Why it is important to rebalance your MF portfolio

Most investors do not keep all their eggs in one basket and invest in various assets classes. Over a period of time all these move in different directions because of which you may have to do some changes in asset allocation. Hence, it becomes mandatory to rebalance ones portfolio from time to time.

1. Define portfolio rebalancing?

Portfolio rebalancing is the process of realigning an out of line portfolio with the original goal. Usually, drastic equity markets movement translate into asset allocations changing. Asset allocation implies that based on your risk profile and time frame, you proportionately invest in equity and debt schemes. Your investments could go up if markets keep moving up, or could go down if markets correct depending upon your asset allocation. Thus, changing your asset allocation determines the risk you take thereby influencing the returns on your portfolio. Hence, you need to rebalance it and bring it back in line with the original.

2. Is it necessary to rebalance a portfolio?

Risk management is one of the biggest reasons to rebalance a portfolio. As an investor if you have decided to allocate 25% to equity investments and markets rise increasing this proportion to 50%, you are taking more risk than intended. Hence, to keep the risk within the tolerance limit, you need to resort to the original allocation. Rebalancing also helps in booking profits in an asset class that is rising and investing in another, that is not risen. Rebalancing enables you to book profits in equities and buy more debt, thereby reducing the risk you take.

3. How frequently should you rebalance?

It is recommended that investors rebalance their portfolios minimum once a year, more so when there is a sharp movement in an asset class. Typically, if markets keep moving in a direction over a 6–8 month period, resulting in your equity allocation change by over 5%, you may want to revisit your portfolio and consider rebalancing it.

4. How can one rebalance?

The proportion of your allocation towards an asset class will change based on markets going up or down. Rebalancing can be done by redeeming units from the asset class that has grown and adding to the asset class whose proportion has fallen. Another way to rebalance is to add fresh money to the asset class that has lagged, thus increasing the value of this asset class and restoring its original allocation.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Fundamentals of Investing

Start making informed decisions by understanding the fundamentals of investing. Get the basics of financial philosophy, its role, and embark on a happy investing journey. For your convenience, we have further divided the content into well-defined sections.

The e-learning booklet includes:

Section 1
Introduction to Savings
Understand the philosophy behind savings, and its role in achieving financial goals.

Section 2
Investment Aims
Define your investment objective before embarking on an investment process.

Section 3
Know Your Risk Appetite
Aggressive or cautious? Identify and assess your risk appetite before taking any investment decisions.

Section 4
Types of Asset Classes
Know about the varied types of asset classes available in the world of investments.

Section 5
Tenets of Financial Planning
Uncover the time-tested tenets of investing and safeguard your portfolio.

Click here to read the e-learning booklet

Understanding Mutual Funds

If you are planning to step towards an effective Mutual Fund investing expedition then you have taken the right halt. Here, you will not only get acquainted with the basic concepts related to mutual fund but also have the common myths about mutual funds unveiled. For easy understandability, we have further synthesized the matter into sections.

The e-learning booklet includes:

Section 1
Basics of Mutual Funds
Get acquainted with the concept of Mutual Funds.

Section 2
Types of Mutual Funds
Know about the varied types of Mutual Funds available to you.

Section 3
Benefits of Mutual Funds
Know the benefits that Mutual Funds offer.

Section 4
Myths about Mutual Funds
Clear the misconceptions that are attached with Mutual Funds.

Section 5
Fees and Expenses
Get familiarized with the fees that Mutual Funds charge.

Click here to read the e-learning booklet

Do you like to flaunt your investment knowledge in your peer group? Do you consider your investment knowledge to be an indispensable tool? Then here's a Quiz which will rate your investment I.Q. and give you a testament of your knowledge scope.

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Aadhaar e-KYC FAQs

Know Your Client (KYC) Guidelines

What is KYC? Why do I need to do KYC?

KYC stands for 'Know Your Client'. It is a Client Identification Process. It is must for all investors who want to invest in mutual fund schemes.

What is the procedure for obtaining the KYC?

What is the meaning of IPV?

I am a new investor to Invesco MF, can I complete the KYC with an investment application form?

Do I have to personally visit the POS to obtain KYC Compliance?

Do I have to repeat the KYC process with every new investment?

I am an existing investor to Invesco MF and have completed the KYC with CSDL Ventures Ltd. (CVL) before December 31, 2011. Do I have to repeat the KYC process as per new guidelines?

Is KYC mandatory for Micro Investments with Invesco MF?

I am resident of Sikkim and exempted from requirement of obtaining PAN, do I need to be KYC compliant?

I am a joint holder / POA holder in the folio? Am I required to comply with the KYC requirements?

Is it necessary for a minor to be KYC compliant?

I want to make some changes in the existing KYC?

How do I check my KYC status?

For more FAQ’s Click here

FAQ’s on Aadhaar e-KYC Process

What is Aadhaar eKYC?

Aadhaar based e-KYC is an electronic, 100% paperless process for first time investors to Mutual Funds to complete their KYC formality using their Aadhaar Number.

Who can do eKYC through Aadhaar?

What if I have applied through one of the KRAs for KYC enrollment?

What if I don’t have a PAN?

What are the steps involved to complete the eKYC through Aadhaar?

