: Fully repatriable — money can be sent back abroad anytime.

Relevance: Required for NRIs to invest in Indian mutual funds.

Example: Your brother in Singapore deposits his salary in an NRE account to invest in mutual funds.

22. NSE

Definition: National Stock Exchange — one of India’s largest stock exchanges.

In Simple Terms: Like a giant marketplace where people buy and sell shares, ETFs, and other securities.

In Real World: Many mutual funds and ETFs are listed here for trading.

Relevance: Provides real-time pricing data and liquidity for traded funds.

Example: You check the NSE website to see how your ETF is performing today.

O

1. Objective of Scheme

Definition: The goal a mutual fund aims to achieve — such as capital appreciation, regular income, or safety.

In Simple Terms: Like setting a target — why you’re saving money: for a vacation, a car, or retirement.

In Real World: Clearly stated in the fund’s offer document to guide investor decisions.

Relevance: Helps align your personal goals with the right fund.

Example: A fund says its objective is “capital appreciation” — you know it’s for long-term growth.

2. Offer Document

Definition: A detailed document provided by a mutual fund explaining all aspects of a scheme.

In Simple Terms: Like reading the instruction manual before assembling a toy — tells you everything you need to know.

In Real World: Mandatory for NFOs and available online or through distributors.

Relevance: Contains key info like risks, expenses, and fund strategy.

Example: Before investing in a new fund, you read the offer document carefully.

3. Offer Price

Definition: The price at which investors buy units during the New Fund Offer (NFO).

In Simple Terms: Like the introductory price of a new mobile phone — usually ₹10/unit.

In Real World: Fixed during NFO period — later changes based on NAV.

Relevance: Attracts early investors due to simplicity and uniformity.

Example: You invest during NFO at ₹10/unit — after listing, NAV rises to ₹12.

4. Offering Document

Definition: Same as Offer Document — contains full details about a mutual fund scheme.

In Simple Terms: Like a brochure for a new school — explains curriculum, fees, teachers, and facilities.

In Real World: Must be read before investing to understand the fund’s structure.

Relevance: Ensures informed investment decisions.

Example: You download the offering document from the AMC website before investing.

5. Offshore Fund

Definition: A mutual fund that invests in foreign markets or is registered outside India.

In Simple Terms: Like investing in a U.S. company while living in India — global exposure.

In Real World: NRIs often use offshore funds to diversify internationally.

Relevance: Subject to foreign regulations and currency risks.

Example: An NRI invests in an offshore fund focused on European tech companies.

6. Online Mutual Fund Platform

Definition: A digital service that allows investors to buy, sell, and manage mutual funds online.

In Simple Terms: Like shopping on Amazon — but for investments.

In Real World: Platforms like Zerodha, Paytm Money, and Groww make investing easy and accessible.

Relevance: Eliminates paperwork and offers convenience.

Example: You start a SIP using your phone app while sitting at home.

7. Ongoing Charges

Definition: Regular fees charged by a mutual fund for managing your investment.

In Simple Terms: Like paying rent monthly for storing your valuables in a locker.

In Real World: Includes expense ratio, management fees, and administrative costs.

Relevance: Reduces your final returns — lower is better.

Example: A fund charges 1.2% ongoing charges — reduces your returns by that much every year.

8. Open-Ended Fund

Definition: A mutual fund that allows investors to buy or sell units anytime at prevailing NAV.

In Simple Terms: Like a shop that’s always open — you can enter or leave whenever you want.

In Real World: Most mutual funds in India are open-ended.

Relevance: Offers maximum flexibility compared to close-ended funds.

Example: You can redeem your units anytime from an open-ended fund.

9. Optimal Portfolio

Definition: A mix of investments that gives the best possible returns for a given level of risk.

In Simple Terms: Like making the perfect thali — balanced mix of flavors without being too spicy or bland.

In Real World: Built using diversification principles and risk profiling.

Relevance: Helps investors maximize returns while managing risk.

Example: A portfolio with 60% equity, 30% debt, and 10% gold is optimal for moderate-risk investors.

10. Option (Dividend Option/Growth Option)

Definition: Two choices investors can make — either receive profits as dividends or reinvest them for growth.

In Simple Terms: Like choosing between pocket money every month or letting it grow in a piggy bank.

In Real World: Dividend option gives regular payouts; growth option lets money compound.

Relevance: Decides how and when you get returns.

Example: A retiree chooses dividend option for monthly income; a young investor picks growth option.

11. Option Plan (Growth, IDCW)

Definition: Investment plans that let investors choose between growth or IDCW (Income Distribution cum Capital Withdrawal) payout methods.

In Simple Terms: Like choosing between keeping your savings growing or taking some out regularly.

In Real World: IDCW gives periodic payouts, part of which includes your own capital.

Relevance: Affects how much money stays invested and grows.

Example: You choose IDCW to get ₹5,000/month from your investment.

12. Order Confirmation

Definition: A message or email confirming that your investment or redemption request has been processed.

In Simple Terms: Like getting an SMS saying your order has been placed — gives peace of mind.

In Real World: Sent by RTA or platform after successful transaction.

Relevance: Validates that your action was completed.

Example: After submitting a redemption, you receive an order confirmation on WhatsApp.

13. Order Execution

Definition: The process of completing a buy or sell transaction at the applicable NAV.

In Simple Terms: Like placing an order and seeing it fulfilled — your money goes out, and units come in.

In Real World: Happens after cut-off time and depends on market conditions.

Relevance: Confirms that your transaction has gone through.

Example: Your SIP payment is executed every month — units added to your account.

14. Original Investment

Definition: The initial amount invested in a mutual fund before any gains or losses.

In Simple Terms: Like the seed money you put into a chit fund — the base amount you started with.

In Real World: Used to calculate capital gains and returns.

Relevance: Helps determine how much you’ve earned or lost.

Example: You invested ₹50,000 — that’s your original investment.

15. Outperformance

Definition: When a mutual fund earns higher returns than its benchmark index or peer funds.

In Simple Terms: Like scoring higher than others in a class test — you did better than average.

In Real World: A sign of good fund management.

Relevance: Indicates skill of the fund manager and potential for future success.

Example: A fund gives 15% return vs. Nifty’s 12% — it outperformed.

16. Outstanding Amount

Definition: The total amount of money invested in a mutual fund by all investors.

In Simple Terms: Like counting all the money collected in a group kitty — shows how big the fund is.

In Real World: Affects fund stability and liquidity.

Relevance: Larger funds may have lower volatility.

Example: A fund reports ₹1,000 crores outstanding amount — shows popularity and size.

17. Overseas Fund

Definition: A mutual fund that invests in international markets outside India.

In Simple Terms: Like buying property in another country — gives global exposure.

In Real World: Popular among investors seeking diversification beyond Indian markets.

Relevance: Subject to currency and geopolitical risks.

Example: You invest in a U.S. Tech Fund to benefit from Silicon Valley growth.

18. Over-Allocation Risk

Definition: Risk from putting too much money into one asset class, sector, or fund.

In Simple Terms: Like eating only samosas for dinner — unbalanced and risky.

In Real World: Can lead to heavy losses if that area underperforms.

Relevance: Diversification reduces this risk.

Example: Investing only in pharma stocks during a slowdown can hurt your portfolio.

19. Overnight Fund

Definition: A type of liquid fund that invests in overnight securities — matures in one day.

In Simple Terms: Like parking money in a locker for one night — safe and instantly available.

In Real World: Ideal for very short-term surplus cash.

Relevance: Minimal interest rate risk, ultra-safe.

Example: You park ₹50,000 in an overnight fund before investing the next day.

20. Overweight Position

Definition: Holding more of a particular security or sector than the benchmark recommends.

In Simple Terms: Like adding extra salt to your food — more than usual, can enhance flavor or spoil taste.

In Real World: Fund managers sometimes overweight sectors they believe will perform well.

Relevance: Increases risk if the overweighted area underperforms.

Example: A fund holds 20% in IT stocks when the index has only 10% — overweight position.

21. Operational Risk

Definition: The risk of loss due to internal failures like errors, fraud, or system breakdowns.

In Simple Terms: Like losing money because the ATM swallowed your card — not your fault, but affects you.

In Real World: Mitigated through strong internal controls and audits.

Relevance: Affects fund performance indirectly.

Example: A technical glitch causes delayed redemption — investor misses a market opportunity.

P

1. PAN (Permanent Account Number)

Definition: A unique 10-digit alphanumeric number issued by the Income Tax Department to identify taxpayers.

In Simple Terms: Like your Aadhaar for taxes — it helps the government track who pays what.

In Real World: Mandatory for investing more than ₹50,000 in a mutual fund scheme.

Relevance: Ensures transparency and prevents misuse of financial systems.

Example: You provide your PAN while starting a SIP to complete KYC formalities.

2. Par Value

Definition: The face value of a security when it is first issued.

In Simple Terms: Like the base price printed on a gift card — doesn’t change even if its real value does.

In Real World: Typically set at ₹10 for new fund offers (NFOs).

Relevance: Used as a reference point for calculating returns or dividends.

Example: You invest during an NFO at par value of ₹10 per unit.

3. Passive Fund

Definition: A mutual fund that simply copies the performance of a market index like Nifty or Sensex.

In Simple Terms: Like copying the class topper’s answers — you follow the market without trying to beat it.

In Real World: Low-cost funds popular among long-term investors.

Relevance: Lower fees mean more returns go to the investor.

Example: You invest in an index fund tracking Nifty 50 — it moves up or down with the index.

4. Payout Option

Definition: A plan where profits from a mutual fund are paid out to the investor regularly.

In Simple Terms: Like getting monthly rent from a property instead of selling it.

In Real World: Commonly used by retirees needing regular income.

Relevance: Reduces total investment over time since part of capital may be returned.

Example: You choose the payout option to get ₹5,000 every month from your investment.

5. PB Ratio (Price-to-Book Ratio)

Definition: A valuation metric comparing a company’s market price to its book value.

In Simple Terms: Like checking how much a shop is worth today vs. how much was invested to start it.

In Real World: Helps investors decide whether a stock is overvalued or undervalued.

Relevance: Used by fund managers to select good quality stocks.

Example: A fund avoids a company with high PB ratio, thinking it’s overpriced.

6. PE Ratio (Price-to-Earnings Ratio)

Definition: A measure showing how much investors are willing to pay per rupee of earnings.

In Simple Terms: Like paying ₹20 for a packet of biscuits that gives you only ₹10 profit — tells you if it’s worth it.

In Real World: Widely used to compare companies in the same sector.

Relevance: High PE may indicate optimism or overvaluation.

Example: A fund manager checks the PE ratio before buying shares of a tech company.

7. Peer Comparison

Definition: Comparing a mutual fund’s performance with similar funds in the same category.

In Simple Terms: Like seeing if your school ranks higher than others in the area.

In Real World: Done using tools like Morningstar or Value Research ratings.

Relevance: Helps investors pick top-performing funds.

Example: Your friend chooses a fund ranked #1 in peer comparison for large-cap equity funds.

8. Performance Attribution

Definition: Breaking down a fund’s returns to understand which decisions contributed most.

In Simple Terms: Like figuring out which dishes made your restaurant profitable — main course, dessert, or drinks.

In Real World: Used by fund managers to improve future strategies.

Relevance: Shows whether returns came from skill or luck.

Example: A fund earned 15% return — 10% from stock picking, 5% from sector allocation.

9. Performance Benchmark

Definition: A standard used to measure how well a mutual fund is performing — usually a stock index like Nifty.

In Simple Terms: Like setting a passing mark — if the fund beats it, it’s doing well.

In Real World: Funds often say “Benchmark: S&P BSE Sensex” or similar.

Relevance: Helps investors know if their fund is underperforming or outperforming.

Example: If your fund gives 12% vs. benchmark’s 10%, it’s beating expectations.

10. Plan Type (Direct/Regular)

Definition: Two versions of the same mutual fund — Direct has no commission, Regular includes distributor fees.

In Simple Terms: Like buying shoes directly from the factory (cheaper) vs. through a store (costlier due to middleman).

In Real World: SEBI allows both, but direct plans give better returns.

Relevance: Choose based on whether you use a distributor or invest yourself.

Example: You invest via Groww app and choose the Direct Plan to save on commissions.

11. PMS (Portfolio Management Services)

Definition: Customized investment services offered to high-net-worth individuals by registered professionals.

In Simple Terms: Like hiring a personal chef to cook exactly what you want — not mass-produced meals.

In Real World: Minimum investment is usually ₹50 lakh.

Relevance: Offers personalized attention but at higher cost.

