Mutual funds

154 terms · each links to a full explanation with a worked example and the exam traps

Accrual principleThe accounting rule that every expense and every income relating to a period is counted in that period whether or not it has been paid or received — so a scheme cannot show better profits by delaying payments.
Actively managed fundA scheme whose fund manager chooses the portfolio within the broad limits of the investment objective, aiming to beat its benchmark — at a higher running cost than a passive fund.
AddendumA notice issued to record an interim change to a scheme's SID, SAI or KIM before those documents are next updated. It is part of the scheme related documents and must accompany the KIM.
AMFI Registration NumberThe registration number AMFI allots to a mutual fund distributor after NISM certification and KYD. It must be quoted on a client's Regular Plan transaction for commission to be paid.
Arbitrage fundA mutual fund that buys in the cash market and simultaneously sells in the futures market to lock in the price difference, giving low NAV volatility similar to a liquid fund.
Asset Management CompanyThe company that runs a mutual fund's schemes day to day — appointed by the sponsor or trustees with SEBI's approval, and paid a fee out of the scheme rather than a share of its profits.
Assets under ManagementThe total value of the money a scheme or a fund house manages — the current NAV multiplied by units outstanding — and the base on which the expense ratio is charged.
Assured returns schemeA mutual fund scheme that promises a specific return, permitted only where a guarantor named in the Scheme Information Document undertakes to pay the shortfall if the scheme itself cannot.
Balanced Advantage fundA dynamic asset allocation hybrid mutual fund that shifts its mix of equity and debt as market conditions change, while usually keeping over 65% net long equity exposure to retain equity taxation.
Balanced Hybrid FundAn open-ended hybrid scheme with 40% to 60% in equity and 40% to 60% in debt, and no arbitrage allowed. It sits below the aggressive hybrid fund on the workbook's risk ladder.
Balanced or hybrid fundA mutual fund that invests across equity, debt and money market instruments in one scheme — taxed as equity-oriented, as a Specified Mutual Fund, or under general rules, depending on how much of it sits in equity.
Base expense limitsThe full set of SEBI ceilings on a scheme's base expense ratio, which differ by scheme type — open-ended equity and debt, index funds and ETFs, fund of funds, and close-ended schemes.
Base Expense RatioThe management-and-administration slice of a scheme's cost, capped by the SEBI slabs — the first and largest of the four components that add up to Total Expense Ratio.
Brokerage and transaction cost allowanceThe execution cost a scheme may charge on top of its base expense limit — up to 0.06% of trade value in the cash market and 0.02% in derivatives, with anything beyond that borne by the AMC, not the scheme.
BSE STAR Mutual Funds PlatformThe stock exchange order-routing system through which distributors and investors transact in mutual fund units — BSE's version is BSE STAR MF, NSE's is NMF II — with the AMC, not the exchange, responsible for settlement.
Capitalization of earningsA SEBI-approved method for valuing an equity holding that has not traded for 30 days — using the price-earnings ratios of comparable traded securities, discounted for its lower liquidity.
Capital Protection FundA closed-end hybrid mutual fund built so most of the original capital is protected at maturity: the bulk goes into debt that grows back to the invested amount, the rest into equity derivatives for extra return.
Cash investment limitMutual funds accept cash only up to Rs 50,000 per investor per mutual fund per financial year, from KYC-compliant resident individuals, sole proprietorships and minors through guardians.
Celebrity endorsementSEBI-permitted use of a celebrity to promote mutual funds as a product category at the industry level only — never a particular AMC or scheme, and only with SEBI's prior approval.
Change in control of the AMCWhen ownership of a mutual fund's AMC changes hands, SEBI and the trustees must approve it first and every unit holder must be offered at least 30 calendar days to exit at NAV with no exit load.
Closed-end discountThe gap by which units of a listed close-ended (or interval) scheme trade below their NAV on the stock exchange. The workbook says there is no limit to it; it tends to narrow as maturity approaches.