Who sends the OTP and how would I receive it?

I haven’t received my OTP as yet. What should I do?

Where do I go to get e-KYC done?

Do I need to submit the physical KYC application form or the physical copy of the Aadhaar Card?

Is there amount restriction on investment for investors completing their eKYC through Aadhaar?

What happens after I get e-KYC done?

How do I check my KYC status?

Can I submit physical transaction request at the Investor Service Centers (ISC) for folios created using Aadhaar based e-KYC?

Can I make a purchase through online as well as physical paper documents after e-KYC?

Tax Provisions for investment in Mutual Funds

As any investor would agree, our investment decisions are guided not only by the features of a particular financial product or its suitability, but also by the prevailing tax provisions that the instrument is subject to. As such, like any other financial product, there are tax implications of investing in mutual fund schemes too. Different types of schemes are subject to different tax provisions. The tenure of investment is also an important factor when deciding upon one’s tax liability. Therefore as an investor, we must have a good understanding of the relevant tax provisions, to help us plan our investments in a better manner.

Taxable event in case of investment in mutual funds may occur in the following circumstances:

Income /Dividend Distribution by a Scheme.

Gain/loss from the redemption /transfer of mutual fund units.

Current tax laws prescribe different tax provisions for equity-oriented mutual funds and other than equity oriented funds. However, dividend income received in respect of the units of a mutual fund scheme is exempt from tax in the hands of an investor, irrespective of the nature of the scheme.

Tax on Equity Schemes^	Individual/ HUF*	Domestic Company^#	NRI*^$ (Individual)
Long Term Capital Gains	10%	10%	10%
Short Term Capital Gains	15%	15%	15%

^ Securities Transaction Tax (STT) will be deducted on equity oriented schemes at the time of redemption / switch to the other schemes / sale of units. Mutual Fund would also pay STT wherever applicable on the securities bought / sold.

^^Finance Act 2018 levies income tax at the rate of 10%(without indexation benefit) on long term capital gains exceeding 1 lakh provided transfer of such units is subject to STT.

* Surcharge of 15% on applicable tax rate in case of Individual / HUF if the total income exceeds Rs. 1 crore and 10% where income exceeds Rs 50 lakhs but does not exceed Rs 1 crore.Health and Education cess to be levied @ 4% on aggregate of base tax and surcharge.

# Surcharge of 7% on applicable tax rate in case of Domestic Company where the total income exceeds Rs. 1 crore but is less than Rs. 10 crore. Surcharge of 12% if the total income of the Domestic Company exceeds Rs. 10 crore. Health and Education cess to be levied @ 4% on aggregate of base tax and surcharge.

$ Tax to be deducted at source (TDS) at the time of redemption of units in case of NRI investors only.

Note: As per Finance Act, 2014, for the purpose of determining tax payable, the amount of distributed income be increased to such amount as would, after reduction of tax from such increased amount, be equal to the income distributed by the Mutual Fund.

DISCLAIMER: The Income-tax benefits described in this document are as available under the present Income-tax Act, 1961 (the Act) as amended by Finance Act, 2008 and are available subject to relevant conditions. The above statement sets out the provisions of the tax law in summary manner only and is not a complete analysis or listing of all potential tax consequences of the purchase, ownership and disposal of units of a mutual fund. The information given is included only for general purpose and is based on the law and practise currently in force in India. The Investors/Unit holders should be aware that the relevant fiscal rules or their interpretation may change. As is the case with any investment, there can be no guarantee that the tax position or the proposed tax position prevailing at the time of an investment will endure indefinitely. In view of the individual nature of tax consequences, each Investor / Unit holder is advised to consult his / her own professional tax advisor.

Tax on Debt Schemes	Individual/ HUF*	Domestic Company^#	NRI*^$ (Individual)
Long Term Capital Gains	20% (with indexation benefit) + 4% Education cess	20% (with indexation benefit) + 4% Education cess	20% (with indexation benefit) + 4% Education cess Unlisted-10%(without indexation benefit)+4% Education cess
Short Term Capital Gains	As per applicable income tax slab rate + 4% Education cess	30% + 4% Education cess	As per applicable income tax slab rate + 4% Education cess

*Surcharge of 15% on applicable tax rate in case of Individual / HUF if the total income exceeds Rs. 1 crore and 10% where income exceeds Rs 50 lakhs but does not exceed Rs 1 crore.Health and Education cess to be levied @ 4% on aggregate of base tax and surcharge

# Surcharge of 7% on applicable tax rate in case of Domestic Company where the total income exceeds Rs. 1 crore but is less than Rs. 10 crore. Surcharge of 12% if the total income of the Domestic Company exceeds Rs. 10 crore. Health and Education cess to be levied @ 4% on aggregate of base tax and surcharge.

$ Tax to be deducted at source (TDS) at the time of redemption of units in case of NRI investors only.

Note: As per Finance Act, 2014, for the purpose of determining tax payable, the amount of distributed income be increased to such amount as would, after reduction of tax from such increased amount, be equal to the income distributed by the Mutual Fund.

