10 Terms Every Smart Investor Must Know
Here’s a list of 10 commonly used terms in mutual funds simplified for you.
Published in
2 min readApr 11, 2019
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If you have been exploring the mutual funds industry, you must have come across these terms loosely thrown around. Here’s what they actually mean.
- NAV: The Net Asset Value (NAV) of a mutual fund represents its per share market value which is updated on a daily basis. When you buy a mutual fund unit, you buy it at this ‘price’ and the same goes for selling the units too.
- Scheme Benchmark: A scheme’s performance is compared against a benchmark or indices. Typical benchmarks being Sensex & Nifty50. The benchmark index chosen is based on the objective of the fund.
- Annualized Returns: The amount of money the investment has earned for you over a year, are your annualized returns for an investment.
- AUM: Assets Under Management is the total value of assets or capital owned by an asset management company (AMC).
- Folio Number: When you invest in a mutual fund scheme, you are allocated a unique number by the AMC. A user can have multiple folio numbers for a specific scheme of the same AMC.
- Scheme Riskometer: A scheme riskometer indicates how risky that scheme is, from a spectrum of it being low, moderately low, moderate, moderately high or high. Each scheme has its unique riskometer.
- Exit Load: As the name suggests, it implies the fee that is charged by AMC when a user withdraws before the lock-in period is over.
- SID: Every mutual fund scheme has a designated Scheme Information Document (SID), created by the AMC. It has all the relevant & mandatory information about the mutual fund scheme such as:
Investment objective & policies, asset allocation pattern, fee & liquidity provisions. The document also contains information about fund management team details, risk factors, load, past performance, benchmark, unit holder information, AMC branches, investor service centers & official points of acceptance. - Fund Rating: It is a score assigned by rating agencies to schemes after assessment of securities based on multiple factors such as risk, historical performance & returns of a fund.
- Lock-in Period: A set period during which an investor is restricted from selling units of a mutual fund. The restriction is imposed by the fund house, in the form of exit loads, or fee that an investor must pay. ELSS funds typically have a 3 year lock-in period, while debt or liquid funds have a much shorter lock-in period.
Help us with more such terms that you might have come across and would like us to explain or simplify for you. We will add more to the list :)