Mutual fund Glossary, WealthhunterIndia

Mutual Fund Glossery

Asset allocation

Asset allocation is an investment portfolio technique that aims to balance risk and create diversification by dividing assets among major categories such as cash, bonds, stocks, real estate and derivatives.

Asset Management Company

Asset Management Company can resolve a query raised by a customer across the counter and while on a sales call.

Annualized Return

Annualized return is the average return on an investment each year over a given time period.

Active Portfolio Management

Active management refers to a portfolio management strategy where the manager makes specific investments with the goal of outperforming an investment benchmark index.


Alpha is a measure of the active return on an investment, the performance of that investment compared to a suitable market index.

Bottom-up approach

The bottom-up approach assumes that individual companies can do well even in an industry that is not performing very well.

Balanced funds

Balanced funds are a great option for the buy and forget type investors (passive investors). A combination of two excellent instruments i.e. debt and equity ensures long-term capital appreciation as well as safety.

Closed-end fund

The Closed-end fund is a pooled investment fund with a manager overseeing the portfolio; it raises a fixed amount of capital through an initial public offering (IPO).


Total amount of money invested by all investors in a scheme.


An entity, usually a bank or trust company, which holds and safeguards securities owned by a mutual fund.

Dated Security

Type of long-term debt instrument redeemable on a fixed date.

Default Risk

The possibility that a bond issuer will default, by failing to repay principal and interest in a timely manner.

Debt Fund

The possibility that a bond issuer will default, by failing to repay principal and interest in a timely manner.

Depository Participant (DP)

An Agent (law) of the depository.

Demate realization

A process for converting the physical shares into Electronic form.


An individual serving as principal underwriter of a mutual funds units, and reselling them to other investors like a retailer and institutional, buying shares directly from the fund.


The process of a company enlarging or varying its range of products or field of operation.

Efficient Portfolio

A portfolio that offers the highest expected return for a given level of risk, or one with the lowest level of risk for a given expected return.

Entry load

It is charged at the time an investor purchases the units of a scheme.

Exit load

It is an amount charged from an investor for exiting or leaving a scheme or the company as an investor.

Equity fund

It is a fund that invests in stocks, also called equity securities.

Expense Ratio

An Annual fee that all funds or ETFs charge their shareholders. Financial Pyramid- Investment plan in the shape of a pyramid structure where the safest investments are at the base and the riskiest investments at the peak.

Fixed Income Security

Debt instrument issued by a government, corporation or other entity to finance and expand their operations.

Fund Manager

An employee of an insurance company who manages the investment of money on its behalf.

Gilt-edged security

A private-issued, investment grade bond.

Gift Fund

This refers to the funds that invest mainly in government securities and treasury bills. The objective here is the safety of principal and adequate liquidity.

Income Fund

Income Fund is a debt/income fund providing regular income through capital gains or regular dividends by investing in debt & money market

Index Fund

The fund that at any point of time has the same composition of an asset as that of its benchmark. These funds rigorously follow their benchmark.

Interest Rate Risk

Probability that the market interest rates will rise significantly higher than the interest rate earned on investments

Liquid Fund

Liquid Funds or money market funds invest in cash assets such as treasury bills, certificates of deposit & commercial paper for short investment horizon.

Liquidity Risk

The risks that a company or bank may be unable to meet short-term financial demands.


A charge is levied by the fund when an investor purchase or sells units in the fund.

Net Asset Value (NAV)

The net asset value (NAV) is usually used in mutual and unit trust fund describing the value of funds of assets and less the value of liabilities.

No-Load Fund

Mutual fund that does not impose any sales charge or commission for buying and selling the units.

Passive portfolio management-

Passive portfolio management involves investing in funds which mirror the behavior of an underlying index such as the Sensex or NIFTY.


The rating is done specific to the security. Crisil, Icra, Care are some of the credit rating agencies.

Record Date

The issuing company fixes a particular date when the investor must own shares in order to be eligible to participate in corporate events like receiving a dividend, bonus shares etc.

Reinvestment Plan

A Reinvestment Deposit Plan basically allows you to reinvest the interest earned on your deposit.

Reinvestment Risk

The risk that future cash flows may have to be reinvested in lower-yielding securities. Lessening this risk is difficult.

Rupee Cost Averaging

Mechanism designed to eliminate the risk of timing the markets in an ill-informed manner, which can result in losses.

Sector Fund

These are meant for investors willing to take a high risk to earn high returns.


A person who introduces and supports a proposal for legislation.

Systematic Investment Plans

SIP is a method of investing a fixed sum, regularly, in a mutual fund scheme.

Systematic Withdrawal Plans

A  facility that allows an investor to withdraw money from an existing mutual fund at predetermined intervals.


Moving money from one scheme to another with in the fund family.

Systematic Risk

The fluctuation of returns caused by the macroeconomic factors that affect all risky assets.

Tax saving fund

Investment in these funds allow the investors to claim a rebate under the Income-tax Act.

Transfer Agents

A transfer agent manages and maintains records of who owns corporations or mutual funds stock or bonds.

Treasury Bills

A short-dated government security, yielding no interest but issued at a discount on its redemption price.


A person or firm that holds and administers property or assets for the benefit of a third party.

Unsystematic Risk

The risk that is unique to a company such as a strike, the outcome of unfavorable litigation, or a natural catastrophe that can be eliminated through diversification.

Value Investment

Investment strategy where stocks have selected that trade for less than their intrinsic values.

Vulture Fund

It is a pool of investor money that makes investments in securities from distressed issuers.

Zero Coupon Bond

It is a bond that makes no periodic interest payments and is sold at a deep discount from face value.