Example: A business owner uses PMS to manage crores in investments tailored to his goals.

12. Point of Presence (PoP)

Definition: An authorized center that helps investors with KYC-related tasks.

In Simple Terms: Like a passport verification center — you go there to confirm your identity.

In Real World: Operated by KRAs like CVL or DotEx across India.

Relevance: Required for completing or updating KYC documents.

Example: You visit a PoP near your office to update your address for mutual fund investments.

13. Portfolio

Definition: A collection of investments held by an individual or a mutual fund.

In Simple Terms: Like a bag containing different fruits — each represents a different asset.

In Real World: Mutual fund portfolios include stocks, bonds, or other securities.

Relevance: Diversified portfolio reduces risk.

Example: Your mutual fund holds shares of Reliance, Infosys, and Tata Motors.

14. Portfolio Rebalancing

Definition: Adjusting the mix of assets in a portfolio to maintain the original balance.

In Simple Terms: Like reordering your kitchen shelves after some items ran out — restoring balance.

In Real World: Done quarterly or annually by fund managers.

Relevance: Keeps risk levels in check and aligns with fund objectives.

Example: A fund sells some equities and buys more debt to bring back 60:40 equity-debt ratio.

15. Portfolio Turnover

Definition: How often the assets in a portfolio are bought and sold within a year.

In Simple Terms: Like changing your wardrobe frequently — shows how active the fund is.

In Real World: High turnover means more trading, more costs, and possibly more gains/losses.

Relevance: Impacts expenses and tax efficiency.

Example: A fund with 200% turnover replaces its entire portfolio twice a year.

16. Portfolio Turnover Ratio

Definition: A percentage showing how much of the fund’s holdings were replaced in a given period.

In Simple Terms: Like saying you changed 50% of your furniture in a year — half new, half old.

In Real World: Measured annually; lower ratios preferred for passive funds.

Relevance: Higher turnover can mean more brokerage and tax impact.

Example: A fund with 75% turnover ratio means three-fourths of its holdings were traded last year.

17. Portfolio Yield

Definition: The average return generated by all assets in a portfolio.

In Simple Terms: Like averaging the interest rates of all your FDs to see overall return.

In Real World: Used to evaluate bond-heavy portfolios.

Relevance: Tells how much income the portfolio generates.

Example: A debt fund’s portfolio yield is 7.5% — meaning on average, it earns that much annually.

18. Power of Attorney (POA)

Definition: A legal document giving someone else the authority to act on your behalf.

In Simple Terms: Like asking your uncle to sign a property deal for you because you’re out of town.

In Real World: Used by NRIs or elderly investors to manage investments remotely.

Relevance: Must be legally valid and notarized.

Example: Your father gives you POA to manage his mutual fund folios.

19. Pre-IPO Investment

Definition: Investing in a company before it goes public (lists on stock exchanges).

In Simple Terms: Like buying shares of a startup before it becomes a big brand.

In Real World: Available through certain mutual funds or PMS schemes.

Relevance: High-risk, high-reward opportunity.

Example: A fund invests in a fintech startup before it lists on the stock market.

20. Prepayment Risk

Definition: The risk that a borrower repays a loan earlier than expected, affecting returns.

In Simple Terms: Like getting your fixed deposit back early — you lose the promised interest.

In Real World: Affects debt funds holding corporate loans or housing finance bonds.

Relevance: Forces funds to reinvest at current (possibly lower) rates.

Example: A housing finance company pre-pays its bond — the fund now earns less interest.

21. Pre-Specified Mandate

Definition: An instruction set in advance for automatic transactions like SIPs.

In Simple Terms: Like setting a reminder to pay your maid every month — no need to do it manually.

In Real World: Set up once and runs automatically until stopped.

Relevance: Promotes disciplined investing.

Example: You set a pre-specified mandate to invest ₹2,000/month in a mutual fund.

22. Principal

Definition: The initial amount invested before any gains or losses.

In Simple Terms: Like the money you put into a chit fund before any bonus or interest.

In Real World: Basis for calculating returns and taxes.

Relevance: Helps track how much you’ve earned or lost.

Example: You invested ₹1 lakh — that’s your principal amount.

23. Principal Amount

Definition: Same as above — the original sum invested in a mutual fund.

In Simple Terms: Like the base fare of a train ticket — before adding extra charges.

In Real World: Used to calculate capital gains and redemption values.

Relevance: Important for tax reporting and tracking growth.

Example: After redeeming units, you see your principal amount was ₹2 lakh.

24. Private Placement

Definition: Selling mutual fund units directly to a small group of investors rather than the public.

In Simple Terms: Like hosting a private party instead of opening a restaurant to everyone.

In Real World: Used by alternative investment funds (AIFs) for HNIs and institutions.

Relevance: Not available to general retail investors.

Example: A family office invests ₹10 crore via private placement in a specialized infrastructure fund.

25. Prospectus

Definition: A detailed document explaining a mutual fund’s features, risks, and operations.

In Simple Terms: Like reading the menu before ordering food — tells you what you’re getting into.

In Real World: Must be read before investing in any new fund.

Relevance: Contains vital information like expense ratio, fund objective, and risks.

Example: You download the prospectus from the AMC website before investing.

26. Public Financial Institution

Definition: A government-owned institution that provides financial services, such as IDBI or IFCI.

In Simple Terms: Like a government-run bank or insurance company — trusted and stable.

In Real World: Some mutual funds are sponsored by PFIs like LIC or GIC.

Relevance: Adds credibility and stability to the fund.

Example: SBI Mutual Fund is backed by a public financial institution.

27. Public Sector Undertaking (PSU)

Definition: A company owned and operated by the government.

In Simple Terms: Like a government-run petrol pump or railway — safe and reliable.

In Real World: Many mutual funds hold PSU stocks for stability.

Relevance: Considered low-risk compared to private sector companies.

Example: A large-cap fund invests in ONGC and Power Grid — both PSUs.

28. Purchase NAV

Definition: The Net Asset Value at which you buy mutual fund units.

In Simple Terms: Like the sticker price of a product — tells you how many units you’ll get for your money.

In Real World: Depends on when you invest before cut-off time.

Relevance: Determines how many units you receive.

Example: You invest ₹10,000 at purchase NAV of ₹20 — you get 500 units.

29. Purchasing Power

Definition: The value of money in terms of what it can buy — affected by inflation.

In Simple Terms: Like realizing that ₹100 today buys less than it did 10 years ago.

In Real World: Investors aim to beat inflation to preserve purchasing power.

Relevance: Influences choice between savings accounts, FDs, and equity funds.

Example: You avoid keeping too much cash because it loses purchasing power over time.

30. Put Option

Definition: A contract allowing the holder to sell an asset at a set price within a specific time.

In Simple Terms: Like insuring your car — if something bad happens, you can sell it at a guaranteed price.

In Real World: Used in advanced funds to hedge against market falls.

Relevance: Protects downside but costs money (premium).

Example: A fund buys put options on Nifty to limit losses if the market crashes.

Q

1. Qualified Institutional Buyer (QIB)

Definition: Institutions approved by SEBI to participate in private placements and IPOs.

In Simple Terms: Like VIP guests allowed into exclusive events — they have special access.

In Real World: Includes banks, insurance companies, and mutual funds.

Relevance: Can invest in complex or high-risk instruments unavailable to retail investors.

Example: A mutual fund qualifies as QIB and invests in unlisted securities.

2. Qualitative Research

Definition: Analysis based on non-numerical factors like company management, brand strength, or industry trends.

In Simple Terms: Like judging a restaurant by its ambiance and customer reviews — not just sales figures.

In Real World: Used alongside quantitative research to assess stocks.

Relevance: Helps predict long-term potential beyond just numbers.

Example: A fund manager evaluates leadership quality before investing in a pharma company.

3. Quant Fund

Definition: A mutual fund that uses mathematical models and algorithms to make investment decisions.

In Simple Terms: Like using a robot chef to cook your meals — based on data, not taste.

In Real World: Popular among tech-savvy investors seeking systematic strategies.

Relevance: Minimizes human bias in decision-making.

Example: A quant fund uses AI to decide when to buy or sell stocks.

4. Quantitative Analysis

Definition: Using numbers and statistics to evaluate investments.

In Simple Terms: Like judging a cricket player by runs scored, not just how he looks batting.

In Real World: Used by fund managers to analyze financial statements and trends.

Relevance: Provides objective basis for investment decisions.

Example: A fund analyzes EPS growth and debt-equity ratio before buying a stock.

5. Quarterly Average AUM

Definition: The average Assets Under Management of a fund calculated over a quarter.

In Simple Terms: Like calculating how much money was in your piggy bank on average each week during the last 3 months.

In Real World: Used to compute expense ratios and fund performance metrics.

Relevance: Affects fund costs and management strategy.

Example: A fund reports quarterly average AUM of ₹500 crores — used for internal planning.

6. Quarterly IDCW Option

Definition: A plan where the fund distributes profits every quarter to investors.

In Simple Terms: Like getting pocket money every three months — part profit, part capital.

In Real World: Chosen by investors needing regular income.

Relevance: Reduces total investment over time.

Example: You choose quarterly IDCW to get ₹10,000 every 3 months.

7. Quarterly Portfolio Disclosure

Definition: A report published every quarter showing the fund’s holdings.

In Simple Terms: Like a progress report card — tells you what the fund owns right now.

In Real World: Published on AMC websites and fact sheets.

Relevance: Lets investors track fund activity and transparency.

Example: You check the latest portfolio disclosure to see if the fund still holds IT stocks.

8. Quarterly Returns

Definition: The profit or loss earned by a mutual fund in a three-month period.

In Simple Terms: Like checking your child’s exam results every term — short-term performance snapshot.

In Real World: Shown in fact sheets and fund reports.

Relevance: Helps monitor consistency and volatility.

Example: A fund gave 5% quarterly return — good if the market gave 3%.

9. Quasi-Equity

Definition: Instruments that share features of both equity and debt — like preference shares or convertible debentures.

In Simple Terms: Like a hybrid vehicle — partly electric, partly fuel-based.

In Real World: Offer steady income with some upside potential.

Relevance: Used by funds to diversify risk and return profiles.

Example: A fund invests in convertible bonds for balanced exposure.

10. Quasi-Equity Instruments

Definition: Same as above — securities that behave like both equity and debt.

In Simple Terms: Like a soft drink that also gives energy — part refreshment, part boost.

In Real World: Include instruments like warrants, ADRs, and FRs.

Relevance: Help in structuring flexible investment strategies.

Example: A fund holds preference shares that offer fixed returns plus voting rights.

11. Quick Redemption

Definition: A facility that allows investors to redeem mutual fund units instantly or within minutes.

In Simple Terms: Like withdrawing cash from an ATM — instant and hassle-free.

In Real World: Available for liquid funds and money market funds.

Relevance: Useful for emergency needs or urgent payments.

Example: You redeem ₹50,000 quickly from a liquid fund to pay hospital bills.

12. Quick Ratio

Definition: A financial metric measuring a company’s ability to meet short-term obligations.

In Simple Terms: Like checking if you have enough cash at home to pay this month’s electricity bill.

In Real World: Used by debt fund managers to assess credit quality.

Relevance: High quick ratio = strong liquidity position.

Example: A fund avoids a company with poor quick ratio due to possible default risk.

13. Quality of Holdings

Definition: Refers to the overall creditworthiness and performance of assets in a fund’s portfolio.

In Simple Terms: Like checking if the fruits in your basket are fresh or spoiling.

In Real World: Top funds emphasize high-quality holdings to reduce risk.

Relevance: Directly affects fund stability and returns.

Example: A fund with blue-chip stocks is said to have high-quality holdings.

R

1. Real Estate Fund

Definition: A mutual fund that invests in real estate companies or properties.

In Simple Terms: Like investing in builders or housing finance companies instead of buying a flat yourself.

In Real World: Popular among investors who want exposure to real estate without owning physical property.

Relevance: Offers diversification and growth potential but can be volatile.

Example: You invest in a real estate fund to benefit from rising home prices without buying land.

2. Real Rate of Return

Definition: The return earned on an investment after adjusting for inflation.

In Simple Terms: Like checking how much more milk you can buy today vs. last year with the same money.

In Real World: Tells you if your money is truly growing or just keeping up with prices.

Relevance: Helps assess whether you’re actually gaining wealth.

Example: Your FD gives 6% interest, but inflation is 5% — your real return is only 1%.

3. Real Return

Definition: Same as above — the actual profit after subtracting inflation.

In Simple Terms: Like calculating how much more rice you can afford now vs. before.

