41 Mutual Fund Related Basic & important Terminologies with Brief Explanations
1. Asset Class:
Category of different investment types, such as stocks, bonds, real estate, cash, etc.
2. Asset Allocation:
The process of diversifying a portfolio by investing in different asset classes, such as stocks, bonds, and cash.
3. Annual report:
A book type document released by a fund house once in a year that details its state of affairs.
4. Assets Under Management (AUM):
The total money managed by the Mutual Fund.
5. Asset Management Company (AMC):
The legal entity set up by a mutual fund to handle its operations.
6. Back-End Load:
A sales commission or fee charged when shares of a mutual fund are sold.
7. Benchmark:
A standard against which the performance of a mutual fund can be measured.
8. Mutual Fund:
A professionally managed investment vehicle that pools money from multiple investors to purchase a portfolio of stocks, bonds, or other assets.
9. Net Asset Value (NAV):
The per-share value of a mutual fund’s assets minus its liabilities. NAV is calculated at the end of each trading day.
10. Expense Ratio:
The percentage of a mutual fund’s assets that is used to cover the fund’s operating expenses.
11. Prospectus:
A legal document that contains important information about a mutual fund, including its investment objectives, risks, fees, and historical performance.
12. Load Fund:
A mutual fund that charges a sales commission or fee to purchase or sell shares.
13. No-Load Fund:A mutual fund that does not charge a sales commission or fee to purchase or sell shares.
14. Front-End Load:
A sales commission or fee charged when shares of a mutual fund are purchased.
15. Redemption Fee:
A fee charged when shares of a mutual fund are sold within a certain period of time after purchase.
16. Index Fund:
A mutual fund that tracks the performance of a specific stock market index.
17. Actively Managed Fund:
A mutual fund where the fund manager makes investment decisions based on research and analysis.
18. Passive Management:
An investment approach where the fund manager seeks to replicate the performance of a specific index or benchmark.
19. Diversification:
Spreading investments across different assets to minimize risk.
20. Allocation Fund:
A mutual fund that invests in a mix of stocks, bonds, and cash.
21. Equity Fund:
A mutual fund that primarily invests in stocks.
22. Bond Fund:
A mutual fund that primarily invests in bonds.
23. Money Market Fund:
A mutual fund that invests in short-term, low-risk securities.
24. Yield:
The annual income generated by a mutual fund’s investments, expressed as a percentage of the fund’s net asset value.
25. Capital Gains:
The profit made when a mutual fund sells a security for more than it paid for it.
26. Dividend:
A portion of a company’s earnings paid out to shareholders, which can be reinvested in the mutual fund.
27. Capital Appreciation:
An increase in the value of a mutual fund’s investments.
28. Redemption:
The process of selling shares of a mutual fund.
29. Risk:
The possibility of losing money in a mutual fund.
30. Volatility:
The degree to which the value of a mutual fund’s investments fluctuates.
31. Alpha:
A measure of a mutual fund’s performance relative to its benchmark.
32. Beta:
A measure of a mutual fund’s volatility relative to its benchmark.
33. Sharpe Ratio:
A measure of a mutual fund’s risk-adjusted performance.
34. Standard Deviation:
A measure of a mutual fund’s volatility.
35. R-Squared:
A measure of how closely a mutual fund’s performance tracks its benchmark.
36. Expense Cap:
The maximum amount that a mutual fund can charge in expenses.
37. Management Fee:
A fee charged by a mutual fund to cover the cost of managing the fund.
38. Turnover Ratio:
The percentage of a mutual fund’s holdings that are bought and sold each year.
39. Blue Chip Fund:
Mutual funds that invest in stocks of a well-established company. The stocks of such a company are called blue-chip stocks.
40. Capital Growth:
The change in net asset value per share of a mutual fund’s securities due to an increase in its market value.
41. Automatic Investment Plan:
An investment plan where a fixed amount is deducted every month from the investor’s bank account and invested in the chosen mutual fund.
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