Important Information: The Income-tax benefits described in this document are as available under the present Income-tax Act, 1961 (the Act) as amended by Finance Act, 2008 and are available subject to relevant conditions. The above statement sets out the provisions of the tax law in summary manner only and is not a complete analysis or listing of all potential tax consequences of the purchase, ownership and disposal of units of a mutual fund. The information given is included only for general purpose and is based on the law and practise currently in force in India. The Investors/Unit holders should be aware that the relevant fiscal rules or their interpretation may change. As is the case with any investment, there can be no guarantee that the tax position or the proposed tax position prevailing at the time of an investment will endure indefinitely. In view of the individual nature of tax consequences, each Investor / Unit holder is advised to consult his / her own professional tax advisor.

Type of Scheme	Individual/ HUF	Domestic Company	NRI^$ (Individual)
Equity-oriented Schemes^	10% +12% Surcharge +4% Health and Education cess	10% +12% Surcharge +4% Health and Education cess	10% +12% Surcharge +4%Health and Education cess
Money Market & Liquid Schemes	25% + 12% Surcharge + 4% Health and Education cess	30% + 12% Surcharge + 4% Health and Education cess	25% + 12% Surcharge + 4% Health and Education cess
Debt Schemes	25% + 12% Surcharge + 4%Health and Education cess	30% + 12% Surcharge + 4%Health and Education cess	25% + 12% Surcharge + 4%Health and Education cess

^Securities Transaction Tax (STT) will be deducted on equity oriented schemes at the time of redemption / switch to the other schemes / sale of units. Mutual Fund would also pay STT wherever applicable on the securities bought / sold

Note: : As per Finance Act, 2014, for the purpose of determining tax payable, the amount of distributed income be increased to such amount as would, after reduction of tax from such increased amount, be equal to the income distributed by the Mutual Fund.

DISCLAIMER: The Income-tax benefits described in this document are as available under the present Income-tax Act, 1961 (the Act) as amended by Finance Act, 2008 and are available subject to relevant conditions. The above statement sets out the provisions of the tax law in summary manner only and is not a complete analysis or listing of all potential tax consequences of the purchase, ownership and disposal of units of a mutual fund. The information given is included only for general purpose and is based on the law and practise currently in force in India. The Investors/Unit holders should be aware that the relevant fiscal rules or their interpretation may change. As is the case with any investment, there can be no guarantee that the tax position or the proposed tax position prevailing at the time of an investment will endure indefinitely. In view of the individual nature of tax consequences, each Investor / Unit holder is advised to consult his / her own professional tax advisor.

NRI Guide to Investing in Mutual Funds

The following information will address most issues that Non Resident Indians/Person of Indian Origin (PIO)/Foreign Institutional Investor (FII) might have, with respect to mutual fund investments in India. In view of the individual nature of implications, each investor is advised to discuss with his / her own investment and tax advisors the specific tax and other implications arising out of their participation in mutual fund schemes.

Who is a Non-Resident Indian (NRI)?

The following are the main three categories of NRIs:-

An Indian citizen who stays abroad for employment or for carrying on business or vocation or under circumstances indicating an indefinite period of stay abroad

Indian citizens working abroad on assignments with foreign governments or international agencies like UNO (United Nations Organization), International Monetary Fund (IMF), World Bank etc.

Officials of Central and State Government and Public Sector Undertakings deputed on temporary assignments or posted to their offices, including Indian diplomat missions, abroad.

Who is a Person of Indian Origin (PIO)?

A Person of Indian Origin means a citizen of any country other than Bangladesh or Pakistan, if:-

He, at any time, held an Indian passport or

He or either of his parents or grand parents was a citizen of India by virtue of the Constitution of India or Citizenship Act, 1956 (57 of 1955) or

The person is a spouse of an Indian citizen or person referred to in a. or b. above

Who is a Foreign Institutional Investor?

FII means an institution established or incorporated outside India, which proposes to make investments in Indian securities and is registered with SEBI. Sub-Account means a person resident outside India, on whose behalf an FII proposes to invest in India. FIIs and Sub-accounts have to obtain registration certificate from SEBI and are governed by the SEBI (Foreign Institutional Investors) Regulations, 1995.

Can a NRI / PIO / FIIs invest in mutual fund schemes in India?

Yes, NRI/PIO/FIIs can invest in mutual fund schemes in India. However, persons residing in any Financial Action Task Force non-compliant countries or territories, United States Person (U.S. Person), corporations and other entities organized under the applicable laws of the United States of America and Residents of Canada as defined under the applicable laws of Canada.

Can a NRI / PIO maintain a bank account in India?

Yes. NRIs / PIOs can maintain accounts in Indian rupees as well as in foreign currency.

Can NRIs / PIOs invest foreign currency in mutual fund schemes in India?

No. Only Indian rupees can be invested in mutual fund schemes in India.

In that case, what are the different types of rupee accounts that NRIs / PIOs need to maintain for investing in mutual fund schemes in India?

The types of rupee accounts that can be maintained by NRIs / PIOs for investing in mutual fund schemes in India are as follows:

NRE Account: Non-Resident (External) Rupee Account

NRO Account : Non-Resident Ordinary Rupee Account

FCNR (B) : Foreign Currency (Non-Resident) Account (Banks)

SNRR : Special Non-Resident Rupee Account

What is the distinction between NRE and NRO Accounts?