In Real World: Equity funds often offer better real returns than fixed deposits.

Relevance: Essential for long-term planning like retirement.

Example: A fund gives 10% return; inflation is 4% — so your real return is 6%.

4. Rebalancing

Definition: Adjusting your investments to maintain your desired mix of assets.

In Simple Terms: Like reorganizing your kitchen shelves after some items ran out — restoring balance.

In Real World: Done by fund managers quarterly or annually.

Relevance: Keeps risk levels in check and aligns with fund objectives.

Example: A fund sells some equities and buys more debt to bring back 60:40 equity-debt ratio.

5. Rebalancing Frequency

Definition: How often a portfolio is adjusted to restore its original asset allocation.

In Simple Terms: Like cleaning your house once a month — regular maintenance keeps things in order.

In Real World: Funds may rebalance monthly, quarterly, or annually.

Relevance: Impacts performance and transaction costs.

Example: A fund rebalances every quarter to stay aligned with its investment strategy.

6. Record Date

Definition: The cut-off date used to determine which investors are eligible for dividends or bonus units.

In Simple Terms: Like the list of names taken before distributing sweets at a temple — only those present get it.

In Real World: Announced by AMCs ahead of dividend payouts or rights issues.

Relevance: Important for knowing when to invest to receive benefits.

Example: You must own units before the record date to get the announced dividend.

7. Redemption

Definition: Selling mutual fund units to get back your money.

In Simple Terms: Like cashing in your gold coins or jewelry when you need money.

In Real World: Can be done anytime (for open-ended funds) or during specific periods (for close-ended).

Relevance: Determines how quickly and how much money you receive.

Example: You redeem ₹2 lakh worth of units to pay for your child’s college fees.

8. Redemption Cut-off Time

Definition: The time by which redemption requests must be submitted to get that day’s NAV.

In Simple Terms: Like submitting homework before class ends — otherwise, it counts for the next day.

In Real World: Typically 3 PM for most funds.

Relevance: Affects how many units you sell and at what price.

Example: You submit redemption before 3 PM — gets processed at that day’s NAV.

9. Redemption Proceeds

Definition: The amount received when you redeem your mutual fund units.

In Simple Terms: Like getting back the money you lent to a friend — plus or minus any gains or losses.

In Real World: Shown in your statement after selling units.

Relevance: Net of exit load and taxes.

Example: You redeem 1,000 units at ₹30 each — proceeds are ₹30,000.

10. Redemption Window

Definition: A specified period during which investors can redeem their units.

In Simple Terms: Like a weekly market — you can only sell your vegetables on certain days.

In Real World: Applies to interval funds and some closed-ended schemes.

Relevance: Ensures orderly redemptions without disrupting fund operations.

Example: An interval fund allows redemption only in the first week of every quarter.

11. Registrar and Transfer Agent (R&T Agent)

Definition: A third-party company that handles investor records and transactions for mutual funds.

In Simple Terms: Like a school office that maintains student records and issues certificates.

In Real World: Companies like CAMS, Karvy, and K-Fintech serve this role in India.

Relevance: Manages KYC, SIP mandates, and unit transfers.

Example: When you start a SIP, your details go through the RTA system.

12. Registrar and Transfer Agent (RTA)

Definition: Same as above — a service provider handling investor services for mutual funds.

In Simple Terms: Think of them as the post office of mutual funds — they keep track of who owns what.

In Real World: Required for all fund operations including purchases, redemptions, and updates.

Relevance: Central to investor experience and transaction accuracy.

Example: If you change your address, you update it with the RTA.

13. Regular Plan

Definition: A mutual fund plan where distributors earn commission from the AMC.

In Simple Terms: Like buying shoes through a store — you pay a little extra so the shopkeeper earns something.

In Real World: Higher expense ratio compared to Direct Plans.

Relevance: Choose if you use a distributor or advisor.

Example: You invest via a local agent — you’re in a Regular Plan.

14. Regulatory Framework

Definition: The set of rules and laws governing how mutual funds operate.

In Simple Terms: Like traffic rules — everyone has to follow them to ensure safety and fairness.

In Real World: Includes SEBI regulations, IT Act, and FEMA guidelines.

Relevance: Protects investors and ensures transparency.

Example: All AMCs must follow SEBI norms on disclosure and reporting.

15. Regulatory Guidelines

Definition: Specific instructions issued by regulators like SEBI for mutual fund operations.

In Simple Terms: Like government orders given to schools on exams and fees.

In Real World: Covers everything from advertising to taxation.

Relevance: Must be followed by all players in the industry.

Example: SEBI requires mutual funds to disclose portfolio holdings every quarter.

16. Reinvestment Option

Definition: A plan where profits are automatically reinvested into more units instead of being paid out.

In Simple Terms: Like planting seeds again to grow more trees — your gains work harder for you.

In Real World: Also known as Growth Option.

Relevance: Helps compound wealth over time.

Example: You choose reinvestment option in a fund — your dividend income is used to buy more units.

17. Reinvestment Plan

Definition: Same as above — a mutual fund plan where earnings are plowed back into the fund.

In Simple Terms: Like adding your festival bonus to your savings — not taking it out, just letting it grow.

In Real World: Favored by young investors building long-term wealth.

Relevance: Maximizes compounding effect.

Example: You opt for a reinvestment plan in your SIP — no payout, just more units.

18. Reinvestment Risk

Definition: The risk that returns will be lower when profits are reinvested.

In Simple Terms: Like saving your salary hike, but then interest rates fall — your extra money earns less.

In Real World: Common in debt funds when interest rates drop.

Relevance: Impacts overall returns even if initial investment does well.

Example: A bond matures and the fund reinvests at lower interest rate — reducing future income.

19. Residual Maturity

Definition: The remaining time until a bond or security reaches maturity.

In Simple Terms: Like counting how many months are left before your fixed deposit ends.

In Real World: Used by debt fund managers to manage interest rate sensitivity.

Relevance: Short residual maturity = less sensitive to rate changes.

Example: A bond has 2 years left to mature — that’s its residual maturity.

20. Return on Investment (ROI)

Definition: A measure of profitability calculated by comparing gain to cost.

In Simple Terms: Like figuring out how much profit you made on a business idea compared to what you spent.

In Real World: Expressed as a percentage.

Relevance: Helps compare performance across different investments.

Example: You invested ₹1 lakh and got ₹1.2 lakh — ROI is 20%.

21. Risk Adjusted Return

Definition: Returns measured against the level of risk taken to achieve them.

In Simple Terms: Like comparing two cars — one fast but risky, another slower but safer.

In Real World: Measured using Sharpe Ratio or Sortino Ratio.

Relevance: Shows whether high returns were worth the risk.

Example: Two funds give 15% return — one with low risk, one with high risk — the first is better.

22. Risk Profiling

Definition: Assessing an investor’s ability and willingness to take risks.

In Simple Terms: Like asking someone how comfortable they are riding a bike at night — tells you how adventurous they are.

In Real World: Done using questionnaires before starting an investment journey.

Relevance: Guides choice between equity, debt, and hybrid funds.

Example: A retiree scores low on risk profiling — advised to invest in debt funds.

23. Risk Profile

Definition: The overall risk appetite of an investor based on age, income, goals, etc.

In Simple Terms: Like labeling someone as “cautious” or “adventurous” — helps decide what kind of food they like.

In Real World: Classifies investors into conservative, moderate, or aggressive.

Relevance: Determines suitable investment options.

Example: A young software engineer has an aggressive risk profile — suited for equity funds.

24. Risk-Return Tradeoff

Definition: The principle that higher returns usually come with higher risks.

In Simple Terms: Like choosing between a safe job or a risky startup — more money, more stress.

In Real World: Investors must decide how much risk they can tolerate.

Relevance: Guides investment decisions and portfolio construction.

Example: You accept higher volatility to chase higher returns in small-cap funds.

25. Riskometer

Definition: A visual tool showing the risk level of a mutual fund on a scale (low to high).

In Simple Terms: Like a spice meter — tells you how hot your dish will be before tasting.

In Real World: Found in offer documents and fact sheets.

Relevance: Helps investors avoid mismatch between risk tolerance and fund risk.

Example: A fund marked as “Very High Risk” is unsuitable for retirees.

26. Rolling Returns

Definition: Returns calculated over multiple overlapping periods to assess consistency.

In Simple Terms: Like checking your weight every month — shows trends, not just one-time results.

In Real World: Used to evaluate fund performance over various time frames.

Relevance: Gives a more realistic view than point-to-point returns.

Example: A fund gave 12% average rolling return over 5-year periods.

27. Rollover (of FMP)

Definition: Automatically reinvesting money from a maturing Fixed Maturity Plan (FMP) into a new one.

In Simple Terms: Like renewing a fixed deposit — your money stays invested without interruption.

In Real World: Preferred by investors seeking continuity.

Relevance: Avoids idle cash and maintains steady returns.

Example: You roll over your ₹5 lakh FMP into a new 1-year FMP.

28. R-Squared

Definition: A statistical measure showing how closely a fund’s returns match a benchmark index.

In Simple Terms: Like seeing how similar two songs sound — higher R² means closer match.

In Real World: Used in evaluating passive and index funds.

Relevance: Closer to 1 means better tracking.

Example: An index fund has R² of 0.98 — it follows Nifty very closely.

29. Rupee Cost Averaging

Definition: Investing a fixed amount regularly, leading to buying more units when prices are low and fewer when prices are high.

In Simple Terms: Like buying milk daily — sometimes it’s cheaper, sometimes costlier, but your average cost evens out.

In Real World: Core benefit of SIP investing.

Relevance: Reduces impact of market timing.

Example: You invest ₹2,000/month — sometimes get 100 units, sometimes 80, depending on NAV.

30. Rupee-Cost Averaging

Definition: Same as above — systematic investing smooths out market fluctuations.

In Simple Terms: Like eating out regularly — sometimes expensive, sometimes cheap meals, but overall cost averages.

In Real World: Makes investing easier and more disciplined.

Relevance: Encourages long-term investing without worrying about market highs/lows.

Example: Over 12 months, your average purchase price is lower due to rupee-cost averaging.

S

1. SAI (Statement of Additional Information)

Definition: A document containing additional details about a mutual fund scheme beyond what’s in the SID.

In Simple Terms: Like reading the fine print in a contract — gives more clarity.

In Real World: Not always needed by retail investors, but useful for advanced users.

Relevance: Contains legal and operational information.

Example: You check the SAI to understand tax implications of a fund.

2. Sales Load

Definition: A fee charged when buying or selling mutual fund units.

In Simple Terms: Like paying a small tip to a broker when buying jewelry — adds to your cost.

In Real World: Banned in India for retail investors since 2009.

Relevance: Entry loads are gone; exit loads still apply.

Example: Older schemes used to charge sales load, newer ones don’t.

3. Scheme Information Document (SID)

Definition: A detailed document explaining a mutual fund scheme’s features and risks.

In Simple Terms: Like a user manual — tells you everything you need to know before investing.

In Real World: Must be read before investing in any new fund.

Relevance: Contains key info like objective, risk, and expenses.

Example: You download the SID from the AMC website before investing.

4. SEBI (Securities and Exchange Board of India)

Definition: The regulator that oversees securities markets and mutual funds in India.

In Simple Terms: Like the traffic police of finance — ensures everyone follows the rules.

In Real World: Issues guidelines on disclosures, investor protection, and fund operations.

Relevance: Regulates AMCs, RTAs, and distributors.

Example: SEBI sets limits on how much AMCs can charge as expense ratio.

5. Section 80C

Definition: A provision in the Income Tax Act allowing deductions up to ₹1.5 lakh per year for eligible investments.

In Simple Terms: Like getting a discount on your tax bill by saving money in approved instruments.

In Real World: ELSS funds qualify under Section 80C.

Relevance: Helps reduce taxable income.

Example: You invest ₹1 lakh in ELSS fund — saves tax on that amount.

6. Sector Fund

Definition: A mutual fund that focuses on stocks of a specific sector like pharma, IT, or banking.

In Simple Terms: Like putting all your eggs in one basket — great if that sector does well, risky if it doesn’t.

In Real World: High-risk, high-reward funds favored by experts.

Relevance: Should form only part of a diversified portfolio.

Example: You invest in a pharma fund to capitalize on vaccine demand.

7. Sectoral Fund

Definition: Same as above — invests in a single industry or sector.

In Simple Terms: Like betting on cricket — pick your favorite team and hope it wins.

In Real World: Popular among investors with sector-specific views.

Relevance: Not suitable for beginners due to high volatility.

