9/10/2020 Investment Glossary

INVESTMENT GLOSSARY AMFI Investor Awareness Programs (Http://Www.Amfiindia.Com/Schedule-Of-Investor-Awareness-Program)

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A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Absolute Returns

There are 2 ways in which returns are depicted- Absolute and annualised. Generally, returns for a less than one year period are shown as absolute returns
while returns for a period greater than one year are shown as annualised returns or per annum returns.

Account Statement

A mutual fund account statement is a document similar to a bank account statement that indicates the mutual fund units owned by an investor, the cost
and current value of the units (in Rs.). One can receive an account at any frequency at any time by email and monthly if it is physical.

Accrual Strategy

There are two ways in which a bond fund earns returns - bond price appreciation and bond coupon receipts. An accrual strategy uses the latter approach
to generate returns by predominantly investing in stable interest bearing securities.


Actively Managed

There are two ways in which funds are managed. One is the discretionary style while the other is non-discretionary. The former uses the fund manager's
judgment to buy and sell securities and is termed as Active Management and the funds are called as Actively Managed Funds.

Alpha

Actively managed funds aim to generate Alpha which is the excess return generated over and above the benchmark index. This is attributable to the fund
manager's skills.

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AMFI

Association of Mutual Funds in India or AMFI represents all Fund Houses as a group in terms of any discussion with SEBI, distributors or investor
associations. It also aims to promote best practices among mutual funds. All mutual fund distributors need to be registered with AMFI.

Annual Report

A write-up given to unit-holders containing the yearly record of a mutual fund’s performance. The report also informs the investor about the fund’s earnings
and operations. Reports are sent out annually.

Annualised Returns

There are 2 ways in which returns are depicted- Absolute and annualised. Generally, returns for a less than one year period are shown as absolute returns
while returns for a period greater than one year are shown as annualised returns.

Application Amount

This is the minimum investment amount for a new investor in a mutual fund scheme.

Arbitrage Funds

Invest in stocks and derivatives where the latter is an equal and opposite position. Arbitrage funds thus carry a relatively lower risk being a completely
hedged portfolio. They are classified as equity funds for tax purposes as they predominantly invest in equities. 

ARN

AMFI Registration Number or ARN is issued by AMFI to all mutual fund distributors who are registered with it as financial intermediaries selling mutual
funds. It is stamped on the application form so that assets mobilized can be captured to compute brokerage of the distributor. All ARN holders must clear 
the AMFI / NISM certification test.

Asset

Any holding with monetary value such as stocks, bonds, real estate, gold and cash.

Asset Allocation

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Investment strategy that diversifies assets among stocks, bonds, gold and money market instruments to help reduce investment risk. It describes the
composition of a fund’s or an individual’s portfolio. For equity funds, this would include a geographic and sector breakdown. For bond funds, it would show
the split between government, corporate and other fixed-income securities.

Asset Class

Different types of investments such as stocks, bonds, gold, real estate and cash. Each asset class depicts similar characteristics

Asset Management Company (AMC)

A firm that invests the pooled funds of investors in securities, in line with the stated investment objectives. For a fee, the investment company provides
diversification, liquidity, and professional management service.

Assets under management (AUM)

Refers to the cumulative market value of investments managed by a mutual fund.

Average Maturity

Maturity of a bond portfolio is a key variable to understand the impact of interest rates or interest rate risk. This is calculated as the average maturity of all
bonds weighed by the percentage holding of each in the portfolio. Longer the maturity, higher the interest rate risk.

Balanced Fund 

A mutual fund scheme with an investment objective of both long-term growth and income, through investment in stocks and bonds. Generally 65% is
invested in stocks and 35% in bonds, in order to provide access to relative stability of fixed income securities and the growth potential of equities.


Basis Point 

It is the smallest measure used in quoting yields on fixed income securities. One basis point is one percent of one percent, or one hundredth of a
percentage point or 0.01%.

Bear Market

A period of time during which securities prices are falling in the stock market.

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Benchmark

A standard used for comparison. Usually to provide a point of reference for evaluating a fund’s performance. The common benchmarks for diversified
equity funds are the BSE Sensex, Nifty 500 or Nifty 50.

Beta

A measure of a fund’s volatility in relation to the stock market, as measured by a stated index. By definition, the beta of the stated index is 1; a fund with
a higher beta has been more volatile than the index, and a fund with a lower beta has been less volatile. Based on past historical records, a beta higher
than 1.0 indicates that when the index rises, the stock will rise to a greater extent than the index; likewise, when the index falls, the stock will fall to a
greater extent. A beta lower than 1.0, indicates that the stock will usually change to a lesser extent than the index. The higher the beta, the greater the
investment risk.

