Mutual funds and investment market are a deep sea. In order to survive a deep sea, you not only need to know how to swim but also you should have some idea of diving. if you have ever done diving, you must be knowing the very first class is of diving signals or jargons. For example, a signal of ‘thumbs-up’ is not an OK signal rather it signals your instructor to take you up at the surface.
Similarly, while trading and investing, you need to learn a few jargons to simplify things while you look at schemes to choose from a wide variety of funds.
1. BULL MARKET
A rising or strong market is called a bull market
2. BEAR MARKET
A falling or weak market is called a bear market
The gain generated by a mutual fund over the period of investment is called return
4. RATING PROFILE
The representation of mutual fund performance in various securities or investments is done by their rating which is basically an evaluation of their creditworthiness. This profile is called a rating profile.
5. NATURE OF SCHEME
The nature of the scheme gives an idea about the investment objective of the fund house. There can be schemes which aim at capital preservation while others could be aiming at capital generation. With different investment objectives, their investment instruments are going to be different as well like debt funds for capital preservation and equity funds for capital generation.
Holdings are the percentage representation of different securities in mutual funds. They are represented as %age to rupee value or net assets or if required both. The idea is the let an investor know what portion of his/her money is invested where which type of security.
7. ASSETS UNDER MANAGEMENT (AUM)
The total market value of investment securities managed by a fund house or an asset management company or a fund manager on behalf of investors are called Assets Under Management.
The measure of an investment’s volatility in comparison with the market is a Beta factor. The Beta is measured on a scale of 1.
B > 1 = investment would be equal to or more volatile than the market
B < 1 = investment would be less volatile than the market. 9. SHARPE RATIO
Noble Laureate William F Sharpe developed the Sharpe Ratio. It is basically the return compared to the risk of any given investment. It is the average return gained in excess of the risk-free rate per unit volatility or total risk.
10. STANDARD DEVIATION
The deviation a fund can show in its volatility with respect to its average returns. For example, if a fund’s average rate of return is 14% and has an S.D. of 4% then the returns will range between 10-18%.
11. EXIT LOAD
Exit load is the fee charged from an investor in case of a premature or untimely withdrawal from a scheme.
12. ENTRY LOAD
Entry load is the fee charged while you start investing in a mutual fund as a sales charge or management fee to be paid to the fund manager or fund house managing your funds.
13. NET ASSET VALUE
The total asset value per unit mutual fund post permissible and related deductions is called the NAV or Net Asset Value of a mutual fund.
14. SYSTEMATIC INVESTMENT PLAN
SIP or systematic investment plan is a method of investing in mutual funds which allows an investor to make a fixed amount of investment on regular intervals. It empowers investors who do not have a lump sum amount to invest altogether, to invest with a smaller amount of money. Read more at https://www.piggy.co.in/blog/what-is-a-sip/
15. YIELD TO MATURITY
YTM or yield to maturity is the anticipated rate of return of an investment if held till its maturity period. YTM is shown in terms of Annual Rate.
16. MINIMUM SUBSCRIPTION AMOUNT
The minimum amount which needs to be paid in order to subscribe to a mutual fund scheme.
17. FUND MANAGER
A person responsible for managing the funds of investors is a fund manager. Fund Managers are generally employed by AMC or can work individually. A Fund Manager is responsible for making decisions regarding selling and purchasing funds as per market correction.
The deviation or dispersion of returns for a given security or fund is called volatility. The greater the volatility, the higher the risk. If the stock market shows a movement of 1%, either way, i.e. either rises by 1% or falls by 1%, the markets are called volatile. It is depicted as VIX or Volatility Index.
A pool of securities owned by an investor is called a portfolio. The securities can be diversified or same. It is advisable to maintain a diversified portfolio for better returns.
20. NET WORTH
The amount left at hand after subtracting losses from returns is called net worth. It may also be defined as the amount by which assets exceed liabilities.
21. INDEX FUNDS
Funds which invest in shares which are identical to the constituents or shares of a popular stock market index are called index funds. Any change in the stock market is mirrored in the indexed funds.
22. GROWTH FUNDS
Funds whose objective is capital gain are called growth funds. Try https://www.piggy.co.in/mutual-funds/?q=growth%20funds
23. GILT FUNDS
Funds which invest only in government bonds or stocks are called gilt funds. try https://www.piggy.co.in/mutual-funds/?q=gilt%20funds