Example: A tech fund focusing only on software companies.

8. Secured Debentures

Definition: Bonds backed by company assets, offering more safety to investors.

In Simple Terms: Like giving a loan to someone who puts their house as collateral — more secure.

In Real World: Debt funds often include secured debentures for stability.

Relevance: Lower default risk than unsecured bonds.

Example: A fund holds secured debentures of a steel company — safer than unsecured ones.

9. Securities and Exchange Board of India (SEBI)

Definition: India’s capital market regulator, responsible for protecting investors and regulating mutual funds.

In Simple Terms: Like the principal of a school — makes sure students and teachers follow the rules.

In Real World: Oversees AMCs, brokers, stock exchanges, and fund houses.

Relevance: Sets standards for fair play and investor education.

Example: SEBI penalizes insider trading and enforces transparency.

10. Security Selection

Definition: The process of picking individual stocks or bonds for a mutual fund.

In Simple Terms: Like choosing players for a cricket team — based on skill, form, and strategy.

In Real World: Done by fund managers using research and analysis.

Relevance: Impacts fund performance and risk.

Example: A fund manager selects IT stocks based on strong quarterly results.

11. Segregated Portfolio

Definition: A separate account created by a fund to hold risky or defaulted securities separately from the main portfolio.

In Simple Terms: Like keeping bad apples away from good ones so they don’t spoil the whole basket.

In Real World: Used when a bond defaults or faces credit downgrade.

Relevance: Protects other investors from bearing losses immediately.

Example: A debt fund segregates a defaulted corporate bond to avoid affecting returns for all investors.

12. Senior Bonds

Definition: Bonds that are prioritized for repayment if a company goes bankrupt.

In Simple Terms: Like being first in line during ration distribution — you get served before others.

In Real World: Preferred by conservative investors and funds.

Relevance: Lower risk than junior or subordinated bonds.

Example: A fund invests in senior bonds of a telecom company for safer returns.

13. Sensex (S&P BSE Sensex)

Definition: A stock market index representing the performance of 30 large, well-established companies listed on the Bombay Stock Exchange (BSE).

In Simple Terms: Like a class monitor who represents how the whole class is doing — if he does well, the class looks good.

In Real World: Often used as a benchmark for equity mutual funds.

Relevance: Reflects overall health of the Indian stock market.

Example: Your fund tracks the Sensex — if it rises, your fund likely rises too.

14. Settlement Cycle

Definition: The time between when a trade is made and when the transaction is finalized.

In Simple Terms: Like placing an order online — it takes time to reach your doorstep.

In Real World: In India, mutual fund redemptions usually settle within 1–3 business days.

Relevance: Impacts when you receive money after selling units.

Example: You redeem your fund on Monday — the money reaches Wednesday.

15. Settlement Date

Definition: The date on which the buyer must pay for the securities or the seller receives payment.

In Simple Terms: Like the delivery date of a product — when the deal officially closes.

In Real World: Important for ETFs and traded securities.

Relevance: Determines when money or units are transferred.

Example: Your SIP purchase settles on T+1 day — units added to your account next business day.

16. Shariah-Compliant Fund

Definition: A mutual fund that follows Islamic principles — avoids interest-based income and certain industries like alcohol or gambling.

In Simple Terms: Like choosing halal food — follows specific religious guidelines.

In Real World: Popular among Muslim investors looking for ethical investing.

Relevance: Ensures investments align with faith-based values.

Example: A fund excludes banks and focuses on consumer goods and healthcare stocks.

17. Sharpe Ratio

Definition: A measure of risk-adjusted return — tells how much extra return you’re getting per unit of risk taken.

In Simple Terms: Like judging a driver not just by speed but by how safely they drive.

In Real World: Higher ratio = better performance relative to risk.

Relevance: Helps compare funds with similar returns.

Example: Two funds give 15% return — one has higher Sharpe ratio, meaning it took less risk to get there.

18. Short Duration Fund

Definition: A debt fund that invests in instruments maturing in 1–3 years.

In Simple Terms: Like parking money in a short-term FD — safe, predictable, and ready soon.

In Real World: Less sensitive to interest rate changes than long-term debt funds.

Relevance: Ideal for goals 1–3 years away.

Example: You invest in a short duration fund to save for a vacation next year.

19. Short-Term Capital Gains (STCG)

Definition: Profit earned from selling units held for less than 1 year.

In Simple Terms: Like selling gold jewelry bought last Diwali — taxed at higher rates.

In Real World: Taxed at your income tax slab — unlike LTCG which gets special treatment.

Relevance: Impacts net returns — plan exits carefully.

Example: You invested ₹50,000 and redeemed for ₹60,000 after 8 months — STCG of ₹10,000 taxed as regular income.

20. SID (Scheme Information Document)

Definition: A detailed document explaining everything about a mutual fund scheme — its objective, risks, costs, etc.

In Simple Terms: Like reading the menu card before ordering food — tells you what you’re getting into.

In Real World: Must be read before investing in any new fund.

Relevance: Contains key info like expense ratio, exit load, and investment strategy.

Example: Before investing, you download the SID from the AMC website to understand the fund.

21. Side Pocketing

Definition: A process where a fund creates a separate account for non-performing assets to protect the rest of the portfolio.

In Simple Terms: Like quarantining a sick person to stop disease from spreading — isolates bad assets.

In Real World: Used in debt funds when a bond defaults.

Relevance: Prevents panic and protects liquidity for healthy investors.

Example: A debt fund side pockets a defaulted bond to avoid affecting redemption requests.

22. SIP (Systematic Investment Plan)

Definition: A method of investing fixed amounts regularly in a mutual fund.

In Simple Terms: Like saving ₹500 every month for Diwali — small, consistent, and grows over time.

In Real World: Most popular way Indians invest in mutual funds.

Relevance: Promotes discipline and reduces impact of market timing.

Example: A salaried employee starts a ₹2,000/month SIP to build wealth over 10 years.

23. SIP Top-up

Definition: Increasing your SIP amount automatically or manually at regular intervals.

In Simple Terms: Like increasing your milk delivery as your family grows — more needs, more investment.

In Real World: Available in many funds to match income growth or inflation.

Relevance: Helps beat inflation without extra effort.

Example: You start a ₹1,000/month SIP and increase it by ₹500 every year.

24. Small Cap Fund

Definition: A mutual fund that invests mostly in small-sized companies with low market capitalization.

In Simple Terms: Like supporting local businesses — high potential, but also high risk.

In Real World: Offers high growth but volatile returns.

Relevance: Suitable for aggressive investors with long horizons.

Example: You invest in a small-cap fund to grow savings faster than large-cap funds.

25. Small-Cap Fund

Definition: Same as above — invests in small-sized companies.

In Simple Terms: Like backing underdog players in cricket — can surprise, but not always consistent.

In Real World: These funds often outperform in bull markets, underperform in bear markets.

Relevance: Part of SEBI’s category-wise classification.

Example: A fund buys shares of a regional cement company — small now, could become big later.

26. Smart Beta Fund

Definition: A type of passive fund that uses rules-based strategies to select stocks based on factors like value, momentum, or quality.

In Simple Terms: Like using a smart recipe to cook — not random, but not fully customized either.

In Real World: Combines passive and active investing styles.

Relevance: Aims to beat traditional index funds.

Example: A smart beta fund selects stocks based on dividend yield and earnings growth.

27. SOA (Statement of Account)

Definition: A summary of your mutual fund holdings provided by the RTA or platform.

In Simple Terms: Like a bank statement — shows how much you have, where, and when you invested.

In Real World: Sent monthly or quarterly via email or available online.

Relevance: Helps track performance and manage investments.

Example: You check your SOA to see how your SIP performed last month.

28. Solvency Ratio

Definition: A financial metric showing whether a company can meet its long-term obligations.

In Simple Terms: Like checking if your uncle can repay his home loan — does he earn enough?

In Real World: Used by debt fund managers to assess credit risk.

Relevance: High solvency ratio = stronger ability to repay debts.

Example: A fund avoids a company with poor solvency ratio due to default risk.

29. Sortino Ratio

Definition: A risk-adjusted return measure that focuses only on downside volatility.

In Simple Terms: Like judging a car not by how fast it goes, but by how well it handles rough roads.

In Real World: Better than Sharpe Ratio for assessing negative risk.

Relevance: Shows how well a fund protects against losses.

Example: Two funds give same returns — one has higher Sortino ratio, meaning fewer dips.

30. Sovereign Bond

Definition: A bond issued by the government, considered very safe.

In Simple Terms: Like lending money to your uncle who owns a house — highly reliable.

In Real World: Backed by government guarantee.

Relevance: Often included in gilt funds and safe-debt portfolios.

Example: A fund invests in sovereign bonds to ensure safety and stable returns.

31. Sovereign Gold Bond (SGB)

Definition: Government-backed bonds linked to the price of gold, offering interest and capital appreciation.

In Simple Terms: Like buying gold from the post office — no storage, earns interest, and backed by RBI.

In Real World: Popular alternative to physical gold.

Relevance: Can be invested through mutual funds or directly.

Example: You buy SGBs to gift gold to your daughter without owning real coins.

32. Sovereign Risk

Definition: The risk that a government may default on its debt or change laws affecting returns.

In Simple Terms: Like investing in a foreign land and fearing sudden tax hikes or bans.

In Real World: Applies to international funds or emerging market investments.

Relevance: Adds uncertainty to global investments.

Example: An NRI invests in U.S. bonds but worries about political instability affecting returns.

33. SPICE Form (for KYC)

Definition: A single form used to complete KYC formalities for mutual fund investments.

In Simple Terms: Like a single application for multiple schools — saves time and effort.

In Real World: Submitted once and valid across platforms.

Relevance: Streamlines investor onboarding.

Example: You fill SPICE Form while starting a SIP to complete KYC.

34. Sponsor (of a Mutual Fund)

Definition: The entity that establishes a mutual fund and appoints trustees.

In Simple Terms: Like the founder of a school — sets up the structure and hires management.

In Real World: Could be a bank, insurance company, or financial institution.

Relevance: Must meet SEBI norms and maintain minimum capital.

Example: HDFC Bank is the sponsor of HDFC Mutual Fund.

35. Spot Rate

Definition: The current market price of a security or asset at any given moment.

In Simple Terms: Like checking petrol prices today — not tomorrow’s or yesterday’s.

In Real World: Used in ETFs and currency-linked funds.

Relevance: Helps calculate real-time NAV for traded funds.

Example: A gold ETF uses spot rate to determine daily NAV.

36. Standard Deviation (Volatility measure)

Definition: A statistical measure showing how much a fund’s returns vary from average.

In Simple Terms: Like measuring how much a baby moves during sleep — more movement = more volatility.

In Real World: High standard deviation means high risk.

Relevance: Helps compare risk levels of different funds.

Example: A small-cap fund has higher standard deviation than a liquid fund.

37. Statement of Account (SOA)

Definition: A record of your mutual fund investments sent periodically by the RTA.

In Simple Terms: Like your WhatsApp chat history — shows all your past transactions clearly.

In Real World: Sent via email or accessible online.

Relevance: Helps track investments and verify details.

Example: You check your SOA to confirm your latest SIP was processed.

38. Step-up SIP

Definition: A SIP where the investment amount increases automatically each year.

In Simple Terms: Like increasing your child’s pocket money every birthday — growing along with life.

In Real World: Ideal for beating inflation and growing corpus faster.

Relevance: Encourages increased savings without manual effort.

Example: You start with ₹1,000/month and increase by 10% every year.

39. STP (Systematic Transfer Plan)

Definition: Transferring a fixed amount from one mutual fund to another at regular intervals.

In Simple Terms: Like transferring money from your savings to FD every month — disciplined shifting.

In Real World: Used to move from debt to equity gradually.

Relevance: Reduces lump sum risk while staying invested.

Example: You park ₹2 lakh in a liquid fund and transfer ₹10,000/month to equity fund.

40. Stock Split

Definition: Dividing one share into multiple shares to make them more affordable.

In Simple Terms: Like cutting a cake into smaller pieces — total size same, but easier to distribute.

In Real World: Done by companies to improve liquidity.

Relevance: Doesn’t change investor’s wealth, just number of units.

Example: A stock splits 1:10 — you get 10 times more shares at 1/10th the price.

41. Stop-Loss

Definition: A feature to sell a fund if it drops below a set price to limit losses.

In Simple Terms: Like setting a limit on how much you’ll spend at a shop — stops you from overspending.

In Real World: Common in advanced trading; rarely used in retail mutual funds.

Relevance: Useful for managing risk in volatile funds.

