With so many types of mutual funds available to you as an investor, you can never fall short of options. However, individuals new to the investing world often refrain from investing in mutual funds despitebeing awareof various benefits of mutual funds. This is because there are a lot of jargons involved with mutual funds. Let’s look at some common terms associated with mutual fund investments.
- Asset allocation –It involves diversification of investments in various asset classes such as bonds, equities, derivatives, etc.
- Asset Management Company (AMC) – A SEBI (Securities and Exchange Board of India) registered company that handles investment decisions and asset management for mutual funds.
- Balanced Fund – Also known as hybrid funds, these are mutual funds that invest across various asset classes such as equity fund and debt fund, that includes bonds, a mix of low-medium risk stocks, and other securities.
- Benchmark – It is a reference point of a group of securities whose performance is taken as a standard against other securities.
- Blue chip fund –Mutual funds that invest in blue-chip shares or stocks, i.e., well-established companies with outstanding overall financial performance.
- Certificate of Deposit – It is short-term security with a fixed maturity date and interest rate that aims at raising funds from the secondary market.
- Equity Linked Savings Scheme (ELSS) – It is a type of equity mutual fund that invests at least 80% of their corpus in equity and equity-related securities.
- Exchange traded fund (ETF) –A type of marketable security that monitors a commodity, index, bonds, or a group of assets like an index.
- Management fee –It is the fee paid by investors to have their assets professionally managed by a mutual fund expert known as the fund manager.
- Net Asset Value (NAV) – It is the value of one unit of a mutual fund scheme. It is a measure of the fund’s performance.
- Portfolio Manager – A person hired by the fund manager who handles investment decisions regarding purchasing and selling of securities for the mutual funds as per the fund’s objective.
- Redemption fee – Charges levied on the investor for exiting a mutual fund scheme. It is imposed to discourage investors from withdrawing.
- Systematic Withdrawal Plans: It is a plan offered by several mutual funds where shareholders are given payments from their mutual fund investments.
- Value investment–It is an investment style that attempts to pick up undervalued shares or stocks in the market.
Alwaysinvest in mutual funds keeping your personal and financial goals in mind and choose the right investment avenue for you. Also, take into account your risk profile and your investment horizon while deciding the investments that work best for your portfolio. You can avail the services of a mutual fund manager who has the expertise and knowledge to handle your portfolio better. Happy investing!