Mutual fund glossary
Plain-language meanings of common terms. General information only, not a recommendation.
- AMC (Asset Management Company)
- The company that sets up and runs a mutual fund’s schemes under SEBI rules.
- AIF (Alternative Investment Fund)
- A privately pooled fund regulated by SEBI that invests in strategies beyond regular shares and bonds, open only to eligible investors.
- ARN
- AMFI Registration Number: the unique number given to a registered mutual fund distributor.
- Compounding
- Earning returns on earlier returns as well as on the amount invested, which makes growth build up over longer periods.
- Direct plan
- A plan bought directly from the fund house, with a lower expense ratio because no distributor commission is paid.
- ELSS
- Equity Linked Savings Scheme: an equity mutual fund with a three-year lock-in that is eligible for a tax deduction under the old tax regime as per prevailing rules.
- EUIN
- Employee Unique Identification Number: identifies the individual who guided the sale of a mutual fund.
- Exit load
- A fee charged by some schemes if units are sold before a stated period.
- Expense ratio (TER)
- The yearly cost of running a scheme, shown as a percentage of its assets and reflected in the NAV.
- FATCA
- A reporting rule under which investors declare tax residency; it matters for NRIs and for some foreign residents.
- Folio
- The account number under which an investor’s units in a fund house are held.
- Inflation
- The general rise in prices over time, which reduces what a rupee can buy.
- KYC
- Know Your Customer: identity and address verification required before investing.
- Liquidity risk
- The risk that an investment cannot be sold quickly or without a loss in value.
- Lock-in
- A period during which units cannot be sold.
- Lumpsum
- Investing a single larger amount at one time, instead of in instalments.
- NAV (Net Asset Value)
- The per-unit value of a scheme, calculated at the end of each business day.
- NRE / NRO account
- Bank accounts for NRIs: NRE holds foreign earnings in rupees; NRO holds income earned in India.
- PMS (Portfolio Management Services)
- A service in which a SEBI-registered portfolio manager manages a portfolio of securities for a client, held in the client’s own demat account.
- Regular plan
- A plan bought through a distributor; its expense ratio includes the distributor’s commission.
- Riskometer
- A label that shows the risk level of a scheme, from low to very high.
- SIF (Specialised Investment Fund)
- A SEBI category between mutual funds and PMS/AIF, with more flexible strategies and a higher minimum investment.
- SID / SAI / KIM
- The scheme documents that explain a scheme’s objective, risks, costs and terms. Read them before investing.
- SIP (Systematic Investment Plan)
- Investing a fixed amount at regular intervals, usually monthly.
- STP (Systematic Transfer Plan)
- Moving a fixed amount at regular intervals from one scheme to another.
- SWP (Systematic Withdrawal Plan)
- Withdrawing a fixed amount at regular intervals from an investment.
- Trail commission
- A commission paid by the fund house to a distributor every year for as long as the investor stays invested in a regular plan.