Funds held in NRE accounts can be repatriated abroad freely. They can also be used for local payments in rupees.

Funds held in NRO accounts cannot be repatriated abroad. They can be used for local payments in rupees only.

Do NRIs / PIOs require any approval from the RBI to invest in mutual fund schemes?

No special approval is required. NRIs/FIIs have been granted a general permission by RBI [Schedule 5 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000] for investing in/redeeming units of the schemes subject to conditions set out in the aforesaid regulations.

However, PIO's need to attach a copy of the PIO card with the application form at the time of investing.

Who Issues PIO Cards? How to get a PIO Card?

Person of Indian Origin (PIO) Cards are issued by Ministry of External Affairs (CPV Division), Government of India to persons of Indian origin through Indian missions abroad. Specific information on rules, forms, particular offices, missions is available on the website www.passport.nic.in

What is the mode of payment for buying units of an Indian mutual fund scheme?

Repatriation Basis

Payments by NRIs / Persons of Indian Origin (PIO) residing abroad / FII may be made either by way of Indian Rupee drafts or cheques by means of (i) inward remittance through normal banking channels; or (ii) out of funds held in NRE / FCNR account payable at par and payable at the cities where the Official Points of Acceptance are located.

In case of Indian Rupee drafts purchased abroad or subscription through NRE/FCNR Account, an account debit certificate from the bank issuing the draft confirming the debit / Foreign Inward Remittance Certificate (FIRC) should also be enclosed.

In case the debit certificate / FIRC is not provided, the AMC reserves the right to reject the application of the NRI investors.

Non Repatriation Basis

NRIs or Person of Indian origin residing abroad investing on a non-repatriable basis may do so by issuing cheques / demand drafts drawn on Non-Resident Ordinary (NRO) account payable at the cities where the Official Points of Acceptance are located.

How will the redemption / dividend proceeds be paid?

If the investor has provided sufficient details for electronic credit, the Fund will give direct credit for redemption/dividend proceeds into the investor’s bank account and such instruction will be adequate discharge of the Fund towards the said payment. In case the credit is not effected by the Unitholder’s banker for any reason, the Fund reserves the right to make the payment by a cheque/ Demand Draft. The cheque will be payable to the first unitholder and will include the bank account number.

Redemption proceeds/repurchase price and/or dividend or income earned (if any) will be payable in Indian Rupees only.

How can the redemption proceeds be repatriated?

Where the investment is made out of inward remittance or from funds held in the NRE account of the investor, the maturity proceeds/repurchase price of units (after payment of taxes) will be credited to the specified NRE account.

The same can be remitted abroad freely by the investor.

What about redemption proceeds from investments made on a non-repatriable basis?

Where the purchase of units is made on a non-repatriable basis, the maturity proceeds / repurchase price of units (after payment of taxes) will be credited to the specified NRO account of the investor.

Are redemption proceeds transferred to a NRI's / PIO's overseas account?

No. Redemption proceeds will be transferred to a specified NRE / NRO account only.

What are the tax provisions for investments in mutual funds by NRIs/PIOs?

For details on the same, please click here.

What is the tax liability for income received from your mutual funds?

As per Section 10(35) of the Income Tax Act, 1961, income received from mutual fund units specified under Section 10(23D) is exempt from income tax in India and the mutual funds are subject to deduction of distribution tax in debt oriented schemes. Hence all dividends are tax-free in the hands of non-resident investors and no TDS is applicable on the same.

Can NRIs / PIOs avail of the indexation benefit?

Yes. Indexation benefit can be avail in respect of units held for more than 12 months.

Can a Power of Attorney (POA) holder invest on behalf of the NRI investor?

Yes. The POA holder needs to sign applicable documents and then he can execute transactions on behalf of the NRI investor.

However, POA holder must submit the original POA or copy, duly notarized along with first time purchase.

Is nomination by NRIs / PIOs allowed?

Yes.

Can a resident Indian have an NRI as nominee?

Yes, the same rules apply for nominees to resident Indian accounts. An NRI can be a nominee to an account which is in the name of a resident Indian.

Do NRIs / PIOs have to comply with 'Know Your Client' (KYC) guidelines?

Yes. For details on the same please click here.

What is the procedure to change the Tax status from NRI to Resident Indian or vice-versa?

The investor needs to submit the following documents to the AMC for a change in tax status:

Letter from the investor mentioning the changes
KYC acknowledgment letter reflecting the change in status
Cancelled cheque of the new bank account with Resident Indian (RI) or Non-Resident Indian (NRI) status

Tools & Calculators

This section contains a variety of interactive tools and calculators that can help you plan your financial future. It mainly aims at reducing your constraints to negligible proportion by providing you with easy-to-use and hassle-free calculative feasibility.

Account Statement

It is the document issued by the mutual fund, giving details of various transactions and holdings of an investor in schemes of the fund.

Adjusted NAV (Total Return)

The Net Asset Value of a unit adjusting for all changes caused due to dividend declaration, bonus etc. assuming reinvestment of distributions made to the investors at the prevailing NAV.

Annual Report

It is the record of a Mutual Fund's performance in an year. Under SEBI's guidelines, it is distributed to investors and/or shareholders.

