Check Here a few Mutual Fund Terms:

• Mutual Fund: A mutual fund is like a team of experts who pool money from many people to invest in different things like stocks, bonds, and other stuff. When these investments make money, everyone in the team gets a share. But if they lose money, everyone shares the loss too.

• Index fund: These are mutual funds with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor’s 500 Index (S&P 500).

An index mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover.

• Funds Managers: They are the employees of the asset management company for managing the investment in the schemes with the help of his team has a number of research analysts and fund managers.

• KYC [Know Your Customer]: It is a process by which any business verifies and identifies its customers or its clients.

• NAV: Net asset value [NAV] is the total asset value per unit of a mutual fund and the value at which the investor enters or exits the mutual fund.

It is calculated by the end of the day.

• Exit Load: It’s the amount charged on the investment when the investor redeems the units of a mutual fund.

Ex: If the exit load set by the mutual fund company is 1% and the investor redeems the investment when the NAV is 100rs, the amount which the investor will get is Rs.99 in his account.

• OTM: One Time Mandate [OTM] is a virtual checkbook for automatic amount deduction without entering the bank account details again and again, in OTM you can also set the limiting amount for the maximum deduction.

• SIP: A systematic Investment Plan [SIP] is an investment scheme offered by mutual fund companies using which an investor can invest small amounts in their mutual funds on periodically it can be a weekly, monthly, or quarterly basis.

It is very similar to bank RDs where a person can start a mutual fund with a minimum amount of 500, 100, etc per month decided by the mutual fund companies.

• Lumpsum: A lump sum amount is a single complete sum of money or investing the entire amount in one shot.

It is similar to bank FDs where if the investor is willing to invest the entire amount available with him in the mutual fund can invest all the amount as a Lumpsum amount or a one-time investment, which will be deducted only once.

• Interest rate: It’s the annualized cost of credit or debt capital computed as the percentage ratio of interest to the principal.

All these things you should know while investing and if any doubt ask but never stop learning

• Yield: Yield is like the interest or rent you get from your investments. It’s a percentage of how much your investments make, and it tells you how much you’re earning.

• Capital Gains: Imagine you bought a toy for $10 and sold it for $15. The $5 extra is a capital gain. It’s like making money when you sell something for more than you paid for it.

• Dividend: Dividends are like sharing cookies. When the team makes money, they give you a share as a cookie. You can either eat the cookie (get cash) or save it to get more cookies later (reinvest).

• Prospectus: A prospectus is like a handbook that tells you everything about the team, from what they plan to do with your money to how well they’ve done before. It’s like a cheat sheet for picking a good team.

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