An unmanaged group of securities whose performance is used as a standard to measure investment performance. Commonly known as a market index. Some well-known benchmarks are the BSE Sensex and NSE Nifty.
The bank or trust company that maintains a mutual fund's assets, including its portfolio of securities or some record of them. The custodian provides safekeeping of securities but has no role in portfolio management.
Average duration provides a measure of a fund's interest-rate sensitivity the longer a fund's duration, the more sensitive the fund is to shifts in interest rates. The relationship between funds with different durations is straightforward: A fund with a duration of 10 years is twice as volatile as a fund with a five-year duration. Duration also gives an indication of how a fund's NAV will change as interest rates change. A fund with a five-year duration would be expected to lose 5% from its NAV if interest rates rose by one percentage point or gain 5% if interest rates fell by one percentage point.
Mutual Funds charge investors an entry load of upto 2.25% to compensate for distribution costs. It is charged at the time an investor purchases the units of a scheme. Since August 2009, SEBI had done away with entry load in cases where the investors directly invested in mutual funds without going through an agent or a distributor.
This is a fund's most recently reported top securities (excluding cash and cash equivalents for all but short-term bond funds). The securities are ranked by the percentage of the portfolio's net assets they occupy. With this information, investors can more clearly identify what drives the fund's performance.
The annual percentage return which is considered to be for a specific valuation in an investment being expressed as the ratio of annual net income (actual or estimated) to the capital value. It is therefore a measure of an investor's opinion about the prospects and risks attached to that investment. The better the prospects and lower the risks, the lower the expected yield and thus the greater the capital value.
A mutual fund that invests only in money markets such as commercial papers, commercial bills, and treasury bills certificate of deposit and other instruments specified by RBI. These funds have a minimum lock-in period of 15 days. Till recently, the RBI regulated money market funds but they now come under SEBI.
The current market worth of a mutual fund share. Calculated daily by taking the funds total assets: securities, cash and any accrued earnings, deducting liabilities, and dividing the remainder by the number of units outstanding.
The price at which a mutual fund's shares are redeemed (bought back) by the fund. The redemption price is usually equal to the current net asset value per share. Also called the bid, call or sell price.
The measure of an investor's ability to withstand volatility in the markets. Investors with a near-term focus are likely to be more conservative than those with a long-term viewpoint who can benefit from the market's fluctuations by taking advantage of compounding and historical growth of the markets.
SIP works on the principle of regular investments. It is like your recurring deposit where you put in a small amount every month. It allows you to invest in a MF by making smaller periodic investments (monthly or quarterly) in place of a heavy one-time investment i.e. SIP allows you to pay 10 periodic investments of Rs 500 each in place of a one-time investment of Rs 5,000 in an MF. Thus, you can invest in an MF without altering your other financial liabilities. It is imperative to understand the concept of rupee cost averaging and the power of compounding to better appreciate the working of SIPs.
Many mutual funds offer withdrawal programs whereby shareholders receive payments from their investments. These payments are usually drawn from the fund's dividend income and capital gain distributions, if any, and from principal only when necessary.
An Asset Management Company is the fund house or the company that manages the money. The mutual fund is a trust registered under the Indian Trust Act. It is initiated by a sponsor. A sponsor is a person who acts alone or with a corporate to establish a mutual fund. The sponsor then appoints an AMC to manage the investment, marketing, accounting and other functions pertaining to the fund.
For instance, ABN AMRO Trustee (India) Private Limited is appointed as the trustee to the ABN AMRO mutual fund.
ABN AMRO Asset Management (India) Limited is appointed as its investment manager. Various funds with different objectives can be floated under the umbrella of one parent. So ABN AMRO Equity Fund, ABN AMRO Opportunities Fund and ABN AMRO Flexi Debt Fund are all independent schemes of ABN AMRO Mutual Fund. They are managed by the ABN AMRO AMC.
This is a fee that is charged when you buy or sell the units of a fund. When you buy the units of a fund, you pay a percentage of it as a fee. This is known as the entry load. Let's say you are investing Rs 10,000 and the entry load is 2%. That means you pay Rs 200 as the entry load and Rs 9,800 is invested in the fund. Now, let's assume you are selling the units of your fund. And the Rs 10,000 you invested initially is now Rs 15,000. Let's further assume the exit load is 2%. So you pay Rs 300 and get back Rs 14,700. Generally, if funds charge an entry load, they will not charge an exit load. Or vice versa. Only one of the loads is charged.The load is a percentage of the NAV.
Let's assume a very small mutual fund has an initial investment of 1,000 units and each unit is worth Rs 10. Hence, the total amount with the fund is Rs 10,000. This is referred to as the corpus. Later, some other investors invest Rs 2,000. Now the corpus will be Rs 12,000 (Rs 10,000 + Rs 2,000). The total amount invested (Rs 12,000) is called the corpus or the total amount of money invested in the fund.
Assets Under Management is the total value of all the investments currently being managed by the fund. Let's say the corpus is Rs 12,000 but, due to a rise in the price of the shares it has invested in, the value of the units has increased. So the Rs 12,000 invested is now worth Rs 15,000. This figure is referred to as AUM.
Equity Linked Saving Schemes are diversified equity mutual funds with a tax benefit under Section 80C of the Income Tax Act. To avail of the tax benefit, your money must be locked up for at least three years.
A Systematic Investment Plan refers to periodic investing in a mutual fund. Every month or every three months, the investor will have to commit to putting in a fixed amount. This will go towards the purchase of units. Let's say that every month you commit to investing, say, Rs 1,000 in your fund. At the end of a year, you would have invested Rs 12,000. If the NAV on the day you invest in the first month is Rs 20, you will get 50 units. The next month, the NAV is Rs 25. You will get 40 units. The following month, the NAV is Rs 18. You will get 55.56 units. So, after three months, you would have 145.56 units. On an average, you would have paid around Rs 21 per unit. This is because, when the NAV is high, you get fewer units per Rs 1,000. When the NAV falls, you get more units per Rs 1,000.
1: KYC is one time exercise while dealing in securities markets – once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
2: Prevent Unauthorised transactions in your Trading/Demat Account –> Update your mobile numbers/email IDs with your stock brokers/Depository Participant. Receive alerts/information of your transaction/all debit and other important transactions in your Trading/ Demat Account directly from Exchange/CDSL at the end of the day ………. Issued in the interest of investors.
3: Prevent Unauthorised transactions in your account –> Update your mobile numbers/email IDs with your stock brokers. Receive information of your transactions directly from Exchange on your mobile / email at the end of the day ………. Issued in the interest of investors.
4: As per the Finance Act, 2015, the Government has decided to levy the Swachh Bharat Cess as proposed in the Union budget, 2015. The cess will be levied at the rate of 0.5% in addition to the 14% service tax.
5:"No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."