Annual Return

The percentage change in net asset value of any fund over a horizon of one year, assuming reinvestment of distribution such as dividend payment and bonuses.

Annualized Returns

It is the absolute return over a period either greater or less than a year aggregated to a period of one year.

Annualized Returns

It is the absolute return over a period either greater or less than a year aggregated to a period of one year.

Applicable NAV

The applicable NAV, is the NAV at which the mutual fund transaction is executed, if the application is received before the cut-off time on a day as set by the fund. All investments or redemptions are processed at that particular NAV. A different NAV holds if received thereafter.

Arbitrage Funds

These type of funds take contrary positions in different markets / securities, such that the risk is neutralized, but a return is earned. Most arbitrage funds take contrary positions between the equity market and the futures and options market.

Asset Allocation

Asset allocation refers to a strategy of diversifying the risk associated with a fund and refers to the distribution of total funds available with the mutual fund scheme to various asset classes such as stocks, bonds etc. based on the fund’s investment objective.

Asset Management Company (AMC)

It is the investment manager for the mutual fund. It is a company set up primarily for managing the investment of mutual funds and takes investment decisions in accordance with the scheme objectives, deed of Trust and other provisions of the Investment Management Agreement.

Annualized Returns

It is the absolute return over a period either greater or less than a year aggregated to a period of one year.

Automatic Investment Plan

A plan that enables the investor to give the mandate for allotting fresh units at specified intervals (monthly, quarterly) against which the investor provides post-dated cheques. On the specified dates, the cheques are realized by the mutual fund and on realization, additional units are allotted to the investor at the prevailing NAV.

Automatic Reinvestment Plan

An investment option available to mutual fund unit holders in which the proceeds from either the fund's dividends, bonus etc. are automatically used to buy more units of the fund.

Average Cost Method

It is the method of arriving at the average price of units bought by the investor by adding all costs involved in purchasing all the units of investment and then dividing the sum by the total number of units.

Average Maturity

Average Maturity is the weighted average of the current maturities of all debt securities held by a debt fund. The weights are assigned on the basis of percentage holding of each security in the portfolio.

Balance Maturity Tenure of a Scheme

It is defined in the case of close-ended schemes as the remaining balance period till the redemption of the scheme.

Balanced Funds

A class of mutual fund schemes where total investment assets are allocated in a portfolio mix of both debt and equity instruments.

Bear Market

It is a period in capital market when investors are on a selling spree and the share prices are going down.

Benchmark

It is a standard against which a scheme's performance can be compared. For example, the performance of a large cap oriented equity fund can be benchmarked against BSE Sensex.

Bond

It is a debt instrument issued by the Government or public sector companies for tenor or maturity of over a year.

Bonus

These are additional units allotted to investors on the basis of their existing holdings. Bonus implies a split of existing units into more than one unit. As the number of units increase while the total net asset value (NAV) of the fund remains the same, the NAV per unit reduces in proportion to the rise in the number of units.

Beta

It is the measure of the sensitivity of a stock or mutual fund schemes relative to the market. The market is assigned a beta of 1. Higher the beta, the more sensitive is the stock or the fund relative to the market. In other words, stocks of mutual funds with beta more than 1 will react more sharply to market fluctuations (upward or downward) vis-à-vis the stocks or mutual fund schemes with beta less than 1

Brokerage

These are additional units allotted to investors on the basis of their existing holdings. Bonus implies a split of existing units into more than one unit. As the number of units increase while the total net asset value (NAV) of the fund remains the same, the NAV per unit reduces in proportion to the rise in the number of units.

Bull Market

Period during which the prices of stocks in the stock market continuously keep rising for a significant period of time on the back of sustained demand for the stocks.

Capital Gains

The profit realization on sale of securities and certain other capital assets (including units of mutual funds) are called capital gains. The gains can be classified into long-term or short-term depending on the period of holding of the asset and are taxed accordingly. Gains on mutual fund units held for more than 12 months are construed as long-term gains.

Capital Protection Oriented Funds

Capital protection oriented funds (CPF) are closed-ended debt mutual funds that aim to invest a significant amount of money in top-rated fixed income instruments and the rest in equities. The tenure of the schemes can be one, three or five years. This investment in fixed income products along with the interest would ensure that the investors will get their capital back on maturity and the investment in equities will provide the upside to the portfolio.

Certificates of Deposit (CD)

Certificate of Deposit (CD) is issued by scheduled commercial banks excluding regional rural banks. These are unsecured negotiable promissory notes. Bank CDs can have maturity of 7 days and up to one year.

Close ended funds

These are funds with a predetermined fixed maturity tenure whose units can be bought only during its NFO stage. After the NFO period, sale and purchase of units can be facilitated through the exchanges as it is mandatory for the close-ended schemes to be listed.

Commercial Paper

Commercial paper (CP) is a short term, unsecured instrument issued by corporate bodies (public & private) to meet their short-term working capital requirements. The maturity of a commercial paper varies from a minimum of 7 days to maximum 1 year.

Compliance Officer

Officer appointed by the AMC to comply with various regulatory requirement and to redress investor grievances associated with the funds.

