Enhance your knowledge of Mutual Fund vocabulary
1โ20 of 120 terms
An account statement is a document that shows all mutual fund investments held with a fund house. It includes details such as transactions, units held, NAV, and current value, helping track investment activity and portfolio value over time.
Adjusted NAV reflects the actual performance of a mutual fund by including the effect of payouts like dividends (IDCW). When a fund distributes income, the NAV reduces, but the investor still receives that value. Adjusted NAV adds this back to show total return.
NAV at purchase: โน100 NAV increases to: โน160 IDCW distributed: โน10 NAV after payout: โน150 Even though the NAV is now โน150, the investor has also received โน10. Total value = โน150 + โน10 = โน160 Actual return = (150 + 10 โ 100) รท 100 = 60% If IDCW is not considered, the return may appear as 50% (โน100 to โน150), which understates the actual return.
Alpha measures how much a fund has performed relative to its benchmark. It helps understand whether the fund has generated returns above or below the benchmark after considering its strategy. Positive alpha indicates outperformance; negative alpha indicates underperformance.
Annualised return shows the average return earned per year over a period. It converts total return into a yearly rate, making it easier to compare investments held for different durations.
Applicable NAV is the NAV at which a transaction (purchase, redemption, or switch) is processed. It depends on application cut-off time, type of scheme, and when the investment amount is available for utilisation by mutual fund, as per applicable rules.
Asset allocation refers to how investments are divided across asset classes such as equity, debt, InvIT, Commodities, etc. It helps manage risk and align investments with financial goals and time horizon.
AUM is the total market value of money managed by a mutual fund or fund house on behalf of investors. It indicates the size of the fund but does not reflect its performance.
Average credit quality reflects the overall credit rating of debt instruments held in a fund. It indicates the credit risk level of the portfolio, with higher-rated securities generally considered lower risk.
Average maturity is the weighted average time until the debt securities in a mutual fund portfolio mature. It helps understand the interest rate sensitivity of debt funds โ longer maturity may mean higher sensitivity.
A bear market is a period when market prices decline over a sustained duration. It is usually associated with cautious investor sentiment and higher volatility.
A benchmark is a standard index used to evaluate the performance of a mutual fund. It acts as a reference to understand how the fund is performing relative to the market.
A large cap fund may use Nifty 50 or Nifty 100 as its benchmark.
Beta measures how sensitive a fund is to overall market movements. It indicates how much the fund's returns may change when the market moves.
Beta = 1.2 means the fund may move about 20% more than the market (up or down).
Blue chip stocks are shares of large, well-established companies with a strong business track record. These companies are usually widely recognised and may show relatively stable performance over time, though market risks remain.
A bond is a fixed income instrument through which an investor lends money to a government or company. In return, the issuer pays interest and repays the principal at maturity, as per agreed terms.
Book value represents the net value of a company's assets after deducting its liabilities. It is sometimes used to assess whether a stock is overvalued or undervalued when compared to other factors like Market Price, PE ratio, etc.
A bull market is a period when market prices are rising and investor sentiment is positive. During such phases, broader market participation may increase.
CAGR shows the average annual growth rate of an investment over a period, assuming compounding. It helps compare long-term performance of mutual fund investments.
Formula: CAGR = (Final Value / Initial Value)^(1 / Number of Years) โ 1
Capital gains refer to the profit earned when mutual fund units are sold at a price higher than the purchase cost. The tax treatment depends on the type of fund and holding period, as per applicable tax rules.
Compounding is the process where returns earned on an investment are reinvested, so future returns are earned on both the original amount and past gains. Over time, this can significantly impact long-term wealth creation.
Returns earned in earlier years continue to generate additional returns in later years.
Corpus is the total amount of money invested in a mutual fund scheme by all investors. It represents the total pool of funds managed under that scheme.