Closed-end schemeA mutual fund scheme offered only during its new fund offer, for a fixed tenure, with no further purchase or direct redemption after that — an investor exiting early must sell on a stock exchange.
Close-ended fundA mutual fund scheme that sells units only in its NFO, runs for a fixed period and redeems all units at maturity — in between, investors can exit only by selling on the stock exchange, where listing is compulsory.
Common Account NumberA single number allotted by MF Utilities under which an investor's mutual fund holdings across multiple AMCs are consolidated, so one form and one payment can cover several schemes.
Common Transaction FormThe single form offered by MF Utilities for transacting in several schemes across participating mutual funds at once, with one payment, submitted through a distributor or any neutral Point of Service.
Composite CAGRThe blended CAGR SEBI requires for benchmark comparison when Total Return Index data is not available for the whole period — Price Return Index CAGR up to the date TRI began, spliced with TRI CAGR after it.
CPE routeAn alternative path to becoming a certified mutual fund distributor without sitting the NISM exam, open only to those aged 50 or over, or with at least 10 years of distribution experience, as of 31 May 2010.
Cum-dividend NAVThe NAV of a scheme's units after a dividend is announced but before it is actually paid out or reinvested — the NAV still includes the value that is about to leave as dividend.
DealerThe AMC fund management sub-team responsible for placing orders with securities brokers on the instructions of the fund managers — the execution arm, not the decision-making one.
Debt oriented fundA mutual fund category investing mainly in debt securities and interest-bearing instruments — lower return than equity funds, but considered safer — with tax treatment that hinges on when the units were bought.
Delivery basisThe SEBI rule that a mutual fund must take or give actual delivery of securities it trades, with named exceptions for permitted short selling, exchange-traded derivatives, and RBI-permitted government security sales.
Direct and regular plansThe two routes into the same mutual fund scheme: a direct plan with no distributor and a lower expense ratio, and a regular plan that pays distributor commission — same portfolio, separate NAVs.
Distributable reservesThe profits a mutual fund scheme may pay out as dividend (IDCW): accrued profits, ignoring valuation gains but deducting valuation losses — so payouts come only from real, realised profit.
Diversified equity fundAn equity scheme that invests across a wide spectrum of companies drawn from several industries, so that no single company and no single industry can sink the portfolio.
Dynamic bond fundA long-term debt mutual fund category that invests across durations, with the fund manager shortening duration when rates are expected to rise and lengthening it when rates are expected to fall.
Economy of scaleThe lower per-unit transaction cost a mutual fund achieves by buying and selling large amounts of securities at once, compared with what an individual investor would pay for the same trades alone.
EmpanelmentThe compulsory registration of a distributor with an AMC, or as a sub-agent of an already-empanelled distributor, without which mutual fund schemes cannot be sold or commission earned.
Employee Unique Identification NumberThe number AMFI gives each certified employee of a mutual fund distributor. It is written on the client's application alongside the distributor's ARN, identifying the individual who sold the scheme.
Entry loadThe former mark-up of a mutual fund's sale price over NAV, charged when an investor bought units. SEBI has banned it, so units are now sold at NAV, subject only to stamp duty.
Equalisation reserveA component of a unit's sale price representing realised gains, set aside and usable later to pay a distribution — so part of a dividend can, in effect, be a return of the investor's own capital.
Equity Linked Saving SchemeAn equity mutual fund category that carries a section 80C deduction of up to Rs 1.5 lakh with a compulsory three-year lock-in — the shortest lock-in of any tax-saving instrument.
Equity Long-Short FundAn investment strategy under a Specialized Investment Fund: at least 80% in equity, with unhedged short exposure through derivatives capped at 25%. Minimum investment Rs 10 lakh across an AMC's SIF strategies.
Equity mutual fundA mutual fund that invests in shares to pursue growth, professionally managed and diversified across large, mid or small caps, sectors and investment styles.