Compounded Annualized Growth Returns (CAGR )

The year-on-year growth rate of an investment over a specified period of time. It is the rate at which a given present value would "grow" to a given future value in a given period of time. CAGR is calculated using the following formula: CAGR = (FV/PV)1/n - 1 Where FV is the future value, PV is the present value, and n is the number of years.

Contingent Deferred Sales Charge (CDSC)

It is the sales load charged by funds in the event of redemptions made within a pre-specified period of purchase. This charge is linked to the period of unit-holding and generally has an inverse relation with the holding period.

Coupon Rate

The annual rate of interest payable on a debt security, expressed as a percentage of the face value of the instrument.

Custodian

The organization that keeps and safeguards the custody of fund's securities and other assets

Cut- off time

Cut off time in relation to Subscription and Redemption of units, means the outer limit of timings on a particular Business Day, which is relevant for determination of Applicable NAV that is to be applied for the transaction.

Debt Funds

Mutual Fund Schemes that invest in debt securities such as Treasury Bills, Government Securities, Bonds and Debentures.

Derivative

Derivative includes (i) a security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for differences or any other form of security; (ii) a contract which derives its value from the prices or index of prices of underlying securities.

Diversification

It’s an investment strategy to spread investments across various securities in various sectors or industries so as to dilute the overall portfolio risk.

Dividend Distribution Tax

A tax payable by a debt oriented mutual fund on dividend distributed to the unit holders. There is no such tax applicable on equity oriented schemes.

Dividend payout

An option given to the investors wherein the profits of a scheme are distributed to them at various intervals. These dividends are paid only from the profits earned by the mutual fund scheme. The timing, quantum and the frequency of the payout depends upon the decision of the fund manager.

Dividend Plan

In a dividend plan, the fund distributes its accumulated income from time to time as and when the dividend is declared.

Dividend Reinvestment

Under this option, instead of paying out dividend in cash to the investor, the dividend declared by the mutual fund scheme is re-invested in the scheme, buying additional units to the investors.

Dividend Warrant

It is the ratio of dividend per share to the price per share.

Dividend Yield funds

These are mutual fund schemes that invest in stocks with high dividend yields relative to the benchmark index. High dividend yield stocks are usually known to be less volatile vis-à-vis the market and thus dividend yield funds are known to offer an equity exposure with relatively lower downside risk.

Equity linked Savings Scheme

A type of equity mutual fund scheme investing in equity and equity related securities. It comes with a lock-in period of three years and provides tax benefits to the investors.

Ex-Dividend Date

It is the effective date of dividend distribution. When the dividend is paid, the NAV of the fund drops by the amount of the dividend.

Ex-Dividend NAV

The NAV declared post record date is the ex-dividend NAV.

Exit Load

It is a fee charged to the investors at the time of redemption from the mutual fund scheme. It usually depends on the holding period of the investment. The longer the holding period, the lower the charge and vice-versa.

Expense Ratio

Expense Ratio refers to the annual percentage of the fund’s asset deducted for fund’s expenses. The fund’s expenses include management fees and other fees associated with the fund’s daily operations.

Exchange Traded Funds (ETFs)

ETFs consists of a portfolio of underlying securities designed to follow a specific index or investment strategy. Basically these are type of open ended funds whose units are traded on the stock exchange.

Face Value

The original issue price of one unit of a scheme

Floating Rate Funds

Mutual Fund Schemes that invest in debt instruments with variable or floating interest rate. These funds invest in bonds and debt instruments whose returns or coupon rates fluctuate in line with the underlying interest rate. Generally, the interest rates on these bonds are tied to a money-market index such as MIBOR, the most commonly used index

Fixed maturity plans

Debt mutual fund schemes where the maturity of the debt papers invested in by the scheme is closely aligned to the maturity of the scheme. AMCs tend to structure the scheme around pre-identified investments. Further, being close-ended schemes, they do not accept moneys post-NFO.

Fund Category

Classification of a scheme depending on the type of assets in which the mutual fund scheme invests its corpus. Fund category can thus be an equity, debt, balanced, gilt, gold ETF, liquid category etc.

Fund Family

Fund family refers to a group of mutual fund schemes offered by one fund house or mutual fund company.

Fund Management Costs

The charge or fees levied by a mutual fund scheme for managing the investors’ funds.

Fund Manager

Appointed by the asset management company (AMC), is the person who has the authority regarding investment decisions of a scheme.

Fund of Funds

It is a mutual fund scheme that invests in units of other mutual fund schemes. Just as a mutual fund invests in a number of different securities, a fund of funds holds units of many different mutual funds. These funds were designed to achieve even greater diversification than traditional mutual fund schemes.

Gilts

Securities issued by the Government are called Government Securities or G-Sec or Gilt.

Gilt Funds

Funds which invest only in Government securities.

Global Funds

Mutual funds that invest in stocks of global or international companies across the world.

Hybrid Funds

Mutual Fund schemes that can invest in a portfolio mix of equity, debt as well as gold ETFs.

Indexation

The central government specifies an index called as cost inflation index, linked to the wholesale price index. The indices of two years (year of purchase and the year of sale) are used for the purpose of computing capital gains tax. The purchase price is multiplied by the index of the year of sale and the product is divided by the index of the year of purchase. This benefit is available only if the security has been held for more than 12 months. On sale of debt-oriented fund schemes, one can opt for paying tax at the rate of a flat 10% or go in for paying 20% after taking the benefit of indexation.

