​Mutual Fund Jargon Simplified​​

Understand financial and technical terms in the simplest of ways

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Rating Profile

Mutual funds invest in securities after evaluating their creditworthiness as disclosed by the ratings.

Nature of Scheme

The investment objective and underlying investments determine the nature of the mutual fund scheme.


The holdings or the portfolio is a mutual fund's latest or updated reported statement of investments/securities.


AUM or assets under management refers to the recent / updated cumulative market value of investments managed by a mutual fund or any investment firm.


Beta is a measure of an investment's volatility vis-a-vis the market. Beta of less than 1 means that the security will be less volatile than the market.

Sharpe Ratio

The Sharpe Ratio, named after its founder, the Nobel Laureate William Sharpe, is a measure of risk-adjusted returns.

Standard Deviation

Standard deviation is a statistical measure of the range of an investment's performance.

Modified Duration

Modified duration is the price sensitivity and the percentage chanin price for a unit change in yield

Exit Load

Exit load is charged at the time an investor redeems the units of a mutual fund.

Entry Load

A mutual fund may have a sales charge or load at the time of entry and/or exit to compensate the distributor/agent.


A group of securities, usually a market index, whose performance is used as a standard or benchmark to measure investment performance of mutual funds, among other investments


The NAV or the net asset value is the total asset value per unit of the mutual fund after deducting all related and permissible expenses.


SIP or systematic investment plan works on the principle of making periodic investments of a fixed sum.

Yield to Maturity

The Yield to Maturity or the YTM is the rate of return anticipated on a bond if held until maturity.

Minimum Additional Amount

This is the minimum investment amount for an existing investor in a mutual fund scheme.

Application Amount for Fresh Subscription

This is the minimum investment amount for a new investor in a mutual fund scheme.

Fund Manager

An employee of the asset management company such as a mutual fund or life insurer, who manages investments of the scheme.

Zero-Coupon Bond 

A bond that pays no interest while the investor holds it.


Volatility equates to the variability of returns from an investment.


One who does underwriting. A financial organization that handles sales of new securities which a company or municipality wishes to sell in order to raise money.


Legal custodian who looks after all the monies invested in a unit trust or mutual fund.

Tracking Error

When using an indexing or any other benchmarking strategy, the amount by which the performance of the portfolio differed from that of the benchmark.

Sector Fund

A fund that invests primarily in securities of companies engaged in a specific investment segment. Sector funds entail more risk, but may offer greater potential returns than funds that diversify their portfolios.

Record Date

A date on which the records of a company are closed for the purpose of determining the stockholders to whom dividends, proxies rights etc., are to be sent.

Price-To-Earnings Ratio (P/E)

The ratio of the market price of the share to earnings per share. This measure is used by investment experts to compare the relative merits of a number of securities.


If an investor buys a security for a price above its eventual value at maturity he has paid a premium for it.

Preferred Stock

Owners of this kind of stock are entitled to a fixed dividend to be paid regularly before dividend can 58 be paid on common stock .


A collection of securities owned by an individual or an institution (such as a mutual fund) that may include stocks, bonds and money market securities.


The contractual right, but not obligation, to buy (call option) or sell (put option) a specified amount of underlying security at a fixed price (strike price) before or at a designated future date (expiration date).

Open-End Fund

An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis.

Net Worth

The aggregate value of the paid up equity capital and free reserves (excluding reserves created out of revaluation), reduced by the aggregate value of accumulated losses and deferred expenditure not written off, including miscellaneous expenses not written of.


A sales charge assessed by certain mutual funds (load funds) to cover selling costs. A front end load is charged at the time of purchase. A back-end load is charged at the time of sale.


Any claim for money against the assets of a company, such as bills of creditors, income tax payable, debenture redemption, interest on secured and unsecured loans, etc.

Institution Investors

Organizations those invest, including insurance companies, depository institutions, pension funds, investment companies, and endowment funds.

Index Fund

A mutual fund which invests in a portfolio of shares that matches identically the constituents of a well known stock market index.

Growth Funds

Unit trusts or Mutual Funds which invest with the objective of achieving mostly capital growth rather than income.

Gilt Funds

Fund that invests exclusively in government securities.

Ex-Dividend Date

The date on or after which the buyer of a security is not entitled to the dividend already declared.


The ownership interest in a company of holders of its common and preferred stock.

Exit Load

Fees charged by mortgage trusts/mutual funds on a sliding scale as penalty for early withdrawal.