ETF cost structureETFs carry a lower ongoing management cost than an equivalent index fund, but add brokerage, demat charges and the buy-sell quote spread on every trade — costs an index fund does not have.
ETF liquidity in IndiaBarring a handful of exceptions, ETF trading volumes on Indian exchanges are thin, with wide buy-sell spreads and quoted prices that can drift well away from the underlying NAV.
Exchange Traded FundA mutual fund scheme whose units are listed and traded on a stock exchange like a share, so you transact at live prices through the day instead of at one end-of-day NAV.
Ex-dividend NAVThe NAV of a scheme after an IDCW has been paid out, lower than before by the amount distributed. Reinvestment of the IDCW happens at this NAV.
Execution only platformA SEBI-recognised digital platform that carries out subscription, redemption and switch transactions in direct plans of mutual fund schemes only — registered with AMFI (Category 1) or as a stock broker (Category 2).
Exit loadA charge levied when an investor redeems units, calculated as a percentage of NAV and deducted from it, usually only if the units are sold within a stated holding period.
Fair valuation principlesSEBI's ten principles requiring a mutual fund to value its holdings at realisable value, in good faith, under Board-approved and disclosed policies, so every investor entering or leaving gets a fair price.
Flexi Cap FundAn open-ended equity scheme that must keep at least 65 percent in equity and may move that money freely across large, mid and small cap stocks, with no fixed split.
Focused FundAn open-ended equity scheme holding at most 30 stocks, with at least 80% in equity, that must state where it focuses (multi, large, mid or small cap). Riskier than a diversified fund, less than a sector fund.
Focussed fundAn equity mutual fund scheme that holds a concentrated portfolio of at most 30 stocks, as capped by SEBI, trading broader diversification for higher conviction in fewer names.
Fund factsheetThe monthly scheme summary an AMC publishes voluntarily — portfolio, performance, risk measures and investment details in one document. It is an AMFI best practice, not a statutory requirement.
Fund management teamThe AMC department that actually invests a scheme's money, normally split into analysts who research opportunities, fund managers who decide, and dealers who place the resulting orders.
GatingA temporary restriction on mutual fund redemptions, allowed only in a market-wide crisis, for at most 10 working days in any 90 days — and never on the first Rs 2 lakh of any redemption request.
Glide pathThe pre-set schedule by which a Life Cycle Fund shifts its mix of equity, debt and gold ETFs as the fund approaches its target maturity date — equity down, debt up, over the fund's life.
Gold ETFAn exchange-traded fund tracking domestic gold prices, backed unit-for-unit by physical gold of 99.5% purity or gold receipts, traded on the stock exchange like a share rather than held as jewellery.
Gold Sector FundA scheme holding the shares of gold mining and gold processing companies, so its returns follow those companies' profits rather than the price of gold, unlike a Gold ETF.
IDCWThe renamed dividend option of a mutual fund scheme — a payout that is part income and part return of your own capital, which is why the NAV falls by exactly the amount distributed.
Index fundsA passive open ended scheme that replicates or tracks a specific index, investing at least 95 percent of total assets in that index's securities, bought and redeemed from the fund rather than on an exchange.
Indicative NAVThe per-unit NAV of an ETF worked out from the current market value of its portfolio during trading hours, disclosed continuously on the exchanges where its units are listed and traded.
Individual channelDistribution by a single natural person acting alone, without staff — as against the "non-individual" channel of banks, national distributors and institutions with employees carrying an EUIN under the firm's ARN.
Infrastructure debt fund schemesA mutual fund scheme that must put at least 90% of its assets into the debt of infrastructure companies, projects and SPVs, with a 30% cap on any single infrastructure borrower.
Instant Access FacilityA facility that credits redemption proceeds to a resident individual investor's bank account on the same day, offered only in overnight and liquid schemes and only through the AMC's own website or app.
