You need to know the names of all the mutual funds, but only if you are trying to fully understand the mutual funds. Or if you are determined to invest, you also need to understand a lot of words or facts related to mutual funds. At that time, we had to search the Internet for the conditions of mutual funds, which wasted a lot of time.

Today in this article I will try to tell you the terms used in mutual funds and their broad meaning in simple language so that everyone knows all the facts about mutual funds before investing. With this you will be able to make the right decision for your investments.

So let us know the frequently used words in mutual funds and their broad meanings in simple words-

Asset Management Company (AMC)

Asset management companies under Mutual Funds are colloquially called money managers or money management firms. These are also called fund houses.

A company or financial institution that operates publicly to invest in mutual funds or exchange-traded funds (ETFs) is known as an investment company or mutual fund companies. Every Asset Management Company is registered with SEBI.

Automatic Investment Plan

It is a method of investing, in which investors have the facility to make their own strategy to invest at a fixed interval. In this, the money set by you is automatically deducted from your bank account on time. Automatic investment plans are a good way to save money.

Blue Chip Fund

Such companies whose size is very large, and which are very strong financially are called blue chip companies, and the mutual funds which invest in such blue chip companies are called bluechip funds.

SBI Bluechip Fund, Axis Bluechip Fund etc. are examples of this, yet it is important to mention that, according to SEBI, there is no separate category of blue chip fund, rather many large cap funds are named as bluechip funds.


A benchmark is a measure of the performance of a mutual fund. For example Nifty 50 is a benchmark to measure many large cap funds and index funds. If the return of the fund is more than the benchmark, it means that your mutual fund has performed well.

Bid Price and Sell or Ask Price

The buy price of a share is called the bid price and the price decided to sell it is called the sell or ask price. Brokers or jobbers do this work in the stock market.

When an investor offers to sell shares to a broker, he gives you a bid or a bid price to buy the shares. Similarly, to buy the same share, along with his profit, he also determines its sell or ask price.


Corpus is the total accumulated capital of a person in mutual funds and the total money that will be collected by investing in mutual funds in the future.

In the financial context, the term corpus is used as a collection of funds.

Closed Ended Scheme

Mutual funds in which investment limits are pre-fixed. After that time frame, such Mutual Funds are closed for direct investment.

Under the close ended scheme, money is collected from the investors through NFO (New Fund Offer). As soon as all the units of that mutual fund are bought by the investors, that mutual fund is closed for the direct investment of a new investor.

Certificate of Deposit

Certificate of Deposit is a certificate purchased through a commercial institution or bank. It is a savings certificate with a fixed maturity period and a fixed rate of interest.

It is issued in different denominations with minimum investment. There is a restriction on withdrawing money till maturity on investing in it. The minimum period for this is 1 year and maximum is 3 years.


A debenture is a type of debenture. Companies issue debentures to raise money needed for their business.

When a company does not want to issue shares, it takes a loan from a bank or issues debentures. By issuing debentures, she borrows money from investors for a few years. In return for this borrowing, it pays fixed interest to the investor as return.


The person who usually does the work of selling mutual funds to the people is called mutual fund agent or distributor. By becoming a mutual fund distributor, any person can create a separate source of his income.


Dividend simply means dividend or a portion of profit.

Dividend or dividend is that which companies give some part of their net profits as profit to their shareholders. Dividend is an additional benefit to the shareholders. For this there is no need to sell the shares of that company.

Entry Load

When an investor invests in a scheme of Mutual Fund or redeems the investment, then the mutual fund company takes some charge from him, this fee is simply called the entry load.

That is, when an investor invests money in a scheme, the charge at that time is called entry load. It is charged for expenses incurred on distribution etc. of a company.

Different mutual fund houses charge different fees as entry load. However, it is pertinent to mention that since August 2009, SEBI has abolished the system of entry load on investments in mutual funds.

Exit Load

If an investor redeems his investment of Mutual Fund, then the charge levied on him at that time is called exit load.

The purpose behind taking exit load is that the investor should not withdraw money from any scheme without urgent work. In fact, the purpose behind levying exit load is that the investor keeps investing in mutual funds for a long period of time so that he can get good returns.

While an exit load is levied at the time you receive payment for your investment from the mutual fund, an exit load may or may not be charged to you whenever you decide to sell the units of your mutual fund. Too. The exit load is calculated as a percentage of the money redeemed.

Expense Ratio

Many types of expenses of Mutual Fund House or Asset Management Company are called Expense Ratio.

Expense Ratio lets us know exactly how much the mutual fund management is charging you for your investment portfolio.

Expense ratio is a ratio that shows the expenses incurred on managing a mutual fund in terms of per unit. This means expense ratio is the annual fee paid by investors to a mutual fund house or asset management company for managing a scheme.

Fund Manager

Fund manager plays a very important role in any mutual fund industry. He is the main face of any mutual fund house.

An investor invests his hard earned money in a fund only on the credit of the fund manager. It is the responsibility of the fund manager to invest money in the mutual fund scheme.

The fund manager keeps an eye on the market and economy trends before investing. The fund manager decides the direction of the portfolio of any investment. An investor invests only by looking at the benchmark of the fund manager.

The truth is that the fund manager contributes the most to the performance of a scheme.

Growth Plan

There are two investment options available in any mutual fund scheme. There is a growth plan, and the other is a dividend plan.

In the growth plan, the investor does not get any dividend or dividend. If you want some money from your investment then you have to redeem some of your units.

You also have to pay capital gains tax on the profit earned on selling the units. Your money stays invested in the growth plan and gets better compounded returns.

If you are investing in equity funds, then you should invest in growth plans only.