Inflation

Defined as the fall in the value of a currency, it results in the rise in prices of goods and services over a period of time.

Investment Management

Investment analysis and execution of investment plans in line with the investment objectives.

Investment Objective

The financial goal (long-term growth, current income, etc.) that an investor or a mutual fund pursues.

Investment strategy

The possibility of erosion in the value of an assets on account of inflation as inflation reduces the purchasing power of the currency.

Interest rate risk

The risk that a security's value will change because of an increase or decrease in interest rates. A bond's price falls with a rise in interest rate rise and vice versa.

Interval Funds

These funds combine features of both open-ended and close-ended schemes. They are largely close-ended, but become open-ended at pre-specified intervals. The benefit for investors is that, unlike in a purely close-ended scheme, they are not completely dependent on the stock exchange to be able to buy or sell units of the interval fund. However, between these intervals, the Units have to be compulsorily listed on stock exchanges to allow investors an exit route.

Jenson's Alpha Coefficient

Defined by Jenson in his portfolio evaluation model, it is the excess return of the fund over the risk adjusted market return, given its level of risk as measured by beta. An investment with a positive alpha indicates that the fund has performed better than expected and a negative alpha indicates that the fund has underperformed, for the level of risk taken by it.

Launch Date

The date on which a scheme is first made open to the public for subscription

Liquid Funds /Money Market Funds

Funds investing only in short-term money market instruments including treasury bills, commercial paper and certificates of deposit. The objective is to provide liquidity and preserve the capital.

Liquidity

The ease with which an asset can be converted to cash. Mutual fund units are generally considered highly liquid investments as they can be sold on any business day at their current net asset value.

Load

A charge that may be levied as a percentage of NAV at the time of investment in a mutual fund scheme or at the time of redemption or exit from the schemes.

Management Fee/Expense

The charge made to a mutual fund for providing investment and advisory services, usually expressed as percentage of assets.

Market Risk

It refers to the risk posed by the market in itself i.e. the risk that the price of a security will rise or fall due to changing economic, political, or market conditions or due to a company's individual situation.

Maturity or Maturity Date

The date on which the principal investment matures and is due to be paid back to the investor.

Minimum Additional Investment

The minimum amount which an existing investor should invest for purchasing fresh units.

Minimum Balance

It is the minimum amount specified to remain invested in the scheme at any given point in time.

Modified duration

Modified duration indicates the percentage change in bond price for one unit change in yield.

Money Market

It refers to a market for very short-term securities. Money market instruments are debt securities that mature in less than a year and are very liquid in nature. Securities such as Treasury Bills and Call Money make up the bulk of trading in the money markets.

Money Market Instruments

It refers to Commercial Papers, Treasury Bills, Call Money, Certificates of Deposits, GOI Securities and any other instrument specified by the Reserve Bank of India that have maturity period of less than or up to one year.

Mutual Funds

An investment company that pools money from its unit holders and invests that money into a variety of securities, including stocks, bonds, and money-market instruments. This represents a way of investing money into a professionally managed and diversified pool of securities.

Net asset value (NAV)

It is the market value of the investments held by the mutual fund scheme on any given day. Computed daily, on per unit basis, NAV is arrived at after deducting the expenses incurred by the scheme in managing the funds.

NFO Open date

This is the date from which investors can invest in a new fund offering (NFO)

NFO Close date

This is the last date for the investors to invest in a new fund offering (NFO) and is especially significant for close-ended schemes that do not accept an investment post the NFO close date.

NRE

Non Resident External Rupee Account, it is a type of bank account for Non-resident Indians (NRIs) where the amount is deposited in the domestic currency i.e. Indian Rupee (INR), which can be converted and repatriated back into the foreign currency.

NRI

An Indian citizen or person of Indian origin who resides abroad.

NRO

Non Resident Ordinary Rupee Account, it is a type of bank account for Non-resident Indians (NRIs) where the amount is deposited in the domestic currency i.e. the Indian rupee (INR) and the same cannot be converted or repatriated back into the foreign currency.

Opening NAV

The NAV disclosed by the fund for the first time after the closure of an NFO.

Official points of acceptance

Funds that are open for investors to enter or exit at any time, even after the NFO.

Passive Funds

Mutual fund schemes that mirror the composition of the index whose performance they seek to track. For example, a passive fund tracking the S&P BSE Sensex would buy only the shares that form part of the index. The proportion of each share in the scheme’s portfolio is also similar to the weightage assigned to the share in the composition of the BSE Sensex. Thus, the performance of these funds tends to mirror the concerned index.

Payout Day

Pay-out day is the day when the exchange makes payment or delivery of securities to the trading members or brokers.

Performance

Performance of an investment indicates the returns from an investment. It shows how a scheme has done in the past and how well it is performing presently. However, past performance does not guarantee future performance.

Public Sector Undertakings (PSU) Bonds

PSU Bonds are medium and long term obligations issued by public sector companies (PSU). PSUs are entities where the government share-holding is greater than 51%.

Purchase Price or Offering Price

The price at which a mutual fund's units can be purchased. The ask or offering price means the current net asset value per unit plus sales charge, if any.