Institutional distributorsThe workbook's name for the largest non-individual mutual fund distributors — the distribution companies and the banks — which sell through salaried staff in a branch network rather than through one agent.
International equity fundA mutual fund scheme investing in shares listed outside India, giving an investor both an equity-market exposure and a currency exposure to the rupee's movement against the foreign currency.
Interval fundA scheme that is largely close-ended but opens for subscription and redemption during pre-specified transaction periods, with compulsory stock exchange listing to give an exit in between.
Investment policyHow a scheme will achieve its investment objective, disclosed in the SID through exactly two aspects: its asset allocation and its investment style.
Investment Strategy Information DocumentA Specialized Investment Fund's scheme document, equivalent to a mutual fund's SID, required to include scenario analysis showing the investor's expected loss from market movements.
Key Information MemorandumThe short summary of the SID and SAI that SEBI requires to accompany every mutual fund application form — the one scheme document an investor is guaranteed to be handed.
Life Cycle FundAn open-ended scheme with a target maturity date between 5 and 30 years, which follows a glide path across equity, debt and other assets — shifting away from equity as maturity approaches.
Liquid assets requirementSEBI's rule that every open-ended debt scheme other than an Overnight, Liquid or Gilt fund must hold at least 10% of its net assets in cash, government securities, T-bills or repo on government securities.
Liquid fundAn open-ended debt scheme investing only in debt and money market securities maturing within 91 days — among the lowest-risk mutual funds, used to park short-term surplus money.
Main portfolioSEBI's defined term for what is left of a mutual fund scheme once a segregated portfolio has been carved out of it — the scheme portfolio excluding the segregated portfolio.
MAM formThe prescribed form a mutual fund folio holder must file, with PAN, KYC and a new bank mandate, to convert a minor's folio to a major's on turning 18 — before which no transaction is allowed.
Market capitalisation bandsSEBI's rank-based bands for classifying companies by size — large cap is the 1st to 100th company, mid cap the 101st to 250th, small cap everything from the 251st onward, by full market capitalisation.
MFD nomination facilityAMFI's industry-wide arrangement letting a mutual fund distributor nominate someone to receive trail commission if the distributor dies, so the family's income from the ARN does not simply stop.
MF LiteA lighter SEBI regulatory framework, introduced in December 2024, for mutual funds that hold only passively managed products — index funds, ETFs, fund of funds or other schemes SEBI specifies.
MF UtilitiesA transaction aggregation platform connecting investors, RTAs, distributors, banks and AMCs, which gives each investor a Common Account Number to consolidate holdings and transact across fund houses.
Money market or liquid fundThe workbook's own mutual fund category investing in short-term liquid instruments such as Treasury Bills and Commercial Paper, the category most likely to fall into taxation as a Specified Mutual Fund.
Multi-asset allocation fundA hybrid mutual fund category that must invest in at least three asset classes, with a minimum of 10% allocated to each — a diversification floor written into the scheme category itself.
Multi Cap FundAn open-ended equity scheme investing across large, mid and small caps, with at least 75% of total assets in equity and at least 25% each in large-cap, mid-cap and small-cap companies.
Mutual fundA trust registered with SEBI that pools money from many investors and invests it in securities on their behalf — not a different product from shares and bonds, but a different way of owning them.
Mutual fund distributorThe intermediary who assesses an investor's goals and resources and matches them to suitable schemes — distinct from the fund manager, who builds the portfolio from market analysis, not from the investor's situation.
Net assetsThe unitholders' funds in a scheme: the market value of everything it owns, plus income accrued and receivables, minus what it owes to others — the figure NAV divides by the number of units.
Net Asset ValueThe net assets of a mutual fund scheme divided by the number of units outstanding — what one unit of the scheme is worth on a given day, after every liability except the unitholders' own.