Blue Chip

Stock of a nationally known company that has a long record of profit, growth, and dividend payment, and a reputation for quality management, products,
and services.

Bond

A debt security or IOU issued by a government entity or corporation, which generally pays a stated rate of interest, and plans to return the principal
amount of the loan on the maturity date. Unlike stockholders, bondholders do not have corporate ownership privileges.


Broker

A broker is basically a sales person who distributes stocks, bonds, or mutual funds. A broker is a licensed person authorised to receive commissions. 
Brokers are always affiliated with a brokerage company or broker-dealer network.


Bull Market

A distinctive time period, during which the prices of securities are rising, usually characterised by high trading volumes.

Business Day

A Business Day is any day other than a Saturday, a Sunday or a day on which banks are not required or obligated by law or executive order to remain
closed including the occasions when the functioning of the Banks/ RBI is affected due to a strike call made by a Recognised Union/ Management in any
part of the country or those days on which normal business cannot be conducted due to natural calamities or any other events.
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CAGR

Compounded annualised growth rate or CAGR is the rate of compounding of interest or growth. It is also known as annualised growth rate or internal rate
of return at which cash flows grow over a period of time.

Call Money

Money that is loaned in the call market, which can be demanded for repayment on call. The term call money is also known as money at short notice as it
is repayable in 24 hours. It is also traded in the money market.

Capital (or principal)

Initial amount of money invested, excluding any subsequent earnings.

Capital Appreciation

Increase in the value of an asset such as a stock, bond, commodity or real estate.

Capital Gains/Losses

Net profit or losses from the sale of securities in the fund’s portfolio. These are further classified as short term and long term capital gains. The holding
period for each type of capital gains as defined in the Income Tax Act 1964 varies from instrument to instrument.

Capital Growth

A rise in the market value of a mutual fund’s securities shown by its net asset value per unit. This is a long-term objective of many mutual funds.

Certificate of Deposit (CD) 

Money market instrument issued by banks or financial institutions (FIs) for a specified time period. Banks can issue CDs for maturities from 7 days to one
year whereas FIs can issue CDs for maturities of 1 year to 3 years.

Closed-end Fund

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A type of fund that has its units listed on stock exchanges. Unlike open-end mutual funds, closed-end funds do not issue and redeem units on a
continuous basis but only at the time of their new fund offer or NFO. Their listed price is determined by supply and demand. They also carry a NAV
besides the traded price.

Closing Price

The price of a security after the final trade at the end of the day.

Collateralized Borrowing & Lending Obligation (CBLO)

Collateralized Borrowing & Lending Obligation (CBLO) is an RBI approved Money Market instrument backed by gilts as collaterals. CBLO was aimed to
benefit those who were phased out of the inter-bank call money market. Clearing Corp of India (CCIL) manages CBLO transactions.

Commercial Paper

Short term unsecured debt issued by companies, usually to finance working capital requirements. They are of upto one year maturity.

Commission

A fee charged by a broker or distributor for his or her service in the buying or selling of securities/ mutual fund units.

Commodity

A commodity is a product that trades on a commodity exchange. Examples of these are gold, food, metal or another physical substance that investors buy
and sell on an exchange.


Compounding

Interest earned not only on the initially invested principal but also on accumulated interest during the period.

Consolidated Account Statement (CAS) 

A statement of transactions and investments across mutual funds and depository accounts. Depository companies have the responsibility of consolidating
the investment information of an investor by PAN number and sending a monthly statement to the investor’s email ID or physical address. CAS contains all
financial transactions (buy, sell, switch) made in mutual fund folios or equity account(s) of the investor besides complete list of holdings and their current
value. Starting October 2016, CAS would also carry information on commission paid to distributors for mutual fund folios.

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Consumer Price Index

The index compiled by a governmental agency which tracks the cost of living by following the change in prices of basic goods and services over time. This
index measures inflation.

Contingent Deferred Sales Charge (CDSC)

A type of exit sales load which is charged when units are redeemed within a specific time period following their purchase. These charges decline as the
holding period increases.

Contrarian

Someone who goes counter to the herd. A contrarian seeks out-of-favour sectors and may sell when others buy.

Convertible Security

Corporate security (usually preferred stock or bond) that is exchangeable for another form of security (usually common stock) at a predetermined price.