Example: You set stop-loss at 10% — fund sells automatically if it falls beyond that.

42. Stop-Loss Trigger

Definition: The pre-set point at which a stop-loss is activated.

In Simple Terms: Like a fire alarm that rings only when smoke crosses a level.

In Real World: Not commonly used in mutual funds, more in direct stock trading.

Relevance: Protects investors from sharp declines.

Example: A trigger at ₹100 means the fund will sell if price hits that level.

43. Strategic Asset Allocation

Definition: A long-term mix of assets chosen based on your goals and risk profile.

In Simple Terms: Like planning your weekly meals — balanced, sustainable, and goal-oriented.

In Real World: Set once and adjusted occasionally.

Relevance: Helps stay aligned with long-term objectives.

Example: You choose 70% equity, 20% debt, 10% gold — and stick to it.

44. Style Box

Definition: A visual tool showing the investment style of an equity fund (e.g., large-cap value vs. mid-cap growth).

In Simple Terms: Like a map showing where your fund operates — north, south, east, or west.

In Real World: Helps investors understand fund behavior.

Relevance: Assists in selecting funds that suit your investment style.

Example: A fund lies in “Large Cap Value” box — invests in undervalued big companies.

45. Style Drift

Definition: When a fund deviates from its stated investment style.

In Simple Terms: Like a vegetarian restaurant serving chicken — not what you signed up for.

In Real World: Happens when fund manager changes strategy without notice.

Relevance: May misalign with investor expectations.

Example: A large-cap fund suddenly buys many small-cap stocks — that’s style drift.

46. Sub-Asset Class

Definition: A细分 of an asset class — e.g., within equities, it could be large-cap, mid-cap, or sectoral.

In Simple Terms: Like categorizing fruits — mangoes, bananas, apples — even though all are fruits.

In Real World: Funds use these to classify investments.

Relevance: Helps in building diversified portfolios.

Example: Your portfolio includes both large-cap and mid-cap sub-asset classes.

47. Subscription (of Units)

Definition: The act of buying mutual fund units during NFO or regular purchase.

In Simple Terms: Like booking tickets for a movie — securing your seat ahead of time.

In Real World: Happens during New Fund Offer (NFO) or fresh purchases.

Relevance: Starts your investment journey.

Example: You subscribe to a new green energy fund at ₹10/unit during NFO.

48. Subscription Process

Definition: The steps involved in buying mutual fund units.

In Simple Terms: Like joining a gym — fill form, pay fee, get started.

In Real World: Includes KYC, mandate setup, and payment.

Relevance: Must be completed to begin investing.

Example: You complete subscription via mobile app — instant confirmation.

49. Surcharge

Definition: An additional tax levied on top of the basic tax.

In Simple Terms: Like paying extra fees at a mall parking lot — already paid entry, but still charged more.

In Real World: Applied to capital gains for HNIs or high-income earners.

Relevance: Lowers post-tax returns for wealthy investors.

Example: If you earn more than ₹1 crore/year, you pay surcharge on your LTCG.

50. Swaps

Definition: Contracts where two parties exchange cash flows — often used by sophisticated funds.

In Simple Terms: Like swapping your saree with a friend — both gain something new.

In Real World: Used for hedging or generating extra income.

Relevance: Complex and mostly used by institutional or hedge funds.

Example: A fund swaps rupee exposure to dollar bonds to manage currency risk.

51. SWP (Systematic Withdrawal Plan)

Definition: A plan where you withdraw a fixed amount from your mutual fund regularly.

In Simple Terms: Like taking monthly rent from a property — steady income without selling the entire asset.

In Real World: Popular among retirees needing regular income.

Relevance: Keeps part of your money invested for continued growth.

Example: You set up a ₹10,000/month SWP from your hybrid fund.

52. Switch Facility

Definition: Option to shift investments from one fund to another within the same AMC.

In Simple Terms: Like changing your phone plan — same provider, different package.

In Real World: Used to adjust risk or rebalance portfolio.

Relevance: Some AMCs charge switch fees.

Example: You switch from equity to debt fund as your goal nears.

53. Systematic Investment Plan (SIP)

Definition: Regular investment of fixed amount in a mutual fund.

In Simple Terms: Like saving ₹500/month in a piggy bank — small, consistent, and powerful.

In Real World: Most common way Indians invest in mutual funds.

Relevance: Builds wealth without stress.

Example: A teacher starts a ₹2,000 SIP to build retirement corpus.

54. Systematic Transfer Plan (STP)

Definition: Moving a fixed amount from one fund to another at regular intervals.

In Simple Terms: Like moving money from your savings to FD every month — automated and planned.

In Real World: Often used to move from debt to equity.

Relevance: Avoids lump sum risk.

Example: You STP ₹5,000/month from liquid fund to equity fund.

55. Systematic Withdrawal Plan (SWP)

Definition: Taking regular payouts from your mutual fund instead of redeeming all at once.

In Simple Terms: Like taking salary from your savings — keeps working for you.

In Real World: Popular with retirees or those needing regular income.

Relevance: Preserves capital and allows compounding.

Example: You take ₹10,000/month SWP from your debt fund.

56. Secondary Market

Definition: A marketplace where existing mutual fund units or ETFs are bought and sold.

In Simple Terms: Like a second-hand car market — ownership transfers without making new cars.

In Real World: Applies to ETFs and close-ended funds.

Relevance: Prices determined by demand and supply.

Example: You buy ETF units from another investor on the stock exchange.

57. Special Situation Fund

Definition: A fund that invests in companies facing unique events like mergers, acquisitions, or restructuring.

In Simple Terms: Like betting on a cricket team before a tournament — high-risk, high-reward.

In Real World: For expert investors who understand event-driven investing.

Relevance: Not suitable for beginners.

Example: A fund bets on a pharmaceutical company undergoing FDA approval.

T

1. Tactical Asset Allocation

Definition: Adjusting your investments based on short-term market opportunities or risks.

In Simple Terms: Like changing your route to work daily based on traffic — smart and responsive.

In Real World: Used by investors who want to make the most of current market conditions.

Relevance: Helps capture gains or avoid losses during market swings.

Example: You move more money into gold funds when stock markets are falling.

2. Target Maturity Fund

Definition: A debt fund that matures on a specific date, often aligned with an investor’s goal.

In Simple Terms: Like a fixed deposit that ends just before you need the money — perfect timing.

In Real World: Similar to Fixed Maturity Plans (FMPs) but available in ETF form.

Relevance: Reduces reinvestment risk as bonds mature with your goal.

Example: You invest in a 2028 target maturity fund for your child’s college fees.

3. Tax Benefit

Definition: An advantage under tax laws that lets you reduce taxable income or pay lower taxes.

In Simple Terms: Like getting a discount on your tax bill by saving in approved instruments.

In Real World: ELSS funds offer tax benefits under Section 80C.

Relevance: Encourages long-term investing and wealth building.

Example: Investing ₹1.5 lakh in ELSS saves you ₹46,800 in taxes annually.

4. Tax Harvesting

Definition: Selling investments at a loss to offset capital gains and reduce tax liability.

In Simple Terms: Like using old clothes to balance out new purchases — lowers overall cost.

In Real World: Legal strategy used by savvy investors before year-end.

Relevance: Helps optimize tax payments without breaking rules.

Example: You sell a fund that lost ₹20,000 to adjust against gains from another fund.

5. Tax Implication

Definition: The effect an investment has on your income tax.

In Simple Terms: Like knowing how much extra you’ll pay in school fees after a salary hike.

In Real World: Equity funds have different tax rules than debt funds.

Relevance: Must be considered before investing or redeeming.

Example: Short-term gains from equity funds are taxed at 15%, while long-term gains over ₹1 lakh are taxed at 10%.

6. Tax Saver Fund

Definition: A mutual fund that helps save tax under certain sections of the Income Tax Act.

In Simple Terms: Like buying health insurance — it costs you a little now but saves you more later.

In Real World: Mostly refers to ELSS (Equity-Linked Savings Scheme) funds.

Relevance: Offers both growth and tax savings.

Example: You invest in a tax saver fund to reduce taxable income and grow wealth.

7. Tax-Saving Fund

Definition: Same as above — a fund that gives tax benefits under Section 80C.

In Simple Terms: Like planting a tree whose shade also cools you — dual benefit of growth and tax break.

In Real World: Popular among salaried individuals.

Relevance: Comes with a lock-in period of 3 years.

Example: You invest ₹50,000 in a tax-saving fund every year to cut tax.

8. Tax-Saving Instruments

Definition: Financial products that help reduce taxable income under tax laws.

In Simple Terms: Like having coupons that let you skip paying full price — here, on taxes.

In Real World: Includes PPF, NSC, ELSS, and NPS.

Relevance: Part of smart financial planning.

Example: Your father uses a mix of PPF and ELSS to save tax each year.

9. Tax-Saving Mutual Fund (ELSS)

Definition: A type of equity mutual fund that offers tax deduction under Section 80C.

In Simple Terms: Like buying vegetables from a shop that gives you free rice — value plus benefit.

In Real World: Has a lock-in period of 3 years and offers market-linked returns.

Relevance: Best for those seeking tax savings and growth.

Example: You invest ₹1 lakh in ELSS fund — reduces taxable income by that amount.

10. Taxable Income

Definition: The portion of your income that is subject to tax after deductions.

In Simple Terms: Like your grocery budget after subtracting discounts — this is what you actually spend.

In Real World: Capital gains from mutual funds add to your taxable income.

Relevance: Determines how much tax you pay.

Example: After deducting ELSS investment, your taxable income drops from ₹8 lakh to ₹6.5 lakh.

11. Taxation of Mutual Funds

Definition: How mutual fund gains are taxed depending on the type and holding period.

In Simple Terms: Like knowing whether the food you bought was VAT included or not — affects final cost.

In Real World: Equity funds taxed differently than debt funds.

Relevance: Influences when and how you redeem.

Example: You hold an equity fund for 1 year — any profit is short-term gain taxed at 15%.

12. TDS (Tax Deducted at Source)

Definition: Tax collected at the time of payment — deducted before giving you the redemption proceeds.

In Simple Terms: Like a restaurant adding service tax to your bill before you pay.

In Real World: Not applicable to mutual funds directly, but applies to dividends (if company pays DDT).

Relevance: No TDS on mutual fund redemptions — you report and pay tax yourself.

Example: Dividends from mutual funds may attract Dividend Distribution Tax (DDT), though now taxed in hands of investor.

13. Technical Analysis

Definition: Studying price charts and patterns to predict future movements.

In Simple Terms: Like checking weather apps to decide if you should carry an umbrella — based on trends.

In Real World: Used by traders and some aggressive funds to time the market.

Relevance: Not commonly used in long-term mutual fund investing.

Example: A fund manager buys stocks based on chart patterns showing upward movement.

14. Tenure

Definition: The length of time you plan to stay invested in a mutual fund.

In Simple Terms: Like deciding how many months you’ll keep your money in a recurring deposit.

In Real World: Dictates choice between short-term, medium-term, or long-term funds.

Relevance: Longer tenures usually mean higher growth potential.

Example: You choose a 5-year tenure to build a car fund.

15. TER (Total Expense Ratio)

Definition: The percentage of assets used to cover operating expenses like management fees and administration.

In Simple Terms: Like paying rent for a shop — part of your profit goes toward running the business.

In Real World: Lower TER means more returns go to the investor.

Relevance: Must compare across similar funds.

Example: A fund with 1.5% TER eats into your return by 1.5% every year.

16. Thematic Fund

Definition: A mutual fund that focuses on a specific theme or trend — like infrastructure, digital India, or climate change.

In Simple Terms: Like investing in a wedding planner startup because weddings are booming.

In Real World: High-risk, high-reward; popular among tech-savvy investors.

Relevance: Performance depends on success of the theme.

Example: You invest in a “Digital India” fund betting on e-governance growth.

17. Threshold Limit

Definition: The minimum amount required to trigger a particular action or benefit.

In Simple Terms: Like needing to spend ₹500 to get free delivery — cross the limit, get the perk.

In Real World: Some funds require minimum holdings to access services like STP or SWP.

Relevance: May affect your investment flexibility.

Example: A fund allows STP only if you have at least ₹50,000 invested.

18. Tier I / Tier II Cities

Definition: Classifications of cities in India based on population, economic activity, and infrastructure.

In Simple Terms: Like categorizing schools — some are urban, some rural.

In Real World: Many mutual fund campaigns target Tier I cities like Mumbai, Delhi, Bengaluru.

Relevance: Affects distribution strategies and awareness levels.