New cadre of distributorsA limited class of mutual fund distributors SEBI allowed from 2012 — postal agents and retired government or bank officers among them — who may sell only five kinds of simple and performing schemes.
New Fund OfferThe period in which a mutual fund scheme's units are offered to the public for the first time, at a fixed NFO price rather than at NAV, and during which the registrar builds the scheme's first register of investors.
Non-traded securityA security (other than money market and debt) not traded on any stock exchange for thirty days before the valuation date, which the AMC must then value in good faith rather than at a market price.
Norms for shareholding in mutual fundsA rule that stops one fund house owning a piece of another: no sponsor, associate or 10% shareholder of one AMC or trustee company may hold 10% or more of, or sit on the board of, another mutual fund's.
Official Point of AcceptanceA location a mutual fund has formally designated to receive transaction requests, where the application is time-stamped — and that stamp, not the moment the investor handed the form over, decides which NAV applies.
One-Time MandateA folio-level authorisation letting a specified mutual fund debit a specified bank account through NACH for purchases, up to a set limit, so the investor need not initiate payment each time.
On-going offerThe continuous, post-NFO period in which an open-ended scheme sells and redeems units at NAV-linked prices on an ongoing basis — the pricing mechanism the workbook shows keeps every investor's holding fair.
Open-ended fundA mutual fund scheme with no maturity date that keeps selling and redeeming units directly after its NFO, at NAV-linked prices, so its number of units and unit capital change every day.
Passive fundA scheme that invests according to a specified index, holding its shares in the index's own weights, so it mirrors the index instead of trying to beat the market — and costs little to run.
Pass-through vehicleThe structural fact that a mutual fund passes the risks and returns of its portfolio straight to unitholders, keeping nothing and promising nothing — which is why it is taxed once and cannot guarantee a return.
Peer group comparisonJudging a fund against other similar actively managed funds rather than against an index — popular, but only sound if the funds follow comparable strategies and their risk is compared alongside their return.
Portfolio disclosureThe published list of the securities a scheme holds, with market values and ISINs — monthly within 10 days for all schemes, and fortnightly within 5 days, with yields, for debt schemes.
Portfolio Turnover RatioThe lower of a scheme's purchases or sales of securities in a period divided by its average net assets — a ratio of 2 means holdings are kept, on average, for about six months.
Post-tax advantage of open-ended debt fundsThe workbook's point that a growth-option open-ended debt fund can beat a comparable debt instrument on post-tax return, since a withdrawal from it is part return of capital, not fully taxable interest.
Potential Risk Class (PRC) matrixSEBI's grid for classifying a debt scheme by its maximum interest rate risk (Macaulay Duration) and maximum credit risk (Credit Risk Value), disclosed so investors know the ceiling the fund manager may take.
Principally traded exchangeThe one stock exchange an AMC selects, and records its reasons for in writing, to value a security that trades on more than one exchange — used consistently until a documented change of exchange.
Qualified Foreign InvestorA sub-category of Foreign Portfolio Investor, open to foreign individuals or associations from an FATF-member and IOSCO MMOU-signatory country, investing through a demat or Unit Confirmation Receipt route.
Quant FundA mutual fund scheme whose security selection is driven by pre-built, data-based models run through machines rather than by a fund manager's discretionary judgement.
Ranking and rating of schemesResearch agencies' assessment of past scheme performance within a category — a numbered rank, or a clustered star rating — that reflects history only, with no ability to predict future performance.
Real estate mutual fund schemesA mutual fund scheme holding actual property: at least 35% of net assets directly in completed, unencumbered Indian real estate, and at least 75% in real estate assets and related securities.
Realised gainA gain a mutual fund scheme has actually banked by selling the security, as against a valuation gain, which sits in the NAV on paper and may never turn into money at all.
Recurring expensesThe ongoing fees and commissions a mutual fund scheme pays its constituents, charged as a percentage of AUM and deducted before NAV is struck — so higher recurring expenses mean lower investor returns.