Convexity

Convexity is a measure of the way duration and price change when interest rates change. A bond is said to have positive convexity if the instrument's value
increases at least as much as duration predicts when rates drop and decreases less than duration predicts when rates rise.

Corpus

The portfolio of securities of a mutual fund aggregated by market value of the securities held is known as corpus or Assets Under Management or AUM.
Mutual funds disclose AUM at a scheme level and at a fund house level.

Coupon

The interest rate on a bond or other debt security that the issuer is obliged to pay the holder until it matures. It is usually given as a percentage of the face
value of the security.

Credit Rating

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A measure indicating the bond issuer’s credit worthiness or the company’s ability to repay the loan. The bonds are rated by an independent rating agency
such as CRISIL, ICRA, and CARE, etc.

Credit Risk

The potential for an issuer to default on its obligation to pay interest or principal on its debt security. Most government securities are considered to have
little, if any credit risk.

Cumulative Total Return

Usually calculated in the same manner as standardised average annual total return, except that these figures represent the total change in value of an
investment over the stated periods and do not reflect any sales charges.

Current Assets

Assets that can be converted to cash within a year.

Current Liabilities

Liabilities that must be paid within a year.

Custodian

Appointed to hold and safe keep the assets and investments of mutual fund. A custodian helps ensuring the interests of the investors by keeping track and
ensuring the safety of their investments under a custodial agreement.


Cyclical Stocks

Stocks which rise and fall in price with the state of the economy, in such industries as construction, automobile, engineering or those affected by the
international economy such as shipping, aviation, and tourism. Cyclical stocks are also stocks which are affected by the natural environment such as
fertilisers and tea. Examples of non-cyclical stocks would be drugs, insurance, basic foodstuffs and many other consumer products.

Debentures

Instruments of debt, usually unsecured. They are also usually credit rated.

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Debt funds/Securities

A general term for any security representing money loaned that must be repaid to the lender at a future date. Bonds, T-bills and money market instruments
are debt securities, but they vary in maturities.

Default

A term that denotes the failure to pay the principal or interest on a financial obligation (such as a bond).

Defensive Stocks

Those that are not impacted too much by cyclicality in the economy. They tend to be accumulated when the economy is on the down turn. Pharma and
fast moving consumer goods or FMCG companies are generally defensive sectors.

Demat Account

Electronic trading of shares required that shares be transferred electronically owing to which physical shares were dematerialised. One holds these shares
in a demat account.

Derivative

A derivative is an instrument whose value is derived from the value of one or more underlying security, which can be commodities, precious metals,
currency, bonds, stocks, stocks indices, etc. Four most common examples of derivative instruments are Forwards, Futures, Options and Swaps. 

Direct Plan or Direct Share Class


SEBI introduced direct plans from Jan 1, 2013 in which investors wishing to buy units directly from a fund house were allowed to do so through direct
plans. These plans have lower expenses to the extent of commission paid to distributors. The returns in direct plans are also higher to that extent vis-a-vis 
regular plans.

Discount

Refers to the selling price of a bond when its price is below its maturity value.

Distribution

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A payment to shareholders resulting from a mutual fund’s realised capital gains, interest, or dividend income. A mutual fund dividend, or distribution, may
be physically paid to the investor, or it may be reinvested in the fund, giving the investor more units.

Diversification

Diversification is a proven strategy to reduce portfolio risk wherein investment takes place across asset classes like equity, debt, gold, real estate. It also
cushions against the negative returns from a single asset class as all asset classes typically do not move in the same direction.

Dividend

An income distribution to shareholders that generally comes from the net profit or earnings of a corporation (or net income from a mutual fund). A change
in the dividend rate, or amount, does not affect the fund’s share price but the NAV of a mutual fund unit falls after the dividend is paid.

Dividend Yield

Used to know how much dividend has been paid by a scheme in a year for the price an investor has paid for buying its units. Any investor whose
investment objective is capital consumption may choose to invest in a scheme with high dividend yield.

Duration

Duration is a measure of interest rate risk meaning the relation between the price and the yield of the bond. It is weighted average of all the cash flows
associated with a bond in terms of their present value. The higher the duration the higher the interest rate risk.

Duration Strategy

There are two ways in which a bond fund earns returns - bond price appreciation and bond coupon receipts. The former refers to a duration strategy while

the latter is an accrual strategy. A duration strategy is useful when interest rates in the economy are on the decline as bond prices and interest rates move
in opposite directions. 