Example: A financial advisor promotes SIPs more in Jaipur (Tier II) than in Pune (Tier I).

19. Time Horizon

Definition: The number of years you plan to stay invested in a mutual fund.

In Simple Terms: Like setting a timer before baking a cake — tells you when it will be ready.

In Real World: Determines whether you choose equity, debt, or hybrid funds.

Relevance: Long horizon = more risk can be taken.

Example: If your goal is 20 years away, you opt for an equity fund.

20. Top-Down Investing

Definition: An investment strategy that starts with macroeconomic trends before selecting individual stocks.

In Simple Terms: Like choosing which state to buy property in first, then which city, then which house.

In Real World: Used by fund managers to pick sectors likely to do well.

Relevance: Helps align investments with broader economic shifts.

Example: A fund picks banking stocks because RBI cuts rates — top-down approach.

21. Top-up SIP

Definition: Increasing your SIP amount periodically, either automatically or manually.

In Simple Terms: Like increasing your milk order when a new family member arrives — more needs, more savings.

In Real World: Helps beat inflation and reach bigger goals.

Relevance: Ideal for growing incomes or rising living costs.

Example: You start with ₹2,000/month SIP and increase by ₹500 every year.

22. Total Expense Ratio (TER)

Definition: The total annual fee charged by a mutual fund for managing your money.

In Simple Terms: Like paying a cook a small fee to manage your meals — they earn something for their work.

In Real World: Includes fund manager fees, administrative costs, and other charges.

Relevance: Lower TER = better net returns.

Example: A fund charges 1.2% TER — for every ₹10,000 invested, ₹120 goes to expenses.

23. Total Return Index

Definition: An index that includes both price changes and reinvested dividends.

In Simple Terms: Like calculating your salary along with bonuses — shows real earnings.

In Real World: Used by index funds to measure performance accurately.

Relevance: Gives a complete picture of returns.

Example: A fund tracks a total return index — includes dividend reinvestment in performance.

24. Tracking Error

Definition: The difference between a fund’s actual returns and its benchmark index.

In Simple Terms: Like comparing your bike speed with GPS — sometimes it matches, sometimes it differs.

In Real World: Common in index funds and ETFs.

Relevance: Lower tracking error = better performance relative to the index.

Example: An index fund aims to match Nifty — but earns 11.5% vs. Nifty’s 12% — tracking error is -0.5%.

25. Tracking Index

Definition: The benchmark index a fund follows to replicate its performance.

In Simple Terms: Like copying the class topper’s notes — follow the leader.

In Real World: Index funds and ETFs use indices like Sensex or Nifty as tracking index.

Relevance: Tells you what the fund is trying to mirror.

Example: A fund says its tracking index is Nifty 50 — it tries to copy its ups and downs.

26. Trade Date

Definition: The day when a mutual fund transaction takes place.

In Simple Terms: Like noting the date you bought groceries — helps track when things happened.

In Real World: Important for calculating purchase NAV and redemption timelines.

Relevance: Affects settlement dates and tax calculations.

Example: You invest on March 10 — that’s your trade date.

27. Transaction Charges

Definition: Fees charged by brokers or platforms for executing trades.

In Simple Terms: Like paying a small fee to a friend who helps you book movie tickets online.

In Real World: Not common in direct mutual fund investing anymore.

Relevance: Most platforms now offer zero transaction charges.

Example: Older distributors used to charge a small fee per transaction — now mostly gone.

28. Transaction Cost

Definition: The total cost involved in buying or selling units, including brokerage, exit load, etc.

In Simple Terms: Like knowing all costs involved in making a cup of tea — gas, water, electricity.

In Real World: High turnover funds may have higher transaction costs.

Relevance: Reduces net returns.

Example: A fund with 200% turnover ratio incurs more transaction costs than a passive fund.

29. Transaction Statement

Definition: A record of all your mutual fund transactions — purchases, redemptions, switches, etc.

In Simple Terms: Like a WhatsApp chat log — shows everything you did with your money.

In Real World: Sent monthly or quarterly by RTAs or platforms.

Relevance: Helps track investment history and verify details.

Example: You check your transaction statement to confirm your last SIP was processed.

30. Transfer Agent

Definition: A third-party company handling investor records and transactions.

In Simple Terms: Like the school office that keeps track of student attendance and marks.

In Real World: CAMS, Karvy, K-Fintech are major transfer agents in India.

Relevance: Ensures smooth operations like KYC, SIP, and redemptions.

Example: When you start a SIP, the transfer agent handles your account.

31. Transition Phase

Definition: A period when a fund changes its investment strategy or moves towards goal completion.

In Simple Terms: Like switching from spicy food to mild dishes as you age — adapting to new needs.

In Real World: Seen in goal-based funds nearing maturity.

Relevance: Reduces risk as the goal approaches.

Example: A retirement fund shifts from equity to debt as retirement nears.

32. Treasury Bills

Definition: Short-term government securities issued for up to one year.

In Simple Terms: Like lending money to the government for a few days or weeks — safe and quick.

In Real World: Part of liquid and money market funds.

Relevance: Offers low risk and stable returns.

Example: A fund invests in 91-day T-bills to ensure liquidity.

33. Treasury Bills (T-Bills)

Definition: Same as above — short-term government bonds.

In Simple Terms: Like parking money in a locker for a week — very safe, easily accessible.

In Real World: Available in maturities of 91 days, 182 days, and 364 days.

Relevance: Preferred by conservative investors and fund houses.

Example: You invest in a liquid fund that holds 91-day T-bills.

34. Trail Commission

Definition: Ongoing commission paid to distributors for maintaining client relationships.

In Simple Terms: Like giving a tip to your waiter each month — not for booking, but for serving.

In Real World: Applicable to Regular Plan investors.

Relevance: Increases expense ratio slightly.

Example: A distributor gets 0.5% trail commission from a fund where you’re in Regular Plan.

35. Trust Deed

Definition: A legal document that establishes a mutual fund trust and outlines its structure.

In Simple Terms: Like a marriage certificate — defines the union between sponsor and trustees.

In Real World: Must be registered under the Indian Trusts Act.

Relevance: Governs fund operations and investor protection.

Example: The trust deed ensures your mutual fund operates within SEBI guidelines.

36. Trustee

Definition: A person or entity that oversees the mutual fund’s activities on behalf of investors.

In Simple Terms: Like a school board that ensures the principal runs the school fairly.

In Real World: Independent body ensuring fund complies with SEBI and trust deed.

Relevance: Protects investor interests and checks AMC actions.

Example: HDFC Mutual Fund is managed by HDFC Trustee Company Limited.

37. Turnover Ratio

Definition: The percentage of a fund’s portfolio that is bought and sold in a year.

In Simple Terms: Like measuring how often you change your wardrobe — frequent changes mean higher costs.

In Real World: High turnover = more trading = more brokerage and taxes.

Relevance: Affects net returns.

Example: A fund with 300% turnover replaces its entire portfolio three times a year.

U

1. ULIP (Unit Linked Insurance Plan)

Definition: A product that combines insurance and investment — part of your money goes to life cover, part is invested in funds.

In Simple Terms: Like buying a house where part of the payment is for the land and part for construction — both together give you value.

In Real World: Used by people who want life insurance along with market-linked returns.

Relevance: Has higher fees and longer lock-in than mutual funds.

Example: You pay ₹5,000/month — ₹1,000 for insurance, ₹4,000 invested in equity or debt funds.

2. Ultra Short Duration Fund

Definition: A debt fund that invests in very short-term instruments maturing in just a few weeks or months.

In Simple Terms: Like keeping your money in a locker for just one night — safe, quick, and ready when needed.

In Real World: Ideal for parking emergency funds or surplus cash.

Relevance: Offers better returns than savings account with minimal risk.

Example: You park ₹2 lakh in an ultra short duration fund before investing in a home loan next month.

3. Unabsorbed Loss

Definition: Past losses that have not yet been used to offset future profits.

In Simple Terms: Like carrying forward last year’s business loss to reduce this year’s taxable profit.

In Real World: Applicable in taxation of capital gains from mutual funds.

Relevance: Can be used to lower tax on current gains.

Example: If you lost ₹20,000 last year and made ₹50,000 this year, only ₹30,000 is taxed.

4. Unclaimed Dividends

Definition: Dividend payouts that investors haven’t received or claimed within the specified time.

In Simple Terms: Like missing out on your share of festival sweets because you didn’t come to the temple on time.

In Real World: Must be claimed within 3 years; otherwise, sent to Investor Education and Protection Fund (IEPF).

Relevance: Investors should check their accounts regularly.

Example: Your fund declared a dividend, but you missed collecting it — now it’s unclaimed.

5. Unclaimed Redemption

Definition: Money from redeemed units that hasn’t been credited to the investor due to wrong bank details or non-response.

In Simple Terms: Like forgetting to collect your luggage from the station — it’s still there, but you need to claim it.

In Real World: Funds report unclaimed redemptions to SEBI and may transfer them to IEPF after a period.

Relevance: Keep your KYC and bank details updated to avoid issues.

Example: You forgot to update your new bank account — redemption amount remains unclaimed.

6. Undervalued Stocks

Definition: Stocks trading at a price lower than their actual worth based on earnings, assets, etc.

In Simple Terms: Like getting a branded shirt at a local market rate — underpriced and a good deal.

In Real World: Sought by value investors looking for hidden gems.

Relevance: May offer high returns if the market corrects.

Example: A fund buys shares of a cement company trading at low PE ratio — seen as undervalued.

7. Underlying Asset

Definition: The asset (like stocks, bonds, gold) in which a mutual fund invests.

In Simple Terms: Like the ingredients in a dish — what makes up the final product.

In Real World: ETFs, index funds, and thematic funds all track underlying assets.

Relevance: Determines how the fund behaves in different market conditions.

Example: An Nifty 50 ETF tracks the 50 stocks in the Nifty index.

8. Underlying Assets

Definition: All the securities a mutual fund owns — like stocks, bonds, or commodities.

In Simple Terms: Like checking what’s inside a gift box — tells you what you actually own.

In Real World: Disclosed quarterly so investors know where their money is going.

Relevance: Helps assess risk, diversification, and quality of holdings.

Example: A fund holds Infosys, TCS, and HDFC Bank — these are its key underlying assets.

9. Unique Identification Code

Definition: A unique number assigned to each mutual fund scheme for tracking and identification.

In Simple Terms: Like a mobile number — no two schemes have the same code.

In Real World: Issued by AMFI to identify mutual fund plans accurately.

Relevance: Ensures clarity during transactions and reporting.

Example: You use the UIC while transferring investments between platforms.

10. Unitholder

Definition: A person who owns units of a mutual fund.

In Simple Terms: Like being a member of a chit fund — you get benefits based on how many units you hold.

In Real World: Also called an investor or unit holder.

Relevance: Entitled to dividends, growth, and voting rights in some cases.

Example: You are a unitholder in “HDFC Equity Fund”.

11. Unit

Definition: The smallest divisible part of a mutual fund — similar to a share in a company.

In Simple Terms: Like slices of a pizza — you buy as many as you can afford.

In Real World: Each unit has a Net Asset Value (NAV), usually starting at ₹10.

Relevance: Determines how much you own and how much you’ll gain or lose.

Example: You invest ₹10,000 in a fund with NAV ₹20 — you get 500 units.

12. Unit Allotment

Definition: The process of giving units to investors after they invest money in a mutual fund.

In Simple Terms: Like getting movie tickets after paying at the counter — proof of your purchase.

In Real World: Happens after cut-off time and based on applicable NAV.

Relevance: Confirms your ownership in the fund.

Example: After submitting SIP payment, you receive 100 units at day’s NAV.

13. Unit Holder Account Statement

Definition: A summary showing your mutual fund holdings, including units, transactions, and values.

In Simple Terms: Like your WhatsApp chat history — shows everything you’ve done with your money.

In Real World: Sent monthly or quarterly by RTAs like CAMS or Karvy.

Relevance: Helps track performance and verify transactions.

Example: You check your unit holder statement to confirm your latest investment.

14. Unit Linked Insurance Plan (ULIP)

Definition: Same as #1 — combines insurance and investment.

In Simple Terms: Like having a piggy bank that also gives you a safety net — part saving, part protection.

In Real World: Popular among those wanting insurance and market-linked growth.

Relevance: Not pure investment — has charges for insurance component.

Example: You invest in a ULIP through your agent to grow money and protect family.

15. Unlisted Securities

Definition: Stocks or bonds that are not traded on stock exchanges.

In Simple Terms: Like owning shares of a small startup — you own them, but can’t sell easily.