Reverse charge mechanismThe GST rule under which the recipient of a service — not the supplier — pays the tax directly to the government, applied to AMCs paying GST on commissions to unregistered mutual fund distributors.
Right to beneficial ownershipA unit-holder's proportionate right to the beneficial ownership of a scheme's assets, evidenced by a unit certificate or demat holding, with units in demat form freely transferable.
Risk-BandThe five-level pictorial risk meter used for Specialized Investment Fund strategies, from level 1 (lowest) to level 5 (highest), in place of the six-level risk-o-meter used for mutual fund schemes.
Risk Management FrameworkSEBI's requirement that every AMC run risk management as an independent, specialised function, with dedicated risk officers for investment, compliance, operational and cyber security risk.
Scheme Information DocumentThe offer document setting out everything about a particular scheme that a prospective investor ought to know before investing — prepared in SEBI's format, vetted but not approved by SEBI.
Scheme performance dashboardThe dashboard every AMC must publish on its website and update regularly, showing how each scheme has performed over various holding periods alongside its category, fund manager, benchmark, TER and portfolio.
Scheme Re-Opening DateThe date after an open-ended scheme's NFO from which investors can buy new units or sell units back to the scheme at NAV-based prices. Close-ended schemes have no re-opening date.
Sector fundAn open-ended equity scheme investing at least 80% in one sector, such as banking or pharma. The riskiest step on the diversification ladder; best used tactically as a satellite holding.
Sector Rotation Long-Short FundA Specialized Investment Fund equity strategy that goes short entire sectors it expects to underperform, holds at least 80% in equity, and limits both the number of sectors shorted and the unhedged short exposure.
Segregated portfolioA ring-fenced sub-portfolio holding the debt instrument hit by a credit event, split out of a scheme so that the good assets stay liquid and exiting investors cannot leave the damaged paper behind.
Self-businessA distributor's own investment in a scheme they are empanelled to sell — on which no commission is payable, since commission compensates for mobilising someone else's money, not one's own.
Short duration fundAn open-ended debt scheme in the short end of the curve: Chapter 2 defines the "Short Term Fund" by a Macaulay duration of 1 to 3 years; Chapter 12 describes maturities of 1 to 3 years.
Short term deposits by a schemeA capped exception letting a mutual fund scheme place cash in a bank deposit — up to 20% of its net assets, for at most 91 days — only to pay redemptions or dividends.
SIP Top-upA SIP facility that raises the instalment at chosen intervals by a fixed amount or a percentage, until a cap or end date is reached, after which the instalment stays constant.
Smart Beta FundAn extension of index funds and ETFs that changes how the index is weighted — equal weights or other parameters instead of market capitalisation — to improve returns, diversify more and reduce risk.
Solution oriented schemesOne of the five broad categories of mutual fund schemes: schemes that invest according to a personal goal such as retirement or a child's education.
Specialized Investment FundA mutual fund product line introduced by SEBI in 2024 for sophisticated strategies, with a minimum investment of Rs 10 lakh across all of an AMC's strategies — sitting between mutual funds and PMS.
SponsorThe person or firm that sets up the mutual fund — applies to SEBI for registration, executes the trust deed in favour of the trustees, and puts up the capital of the AMC.
Standard benchmarksA fixed, SEBI-specified benchmark for each scheme category — Sensex or Nifty for equity, the 10-year GOI security for most debt schemes — disclosed alongside a scheme's own chosen benchmark for comparison.
Statement of Additional InformationThe scheme related document carrying statutory information about the mutual fund or AMC offering a scheme — one SAI for all the fund's schemes, updated every year and legally part of the SID.
Style driftA fund manager departing from the investment style the scheme promised — such as a value fund filling up with fully-valued front-line stocks — so investors carry risks they did not sign up for.