Hedge Fund

A hedge fund is a hedging risk. This means that when you invest at zero risk, then such an investment can be called a hedge fund. Hedge funds can take exposure to anything at any time. In hedge funds, you can get good returns even in a short period of time.

Invest in hedge funds with borrowed money. Hedge funds are short sell ie they sell short.

Index Fund

Index funds are a category of natural funds. As the name suggests, such funds invest in the shares of a company included in an index of the stock market. This means the performance of such mutual funds is similar to the index they track.

Index funds are also known as index tide or index tracked mutual funds. Such funds invest in the shares of a company included in an index fund of the stock market like Nifty 50 etc. If the index performs well, then that fund also has the potential to deliver good returns.


Such people working in the stock market are called jobbers who are ready to buy and sell shares anytime.

A jobber is a member of a stock exchange, ready to buy and sell shares at all times. Because of this characteristic they are called jobbers.


Such a scheme of Mutual Fund in which the investor cannot withdraw the deposited amount for a certain period. Such period is called lock-in period.

In Equity Linked Savings Schemes (ELSS) in Mutual Funds, an investor cannot redeem his fund for 3 years from the date of investment. This means that the lock-in period of this fund is 3 years.

Lump sum

When the accumulated money is invested in a mutual fund in one go, then it is called lump sum investment.

Due to a sharp fall in the stock market due to any reason, the price of the share and NAV goes down. In such a situation, you can buy as many units as possible by investing in equity or debt funds through lump-sum. You can earn good profit by selling it when the market rises.

Money Market fund

Money market funds are also called liquid funds. These are called short term investments. In these, you can also withdraw all your money in case of emergency.

It is an open-ended plan, which invests your capital in liquid instruments like commercial paper or certificate of deposit etc.

Mutual Fund

In mutual funds, the money of many investors is deposited in one place and then this fund is invested in the market.

Mutual Funds are managed by an Asset Management Company (AMC). Every mutual fund house has different types of mutual fund schemes.

It is also considered as an investment option in the stock market. This means that for those people who do not have very good knowledge about investing in the stock market, in such a situation, Mutual Funds are a good investment option for those people.

Net Asset Value (NAV)

NAV or Net Asset Value is the price at which you buy a single unit in a mutual fund scheme.

Mutual funds are divided into small parts so that even a small investor can invest in it. Each divided part is called a unit, and the cost of that one unit is called the NAV or Net Asset Value.

It can be understood with an example, like one unit of a fund is priced at ₹50 and an investor wants to invest ₹1000, he/she will get 20 units at an NAV of ₹50.

Open Ended Scheme

As its name suggests, this open ended scheme is just like its name. This means that the investor can invest in it at any time and can also exit from it at will.

However, investors have to pay some charge as exit load if they redeem before a certain time period like 1 year for long-term holding. This charge is usually around 1%.


Portfolio is such a list, which keeps an account of how much you have invested in different places, and how much return you are getting on it.

In simple language we can say that in a portfolio we can see all our investments at one place.

To reduce your investment risk, you should have a diversified portfolio. Portfolio can be of an individual or of a company.

Redeem or Redemption

The process under which an investor wants to get his money back from that scheme by selling the units of his mutual fund, then that process of selling the mutual fund is called redemption or redemption.

Sector Fund

Sector funds are a type of mutual fund. It invests in securities of specific sectors. Such as banking, telecom, pharmaceuticals, information technology and infrastructure etc.

This means that the money invested in sector funds is restricted to specific industries or sectors only.

Stock Fund

Such mutual funds which invest mainly in stocks are called stock funds. Equity fund is also another name of stock fund.

Stock Mutual Funds are broadly divided by companies based on their size, portfolio and investment nature of the holding.

Switch or Switching

When an investor withdraws his investment in Mutual Fund from one fund and invests in another fund, then this process is called switching.

Investors can switch their investments to another fund only from an open ended scheme.

Systematic Invest plan (SIP)

Systematic Investment Plan (SIP) or SIP disciplines your Mutual Fund investments. In this, instead of investing the entire money at once, the investor keeps investing a fixed amount every month or at a fixed interval.

SIP gives you the opportunity to put a certain amount of money in your mutual fund scheme every month. SIP continues your investment regularly even when the stock market is up or down.

There is no need to choose a tenure to invest through SIP for a long time. You can turn it off anytime as per your convenience.

Through Systematic Investment Plan, you can start investing in Mutual Funds with a minimum of Rs 500.

Systematic Transfer plan (STP)

Systematic Transfer Plan is a scheme of Mutual Fund, where a pooled amount is invested in a particular scheme. Out of that certain amount is transferred to another scheme at pre-determined time intervals. In this, investments can be made from one fund to another depending on the volatility of the market. The risk of market stability can be avoided with STP.

Systematic Withdrawal Plan (SWP)

On starting the Systematic Withdrawal Plan, every month the units of the fixed amount are sold by you from your mutual fund investment, and the money gets deposited in your bank account.

Systematic Withdrawal Plan is the exact opposite of SIP or SIP.

Treasury Bills

Treasury Bills or T. Bills are known as investment options. Governments issue Treasury Bills with the help of Reserve Bank of India.

We can understand it in this way that when we need money, then we take loan from the bank, and in return pay interest to the bank.

Similarly, when the government needs money for less than 1 year, it collects money from investors through treasury bills, and in return pays interest to investors in proportion to their capital.

Venture Capital Fund

This is also a type of fund, in which money is invested by looking at the success potential of start-ups and new industries. Sometimes the money invested in it gives unexpected returns and sometimes the money may get sunk.

New companies or ventures, which have just been started, are a popular way to raise money in venture capital at such an early stage.

People who invest money in this type of company are called Venture Capitalists.

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