Entry Load

Fee paid by an investor when purchasing units in a trust or managed fund. The fee is included in the price that new investors pay.


Payment made to shareholders, usually once or twice a year out of a company’s profit after tax.


Spreading the risk by constructing a portfolio that contains many different investments whose returns are relatively uncorrelated.


When a security is quoted at a price below its nominal or face value, it is said to be at a discount.


A security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for differences or any other form of security.


Bonds issued by a company bearing a fixed rate of interest usually payable half yearly on specific dates and principal amount repayable on a particular date on redemption of the debentures.

Coupon Rate

The interest rate stated on the face of coupon.

Blue-Chip Stocks

The best rated shares with the highest status as investment based on return, yield, safety, marketability and liquidity

Bear Market

A weak or falling market characterized by the dominance of sellers.

Basis Point

One hundredth of a percentage point. Basis points are used in currency and bond markets where the size of trades mean that large amounts of money can change hands on small price movements .

Balance Sheet

An accounting statement of a company’s assets and liabilities, provided for the benefit of shareholders and regulators.

Balanced Funds

Funds which aim to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents.


Technically, arbitrage consists of purchasing a commodity or security in one market for immediate

Trigger Facility

Mutual funds offer an optional feature that gets automatically activated (through an alert) on the occurrence of a pre-defined event.

Treynor Ratio

A variant of the Sharpe Ratio, this measures the risk-adjusted performance for each unit of dispersion measured by beta (i.e. market risk).

Total Expense Ratio (TER)

Apart from risks and returns, investors must look at the costs involved while investing in mutual funds.

Systematic withdrawal plan (SWP)

Systematic withdrawal plan helps investors to redeem a fixed amount of their investments from their mutual funds.

Systematic transfer plan (STP)

Systematic transfer plan allows investors to transfer the pre-defined amount on a specified date from one particular scheme to another by giving one-time instruction to the fund house.

Know Your Client

Commonly referred to as KYC, it is a term used for the client identification process by mutual funds, banks, insurance companies, etc.

Jensen's Alpha ()

The excess or abnormal returns earned by the mutual fund portfolio compared to its benchmark.

Systematic Investment Plan (SIP)

The concept of systematic investment plan is similar to recurring bank deposits wherein investors contribute a fixed sum of money at regular intervals.

Standard Deviation

It implies how much returns on a fund are deviating from the average returns based on its historical performance.

Sharpe Ratio

This ratio measures the risk-adjusted performance for each unit of dispersion measured by Standard Deviation.


This term is used to gauge the correlation between the mutual fund scheme and the benchmark index measured in the range of 0 to 100.

Net Asset Value

Net asset value or NAV is the most commonly associated word with mutual funds and widely used by investors while buying and selling mutual fund units.

Indexation Benefit

Indexation is an option available for investors to manage their inflation-adjusted returns.

Credit Quality

While investing in debt funds, investors should gauge the credit quality of the instruments in the portfolio.

Consolidated Account Statement (CAS)

CAS refers to a single account statement which combines the transactions in all folios of an investor across all the mutual fund schemes/ fund houses.

Average Maturity

Pure debt and hybrid mutual funds have different types of fixed income instruments in their portfolio with each of them having a maturity date.

Asset Allocation

Asset allocation is an investment strategy which aims to spread investor's portfolio across several assets such as equities, bonds, gold and cash according to their age, goals, risk tolerance ability and investment horizon.

Addendums and Notices

Offer document of a mutual fund scheme spells out all the details including investment objective, risk factors, sponsor's track record, educational qualification and work experience of key personnel.

Compounded Annualised Growth Rate (CAGR)

It is the return of a fund from one point to the other after factoring in the time for holding investments.


It measures the volatility of a particular fund in comparison to the market as a whole. It will indicate how sensitive the returns of the fund are to the fluctuation in the market.

Benchmark Index

In mutual fund parlance, very often we hear that a particular scheme has outperformed or underperformed its benchmark index.

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An Investor Education and Awareness Initiative.
Investors should deal only with registered Mutual Funds, details of which can be verified on the SEBI website (https://www.sebi.gov.in ) under ‘Intermediaries/Market Infrastructure Institutions’. Please refer to website of mutual funds for process for completing one-time KYC (Know Your Customer) including process for change in address, phone number, bank details etc. Investors may lodge complaints on https://www.scores.gov.in against registered intermediaries if they are unsatisfied with their responses. SCORES facilitates you to lodge your complaint online with SEBI and subsequently view its status.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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An investor education initiative, SBI MUTUAL FUND.
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