Suitability dutyA mutual fund distributor's obligation, under both AMFI's Code of Conduct and SEBI's fraudulent-practices regulation, to gather an investor's financial status and objectives and recommend only what actually fits them.
SwitchA single mutual fund transaction that redeems units from one scheme (or option) and invests the proceeds in another on the same date — a redemption and a purchase rolled into one.
Synthetic indexA blended benchmark built by combining two or more existing indices in fixed proportions — used where no single published index matches a hybrid or multi-country scheme's actual asset mix.
Systematic Investment PlanA facility to invest a constant amount into a scheme at regular intervals, which buys more units when the NAV is low and fewer when it is high and so averages the cost of acquisition down.
Systematic Transfer PlanA standing instruction to move a fixed amount from one scheme into another of the same mutual fund at a set frequency — a withdrawal plan out of the source and a SIP into the target.
Systematic Withdrawal PlanA standing instruction to redeem a set amount — or only the appreciation — from a mutual fund scheme at a chosen frequency, used to manufacture a regular income in retirement.
Thematic fundAn open-ended equity scheme investing at least 80% in line with a theme — infrastructure, MNCs, PSUs — spanning several sectors, and so riskier than a diversified or focused fund but less concentrated than a sector fund.
Three-tier structureThe legal architecture of an Indian mutual fund: a sponsor that establishes it, a trust whose trustees hold the assets for unit holders, and an asset management company appointed to manage the money.
Time stampingThe tamper-proof stamping of every mutual fund application with location code, machine identifier, serial number, date and time at the official point of acceptance — the record that decides which NAV applies.
Total Expense RatioThe all-in annual cost of a mutual fund scheme as a percentage of daily net assets — the base expense ratio plus brokerage, transaction cost and statutory levies — charged to the scheme, not billed to the investor.
Tracking errorThe gap between the return of a passive fund and the return of the index it is trying to replicate — the measure of how faithfully an index fund or ETF does its one job.
Trail commissionThe commission an AMC pays a mutual fund distributor as a percentage of the current value of the investments they brought in, calculated daily and paid for as long as the investor stays invested.
Transaction periodThe window during which an interval mutual fund scheme turns open-ended, allowing subscriptions and redemptions, before closing again until the next scheduled window.
Transfer of IDCW planA facility that automatically invests the IDCW (dividend) declared in one scheme into another scheme of the same mutual fund, on the next business day after the record date.
TriggerA standing instruction that automatically redeems or switches units when a market level, NAV, date or percentage change is reached — a one-time facility that ends once it has fired.
Trust deedThe registered instrument, executed by the sponsor in favour of the trustees, that constitutes a mutual fund as a trust, names its first trustees and governs its operations under clauses SEBI prescribes.
TrusteesThe guardians of a mutual fund trust, who hold its property for the unitholders and oversee the AMC — at least two-thirds of them independent, each approved by SEBI in advance.
UnitThe share of a mutual fund scheme that an investor's money is translated into — typically carrying a face value of Rs 10, and worth whatever the scheme's NAV is on the day.
Unit capitalThe number of units a mutual fund scheme has issued multiplied by their face value — an accounting figure that records what investors contributed, not what their holding is worth today.
UnitholderA mutual fund investor, represented by the number of units held, who owns a proportional share of the scheme's assets and shares in its profits or losses accordingly.
Valuation agencyAn independent agency whose valuation matrix mutual funds must use to price non-traded and thinly traded debt; there have to be at least two, and AMFI has appointed CRISIL and ICRA.
Value averagingA systematic investing method that sets a target growth path for the investment's value and invests more when the value falls short of it and less when it runs ahead.
Voluntary cessation of businessWhen a distributor stops operating and the investor asks to change distributor code because of it, the new distributor may earn trail commission — unlike an ordinary code change, where neither is paid.
Winding up waterfallThe order in which a wound-up scheme's sale proceeds are used: liabilities due and payable first, then a provision for winding-up expenses, and only the balance to unit-holders.