In Real World: Found in private equity or alternative investment funds.

Relevance: Adds risk due to lack of liquidity.

Example: A fund invests in pre-IPO companies — these are unlisted securities.

16. Unlisted Security Exposure

Definition: The percentage of a fund’s portfolio invested in unlisted securities.

In Simple Terms: Like investing in a small roadside stall — could grow big, but hard to exit quickly.

In Real World: Limited to certain types of funds like PMS or AIFs.

Relevance: High exposure = higher risk and less transparency.

Example: A special situation fund has 10% unlisted security exposure.

17. Unrated Debt Securities

Definition: Bonds or debentures that do not have a credit rating from agencies like CRISIL or CARE.

In Simple Terms: Like borrowing money from a friend without checking their credit score — risky and uncertain.

In Real World: Some debt funds include unrated bonds for higher interest.

Relevance: Higher returns but more default risk.

Example: A fund includes unrated bonds from a real estate firm — higher yield but riskier.

18. Unsystematic Risk

Definition: Risk specific to a company or industry — like a factory fire or management change.

In Simple Terms: Like your neighbor’s dog barking every night — affects only his house, not the whole colony.

In Real World: Reduced through diversification across sectors and companies.

Relevance: Different from market-wide systematic risk.

Example: A pharma fund falls due to regulatory changes — that’s unsystematic risk.

19. Upfront Commission

Definition: A one-time fee paid to distributors when an investor buys a Regular Plan.

In Simple Terms: Like giving a tip to your waiter once when you order food — not repeated later.

In Real World: Included in expense ratio and reduces over time.

Relevance: Makes Regular Plans costlier than Direct Plans.

Example: Distributors earn upfront commission from Regular Plan sales.

20. Upside Capture Ratio

Definition: A measure of how well a fund performs relative to its benchmark during rising markets.

In Simple Terms: Like comparing how fast you run uphill vs. others — higher means faster climb.

In Real World: Above 100% means the fund beat the benchmark during rallies.

Relevance: Helps assess performance in bull markets.

Example: A fund has 110% upside capture — it gains more than the index when markets rise.

21. Upside Potential

Definition: The ability of an investment to increase in value during favorable market conditions.

In Simple Terms: Like a small shop growing into a big brand — depends on location, demand, and timing.

In Real World: Evaluated by fund managers before buying stocks.

Relevance: Guides selection of high-growth opportunities.

Example: A mid-cap stock is said to have high upside potential — fund buys it.

22. Utility Bill (KYC)

Definition: A document like electricity, water, or gas bill used to verify residential address during KYC.

In Simple Terms: Like showing your ration card to prove you live in the area — simple and accepted proof.

In Real World: One of the valid documents for completing KYC formalities.

Relevance: Must be recent (not older than 2 months).

Example: You submit your BESCOM bill to complete KYC while starting a new SIP.

V

1. Valuation

Definition: The process of determining the worth of an asset or company.

In Simple Terms: Like checking how much your old bike is worth before selling it — not what you paid, but what it’s worth now.

In Real World: Fund managers use valuation to decide whether a stock is overpriced or underpriced.

Relevance: Helps avoid buying expensive stocks and find good opportunities.

Example: A fund manager says a telecom company is undervalued — so they buy its shares.

2. Valuation Ratios

Definition: Tools like P/E ratio or P/B ratio that help assess if a stock is cheap or expensive.

In Simple Terms: Like comparing prices at different vegetable shops to see where things are cheaper.

In Real World: Used by fund managers to evaluate investment options.

Relevance: Helps compare companies and sectors for better decision-making.

Example: You notice a bank stock has a lower P/E than peers — possibly undervalued.

3. Value at Risk (VaR)

Definition: An estimate of the maximum loss a portfolio might suffer over a set time under normal market conditions.

In Simple Terms: Like setting a limit on how much you can spend during shopping — warns you about possible losses.

In Real World: Used by funds to manage risk and protect investor capital.

Relevance: Gives investors a sense of worst-case scenarios.

Example: A fund reports daily VaR of 2% — meaning it could lose up to 2% in one day.

4. Value Fund

Definition: A mutual fund that invests in undervalued stocks believed to have long-term potential.

In Simple Terms: Like buying a saree at a discount store — seems cheap now, but may be valuable later.

In Real World: Favored by conservative investors who believe in long-term growth.

Relevance: Focuses on fundamentals rather than short-term trends.

Example: A value fund buys shares of a cement company trading below its real worth.

5. Value Investing

Definition: An investment strategy focused on buying stocks that appear cheaper than their actual worth.

In Simple Terms: Like buying gold from a local jeweler at a fair price instead of paying high mall rates.

In Real World: Popularized by Warren Buffett — used by many mutual fund managers.

Relevance: Seeks to profit from market inefficiencies.

Example: A fund manager uses value investing to pick stocks trading below book value.

6. Variable Income

Definition: Income that changes based on performance — unlike fixed income which stays constant.

In Simple Terms: Like your monthly bonus — sometimes big, sometimes small, sometimes zero.

In Real World: Seen in dividend option funds or IDCW plans.

Relevance: Can fluctuate depending on fund performance and market conditions.

Example: Your fund gives ₹2/unit one quarter and ₹0.50/unit the next — variable income.

7. Variable SIP

Definition: A type of SIP where the investment amount changes automatically based on market levels or income.

In Simple Terms: Like increasing your milk order when your salary rises — more money, more investment.

In Real World: Helps increase investments during market lows or rising incomes.

Relevance: Offers flexibility compared to regular SIPs.

Example: You set a rule to invest more when Nifty falls below 17,000.

8. Variance

Definition: A statistical measure showing how spread out a fund’s returns are from average.

In Simple Terms: Like tracking how much your tea stall’s daily sales vary — some days ₹500, some days ₹1,500.

In Real World: High variance = higher risk.

Relevance: Tells how stable or unpredictable a fund is.

Example: A small-cap fund shows high variance — means it swings a lot.

9. Venture Capital Fund

Definition: A fund that invests in early-stage startups or private companies.

In Simple Terms: Like funding your friend’s new restaurant idea — risky, but could give big returns.

In Real World: Not available to all retail investors — usually part of Alternative Investment Funds (AIFs).

Relevance: Long-term, high-risk, high-reward investment.

Example: A venture capital fund invests in a fintech startup before it lists.

10. Vesting Period

Definition: The time after which benefits or ownership rights become available to investors.

In Simple Terms: Like waiting for your birthday to open a gift — until then, you can’t use it.

In Real World: Applies to ESOPs, some pension schemes, or special funds.

Relevance: Ensures long-term commitment.

Example: A fund locks your units for 2 years — only after that can you redeem freely.

11. Virtual Portfolio

Definition: A mock portfolio created to track hypothetical investments without using real money.

In Simple Terms: Like playing fantasy cricket — no real stakes, just practice.

In Real World: Used by investors to test strategies before investing real money.

Relevance: Helps learn without risking capital.

Example: You create a virtual portfolio of IT stocks to see how it performs.

12. Volatility

Definition: How much the price of a security or fund goes up and down over time.

In Simple Terms: Like riding a bullock cart vs. a rollercoaster — one is smooth, the other shaky.

In Real World: Equity funds are more volatile than debt funds.

Relevance: Higher volatility = higher risk.

Example: A small-cap fund swings between gains and losses — high volatility.

13. Volatility Clustering

Definition: A pattern where periods of high volatility tend to follow each other.

In Simple Terms: Like having several rainy days in a row — once it starts, it doesn’t stop easily.

In Real World: Observed during market crashes or geopolitical events.

Relevance: Impacts timing and risk management.

Example: After a crash, markets keep swinging — this is volatility clustering.

14. Volatility Index

Definition: A measure of expected market volatility — often called “fear index”.

In Simple Terms: Like checking weather forecast before going out — tells you how stormy the market will be.

In Real World: India’s VIX is tracked by traders and funds to gauge market sentiment.

Relevance: High VIX = fear in the market.

Example: During elections, VIX spikes — indicating uncertainty.

15. Volatility Skew

Definition: A concept where options on the same asset show different implied volatility for different strike prices.

In Simple Terms: Like expecting more rain on weekends than weekdays — different risks at different points.

In Real World: Used by advanced funds and hedge funds.

Relevance: Indicates market expectations of downside or upside.

Example: A fund analyzes volatility skew before hedging equity exposure.

16. Voluntary Exit Load

Definition: A fee charged when you choose to redeem before a certain period, even though you’re allowed to do so.

In Simple Terms: Like paying extra to cancel a hotel booking early — optional, but costly.

In Real World: Encourages long-term investing and protects fund stability.

Relevance: Reduces frequent redemptions.

Example: A fund charges 1% voluntary exit load if you redeem within 1 year.

17. Voting Rights

Definition: The right of unitholders to vote on major decisions affecting the fund.

In Simple Terms: Like voting in a housing society meeting — your say matters.

In Real World: Rarely exercised by retail investors; more common in institutional holdings.

Relevance: Protects investor interests in key decisions.

Example: Investors vote to change fund objectives or terminate a poorly performing scheme.

W

1. WACC (Weighted Average Cost of Capital)

Definition: The average rate a company pays to finance its operations through debt and equity.

In Simple Terms: Like calculating the cost of borrowing money from friends and banks — mix of both.

In Real World: Used by fund managers to evaluate company valuations.

Relevance: Lower WACC = better for business growth.

Example: A fund avoids a company with high WACC due to heavy debt burden.

2. Watchlist

Definition: A list of stocks or funds an investor monitors for future investment.

In Simple Terms: Like keeping a list of items you want to buy when prices drop — planned shopping.

In Real World: Used by fund managers and individual investors.

Relevance: Helps stay prepared for market movements.

Example: You add a pharma stock to your watchlist — wait for dip before investing.

3. Waterfall Structure

Definition: A method of distributing profits among investors based on predefined rules.

In Simple Terms: Like sharing sweets — everyone gets a portion based on agreement.

In Real World: Common in alternative investment funds (AIFs) and private equity.

Relevance: Ensures fairness in profit distribution.

Example: A fund distributes returns first to senior investors, then junior ones.

4. Wealth Creation

Definition: Growing your money significantly over time through smart investing.

In Simple Terms: Like planting a sapling and watching it grow into a tree — takes time but rewards patience.

In Real World: Equity funds are known for wealth creation over decades.

Relevance: Goal of most long-term investors.

Example: A young professional builds ₹1 lakh into ₹1 crore over 25 years via SIP.

5. Wealth Management

Definition: Comprehensive financial services including investment planning, tax advice, and estate planning.

In Simple Terms: Like hiring a personal chef, driver, and cleaner together — full-service care.

In Real World: Offered by banks and financial institutions to HNIs.

Relevance: Tailored to individual needs and goals.

Example: A wealthy businessman hires a wealth manager to handle his investments and taxes.

6. Weighted Average Life

Definition: The average time it takes for a bondholder to recover principal through scheduled repayments.

In Simple Terms: Like knowing how many months it’ll take to get back your loan from a friend in installments.

In Real World: Used in debt funds holding bonds with staggered repayments.

Relevance: Helps assess interest rate sensitivity.

Example: A bond fund calculates weighted average life to manage liquidity.

7. Weighted Average Maturity

Definition: The average time to maturity of securities in a fund, weighted by their size.

In Simple Terms: Like figuring out the average age of your kids — gives you a balanced view.

In Real World: Debt funds report this regularly to show interest rate risk.

Relevance: Longer maturity = more sensitive to rate changes.

Example: A fund’s weighted average maturity is 4 years — moderate interest rate risk.

8. Weekly NAV

Definition: The Net Asset Value calculated weekly for certain mutual funds.

In Simple Terms: Like checking petrol prices every Sunday — not daily, but regularly.

In Real World: Applicable to interval funds or certain offshore funds.

Relevance: Less frequent updates mean less liquidity.

Example: You check weekly NAV of a foreign fund because it tracks overseas markets.

9. Weekly SIP

Definition: A Systematic Investment Plan where money is invested every week instead of monthly.

In Simple Terms: Like saving ₹500 every Monday — small amounts, big impact over time.

In Real World: Not very common in India, but useful for ultra-disciplined investors.

Relevance: Speeds up rupee cost averaging.

Example: A trader invests ₹2,000 every Monday in a liquid fund.

10. Widening Spread

Definition: The increasing difference between two related assets — like bond yields or stock prices.

In Simple Terms: Like noticing the gap between two runners growing — one speeds up, the other slows down.

In Real World: Happens in debt funds during credit crises or sectoral funds during downturns.

Relevance: May signal risk or opportunity.