Price to earnings ratio (P/E Ratio)

The ratio of the company’s share price to the earnings per share

Sale price

The price at which a fund offers to sell one unit of its scheme to investors. This NAV is grossed up with the entry load applicable, if any.

Scheme Information Document (SID)

It is a legal document that helps investors take a balanced view on the investment. The Offer Document or SID is one of the most important sources of information on the mutual fund scheme to help prospective investors evaluate the merits and demerits of investing in the scheme.

Scheme re-opening date

This is the date from which the investors can offer their units for re-purchase to the scheme (at the re-purchase price); or buy new units of the scheme (at the sale price). The AMC announces Sale and Re-purchase prices from the Scheme Re-Opening Date.

Sector Allocation

It refers to the portion of assets of a fund which is invested in a particular well-defined segment of the economy, like Information Technology, pharmaceuticals, utilities, media, telecommunications, etc.

Sector funds

These funds invest in only a specific sector. For example, a banking sector fund will invest in only shares of banking companies. Gold sector fund will invest in only shares of gold-related companies.

Sharpe Ratio

The Sharpe ratio measures the risk-adjusted return of a fund. Simply put, the ratio measures the variability of ' excess returns' (defined by returns of the fund over the 'risk less' security). Mathematically, the formula takes a fund's return in excess of a risk-free investment and divides this by the standard deviation of the returns. The higher the Sharpe ratio, the better the fund

Standard Deviation

Standard deviation is one of the most common measure used in the assessment of a mutual fund scheme. As the term suggests, it measures the deviation of a portfolio’s returns from the fund’s average or mean returns over a period of time. In essence, it signifies the possible range within which the fund’s returns can swing. The two extreme values can be ascertained by adding and subtracting the standard deviation from the funds average return.

Statement of Additional Information (SAI)

It has statutory information about the mutual fund that is offering the scheme. It stands to reason that a single SAI is relevant for all the schemes offered by a mutual fund. Technically SAI, is a part of SID.

Switch

Redemption of a unit in any scheme (including the plans / options therein) of the Mutual Fund against purchase of a unit in another scheme (including plans / options therein) of the same asset management company subject to completion of lock-in period, if any, of the units of the scheme(s) from where the units are being switched.

Systematic Investment Plan (SIP)/ Recurring investment

A program that allows an investor to provide post-dated cheques to the mutual fund to allot fresh units at specified intervals (usually monthly or quarterly). On the specified dates, the cheques are realized by the mutual fund and additional units at the prevailing NAV are allotted to the investor. This enables investor to invest small amounts each month and take advantage of rupee cost averaging.

Systematic Transfer Plan (STP)

A plan that allows the investor to give a mandate to the fund to periodically and systematically transfer a certain amount from one scheme to another.

Systematic Withdrawal Plan (SWP)/Recurring withdrawal

A plan offered with some schemes under which post-dated cheques for fixed amounts (as may be fixed by the fund) are issued to the investors for monthly, bi-monthly or quarterly withdrawals. The withdrawals are as per the requirements of the investor specified by him/ her at the time of investment.

S & P BSE Sensex Index

It is the index comprising the equity prices of select 30 blue-chip companies listed on the Bombay Stock Exchange (BSE) which is taken as a representative of the stock market movement.

Thematic funds

These funds in sectors that directly or indirectly cater to the investment theme. For instance, a thematic fund with infrastructure theme, would invest in shares of companies related to infrastructure such as construction, toll-collection, cement, steel, telecom, power etc. The investments done by thematic funds are thus more broad-based than a sector fund; but narrower than a diversified equity fund.

Total Assets Under Management

The market value of the total investments of a fund as on a particular date

Total Return

Return on an investment over a specified period of time, which includes share-price appreciation, reinvested dividends or interest, and any capital gains.

Treasury bills (T-Bill)

These are short term debt instruments with a maturity of one year or less issued by the Reserve Bank of India on behalf of the Government of India.

Tracking error

Difference between the scheme performance and that of its benchmark is called tracking error.

Unit holder

The investor or owner of units of a mutual fund.

Unit Capital

The number of units multiplied by its face value (Rs. 10) is the capital of the scheme is its Unit Capital.

Value Stocks

Stocks that are considered to be undervalued based upon such ratios as price-to-book or price-to-earnings (P/E). These stocks generally have lower price-to-book and price-to-earnings ratios, higher dividend yields and lower forecasted growth rates than growth stocks.

Volatility

Volatility refers to the fluctuations in the market price of the security over a short period of time. Volatility is often measured using measures such as beta, standard deviation, R–squared and Sharpe ratio.

Yield curve

A representation of the relationship between the interest rate and maturity period of the bond. In other words it is a relationship between the time and yield of debt securities.

Year to date

It is a time period starting from the beginning of the year and continuing up to the present day.

Yield To Maturity

Used to determine the rate of return an investor will receive if a long-term, interest-bearing investment, such as a bond is held to its maturity date. It takes into account purchase price, redemption value, time to maturity, coupon yield and the time between interest payments.

Zero Coupon bond

It is a bond that is bought at a price lower than its face value. It doesn’t make period interest payments or have coupons, but pays the principal upon maturity.

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