Example: A widening spread between AAA and BBB bonds suggests rising default risk.

11. Wind-Up of Scheme

Definition: Closing a mutual fund scheme and returning money to investors.

In Simple Terms: Like shutting down a shop and giving back deposits to customers.

In Real World: Done when a fund isn’t performing well or is outdated.

Relevance: Rare, but happens in close-ended funds.

Example: SEBI asks a poor-performing fund to wind up — investors get their money back.

12. Windfall Gain

Definition: A sudden, unexpected profit from an investment.

In Simple Terms: Like winning a lucky draw — not planned, but welcome.

In Real World: Seen when a company gets acquired or receives regulatory approval.

Relevance: Can boost returns unexpectedly.

Example: A fund holds a stock that suddenly jumps after FDA approval — windfall gain.

13. Withdrawal

Definition: Taking money out of your mutual fund account — either fully or partially.

In Simple Terms: Like taking cash from your piggy bank when you need it.

In Real World: Done via redemption or SWP.

Relevance: Affects portfolio growth and tax liability.

Example: You withdraw ₹50,000 from your fund to pay school fees.

14. Withholding Tax

Definition: Tax deducted at source when a fund makes payments like dividends.

In Simple Terms: Like getting your salary after TDS — the government takes its share first.

In Real World: No longer applies directly to mutual fund redemptions — investors pay tax themselves.

Relevance: Used to apply tax on international fund dividends.

Example: An NRI fund deducts 10% withholding tax before sending dividends.

15. Working Day

Definition: A day when financial institutions operate — typically Monday to Friday (excluding holidays).

In Simple Terms: Like knowing the post office is closed on Sunday — transactions happen only on working days.

In Real World: Determines when you can transact in mutual funds.

Relevance: Cut-off times and NAVs depend on working days.

Example: You submit redemption on Saturday — processed on Monday as weekend is non-working.

16. Wrap Fee

Definition: A single fee covering multiple services like advisory, transaction costs, and fund expenses.

In Simple Terms: Like paying a flat fee for a buffet — covers everything in one go.

In Real World: More common abroad — rare in Indian mutual funds.

Relevance: Simplifies fee structure but may hide costs.

Example: A wrap fee of 1.5% covers advisory + fund management.

17. Write-Off

Definition: Removing an asset from the books because it’s unlikely to generate returns.

In Simple Terms: Like accepting your fridge is broken and throwing it away — no more use, so no point keeping it.

In Real World: Happens when a bond defaults or a company goes bankrupt.

Relevance: Impacts fund returns and NAV.

Example: A debt fund writes off a defaulted corporate bond — reduces fund value.

18. Warrant

Definition: A certificate that gives the right to buy shares at a set price in the future.

In Simple Terms: Like a coupon that lets you buy a mobile at last Diwali price even if it’s costlier now.

In Real World: Sometimes included in portfolios of aggressive funds.

Relevance: Adds leverage and growth potential.

Example: A fund holds warrants of a tech startup — exercises them when the stock rises.

X

1. X-Dividend Date (Ex-Dividend Date)

Definition: The date after which new investors are not eligible to receive the declared dividend.

In Simple Terms: Like arriving late at a temple festival — you miss out on the sweets being distributed.

In Real World: Must own units before this date to get the dividend.

Relevance: Helps manage timing of purchases and redemptions.

Example: You buy units one day after X-dividend date — you don’t get the ₹2/unit dividend.

2. X-Factor

Definition: A measure used by regulators to assess performance of pension or insurance funds.

In Simple Terms: Like checking how fair a referee is — tells you if the fund is doing its job well.

In Real World: Not commonly used in retail mutual funds but relevant for institutional products.

Relevance: Ensures fairness and efficiency in long-term investing.

Example: An insurance company uses X-Factor to check how well it manages policyholder money.

3. XIRR

Definition: Extended Internal Rate of Return — used to calculate returns when investments are made at irregular intervals.

In Simple Terms: Like calculating profit from Diwali gifts received at different times — not all at once.

In Real World: Used to find actual return on SIPs or irregular investments.

Relevance: More accurate than CAGR for real-life investment patterns.

Example: You invested ₹5,000 in Jan, ₹10,000 in March, and ₹8,000 in July — XIRR shows exact return.

4. XNAV (Real-time NAV for ETFs)

Definition: Real-time Net Asset Value for Exchange Traded Funds (ETFs), updated during market hours.

In Simple Terms: Like checking petrol prices live — not yesterday’s rate, but what it is now.

In Real World: Available for ETFs traded on exchanges like NSE or BSE.

Relevance: Helps traders make informed decisions during the day.

Example: You watch XNAV of a gold ETF while trading on your mobile app.

5. XBRL Reporting

Definition: A digital format used for regulatory filings, including mutual fund disclosures.

In Simple Terms: Like submitting your school report card in a standard format so everyone can read it easily.

In Real World: Used by AMCs to submit data to SEBI in a structured way.

Relevance: Improves transparency and ease of analysis.

Example: Fund houses use XBRL to file quarterly portfolio reports with SEBI.

6. X-Return Value

Definition: Returns adjusted for certain factors like risk, inflation, or benchmark performance.

In Simple Terms: Like checking how much more milk you can buy today vs. last year — not just price, but value.

In Real World: Used by professionals to evaluate true performance.

Relevance: Gives a clearer picture than raw returns alone.

Example: A fund gives 12% return, but X-return (adjusted for inflation) is only 7%.

Y

1. Yield

Definition: The income earned from an investment, usually expressed as a percentage.

In Simple Terms: Like getting rent from a property — it’s the return you earn regularly.

In Real World: Debt funds often talk about yield to show expected income.

Relevance: Helps compare income-generating investments.

Example: A bond gives 7% yield — means you earn ₹7 for every ₹100 invested annually.

2. Yield Adjustment

Definition: Changing the expected yield based on changes in market conditions or fund holdings.

In Simple Terms: Like recalculating your monthly grocery budget after prices rise — update your expectations.

In Real World: Done by debt fund managers when interest rates change.

Relevance: Affects future returns and investor planning.

Example: A fund adjusts yield downward after RBI cuts interest rates.

3. Yield Curve

Definition: A graph showing returns (yields) of bonds with different maturities — short-term vs. long-term.

In Simple Terms: Like comparing how much interest you get on FDs of 1 year vs. 5 years.

In Real World: Helps debt fund managers decide whether to invest in short or long-term bonds.

Relevance: Upward curve = healthy economy; inverted = recession warning.

Example: When the yield curve inverts, debt funds shift to safer, shorter bonds.

4. Yield on Cost

Definition: The current dividend or interest divided by the original cost of investment.

In Simple Terms: Like paying ₹100 for a stock that now pays ₹10/year — your yield on cost is 10%, even if price rose.

In Real World: Shows how good your entry price was.

Relevance: Different from current yield — focuses on purchase price.

Example: You bought a bond at ₹90 that pays ₹6 annual interest — your yield on cost is ~6.67%.

5. Yield Pickup

Definition: The extra return earned by choosing a riskier bond over a safer one.

In Simple Terms: Like choosing a slightly risky street food stall for tastier food — small risk, big reward.

In Real World: Seen when moving from government bonds to corporate bonds.

Relevance: Measures compensation for added credit risk.

Example: Moving from gilt fund to corporate bond fund gives 1.5% yield pickup.

6. Yield Spread

Definition: The difference in yields between two bonds or asset classes.

In Simple Terms: Like comparing how much sugar costs at two shops — the gap tells you where it’s cheaper.

In Real World: Used to assess risk and opportunity in fixed income markets.

Relevance: Wider spread = higher perceived risk.

Example: Government bond yields 6%, corporate bond yields 7.5% — spread is 1.5%.

7. Yield to Maturity (YTM)

Definition: The total return expected on a bond if held until maturity.

In Simple Terms: Like knowing how much interest you’ll earn from an FD if you keep it till end.

In Real World: Used by debt funds to estimate returns from bond portfolios.

Relevance: Helps compare bond funds and plan for stable income.

Example: A bond has YTM of 7.2% — you expect that average return if held fully.

8. Yearly NAV Change

Definition: The change in Net Asset Value of a mutual fund over a year.

In Simple Terms: Like checking how much your child grew in height this year — growth in value over time.

In Real World: Shown in fact sheets and fund reports.

Relevance: Tells you how well the fund did in the past 12 months.

Example: A fund’s NAV went from ₹20 to ₹24 — yearly change is +20%.

9. Yearly Returns

Definition: The profit or loss made by a fund in one year, expressed as a percentage.

In Simple Terms: Like checking how much your savings grew in one year — better than just seeing final amount.

In Real World: Published annually in fund factsheets.

Relevance: Helps track performance over time.

Example: Your fund gave 12% yearly return — beats inflation and FDs.

10. Y-axis

Definition: The vertical axis on a chart — often used to show returns, NAV, or growth.

In Simple Terms: Like the side of a staircase — tells you how high or low you’ve gone.

In Real World: In graphs, the Y-axis might show fund returns or volatility.

Relevance: Helps interpret visual data correctly.

Example: On a fund performance graph, the Y-axis shows % returns over time.

Z

1. Zero Balance SIP

Definition: A SIP that allows you to start investing without maintaining any minimum account balance.

In Simple Terms: Like joining a chit fund without needing to keep extra money aside — just pay your monthly share.

In Real World: Common on platforms like Paytm Money or Groww.

Relevance: Makes investing accessible to all income groups.

Example: You start a ₹500/month SIP with zero balance requirement.

2. Zero Exit Load

Definition: A fund that doesn’t charge any fee for redeeming your units early.

In Simple Terms: Like withdrawing your FD without penalty — no extra fees, just your money back.

In Real World: Most open-ended funds in India have zero exit load after a set period (e.g., 1 year).

Relevance: Encourages flexibility and easy access to money.

Example: You redeem your fund after 6 months — no exit load charged.

3. Zero Holding Period

Definition: A holding period of less than a day — sometimes seen in overnight or ultra-short-term funds.

In Simple Terms: Like parking your car for just a minute — barely any time passed.

In Real World: Applicable to liquid or overnight funds where money is invested and redeemed quickly.

Relevance: Impacts tax treatment and returns.

Example: You invest in an overnight fund at night and redeem it in the morning — zero holding period.

4. Zero-Based Budgeting

Definition: A method of planning where every rupee is assigned a purpose — starting from zero each month.

In Simple Terms: Like deciding fresh every month how to spend your salary — no carry-forward assumptions.

In Real World: Not directly related to mutual funds but useful for personal finance.

Relevance: Helps investors allocate money systematically.

Example: You use zero-based budgeting to decide how much to invest, save, and spend each month.

5. Zero-Coupon Bond

Definition: A bond that doesn’t pay regular interest but is sold at a discount and redeemed at face value.

In Simple Terms: Like buying a gift card for ₹90 that’s worth ₹100 later — no payout, just gain at end.

In Real World: Part of many debt fund portfolios for steady returns.

Relevance: Offers predictable returns with no reinvestment risk.

Example: You invest ₹9,000 in a zero-coupon bond — get ₹10,000 after 3 years.

6. Zero-Risk Asset

Definition: An investment considered completely safe — like government bonds or bank deposits.

In Simple Terms: Like keeping your money in a locker — nothing will happen to it.

In Real World: Includes instruments like T-bills or sovereign bonds.

Relevance: Used in conservative portfolios for stability.

Example: A fund allocates 10% to zero-risk assets to protect against crashes.

7. Zonal Office (of AMCs)

Definition: Regional office of an AMC responsible for customer service and operations in a specific area.

In Simple Terms: Like having a branch of a bank in your town — local help for your investments.

In Real World: HDFC Mutual Fund has zonal offices in Mumbai, Delhi, Chennai, etc.

Relevance: Provides support to investors outside head office locations.

Example: You visit the Zonal Office of ICICI Prudential in Ahmedabad for KYC assistance.

8. Zone-based Pricing

Definition: Charging different fees or offering different plans based on the investor’s location.

In Simple Terms: Like getting a lower rate in a village compared to city — depends on where you are.

In Real World: Rare in mutual funds, but may apply to distribution or advisory services.

Relevance: May affect accessibility or convenience.

Example: Some distributors offer zone-based pricing to Tier II city clients.

9. Z-Score

Definition: A statistical measurement assessing the likelihood of a company going bankrupt.

In Simple Terms: Like checking a student’s grades to predict exam results — helps know financial health.

In Real World: Used by debt fund managers to avoid risky companies.

Relevance: Higher score = healthier company.

Example: A fund avoids a company with low Z-score due to possible default risk.