Earnings (per share) or EPS

The profit after tax for a company during a specific period for every share held. It is calculated by subtracting the cost of sales, operating expenses and

taxes from revenues, for a specific time period. It is the reason corporations exist and often the single most important determinant of a stock’s price. If the
profit after tax is Rs.1000 and number of shares is 100, then EPS is Rs.10.

ELSS

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Equity Linked Savings Scheme or ELSS allows an investor to get the benefit under Sec 80C of the Income Tax Act upto a limit of Rs. 1.5 lakh per year.
They have a lock-in period of 3 years.

Entry load

The upfront sales charge on mutual fund purchases, currently abolished in India.

Equity

A type of security representing part ownership in a company or corporation. Common stocks, preferred stock, and convertible stock are types of equity
securities.

ETF or Exchange Traded Fund

These are similar to index funds which replicate a benchmark index but have lower expenses charged to the fund. Popularly known as ETFs, they are
traded on stock exchanges like equity stocks. One needs a demat account to trade in ETFs.

EUIN

Employee Unique Identification Number or EUIN is issued by AMFI to employee/ relationship manager/ sales person of the distributor interacting with the
investor for the sale of mutual fund products. EUIN aims to assist in tackling the problem of mis-selling even if the EUIN holder leaves the distributor.

Exit Load 

The charge levied at the time of exit is called exit load. This may be applicable in some schemes and for a certain period. One must check exit loads

before investing to map with the investment horizon.

Expense Ratio 

Each category of mutual funds is allowed to charge a particular percent of its AUM as scheme expenses. The term is commonly called Expense Ratio.
Generally Equity funds have a higher expense ratio vis-à-vis debt funds.

Face Value

The value printed on the face of a stock, bond or other financial instrument or document. It is also the issue price of a mutual fund unit. Percentage
dividends are calculated on face value.

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Fact Sheet

Contains the details of the investments (portfolio) made by a mutual fund scheme besides returns, fund manager details, asset allocation, etc. A factsheet
is released on a monthly basis.

Financial Planning

It is very important to plan your investments so that you are able to meet all your life time goals. There is a scientific process called financial planning
which you can follow involving risk profiling, goal analysis, asset allocation, product selection and goal monitoring.

Fixed Assets

A long-term asset that will not be converted to cash within a year such as a house or a plot of land.

Fixed Income Securities

A security that pays a certain rate of return but offers limited potential for growth in capital. This usually refers to government and corporate bonds, which
pay a fixed rate of interest until the bonds mature. A mutual fund investing in these types of securities may also be referred to as a fixed-income
investment or security. Traditional assured returns products like bank fixed deposits are also fixed income securities.

Floating Rate

An interest rate which is periodically adjusted, usually based on a standard market rate outside the control of the institution. These rates often have a 
specified floor and ceiling, which limit the floating rate. The opposite of having a floating rate is having a fixed rate.

FMP 

Fixed Maturity Plan or FMP has a defined term after which the scheme ceases to exist. It is a closed ended fixed income scheme. 

Folio

A folio is an investor's unique mutual fund account. Much like a bank account number, a Folio number depict their holdings in the schemes of a fund

house.

Front-end Load

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A one- time charge that investors pay at the time they buy fund units. It is also called as entry load which is currently abolished in India.

Fund Manager

An employee of the asset management company such as a mutual fund or life insurer, who manages investments of the scheme. He is usually part of a
larger team of fund managers and research analysts. A fund manager may also be referred as a Portfolio Manager.

Fund of Funds (FOF)

A fund that invests in other mutual funds, unlike a normal fund which invests in equity and fixed income securities.

Gilts

A type of government security.

Government Securities

Securities that are sold to the public by the government, also called Gilts.

Growth Funds

Mutual funds with a primary investment objective of long-term growth of capital. Unlike income, which is somewhat regular and consistent in most cases,
growth is much less certain. Growth investments, however, usually outpace the returns on income investments over the long-term (five to ten years, or 
longer). A growth fund invests mainly in common stocks with significant growth potential.


Growth Investing

A style of investing that invests in fundamentally sound businesses with the belief that the stock will go up in price. The stocks in this portfolio are well 
researched, liquid and of high quality and will usually give you a high P/E ratio and lower dividend yields in comparison to the market.

Holdings 
The possessions or securities in an investor’s portfolio.

Hybrid Funds

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One can avail ready-made diversified products in mutual funds through hybrid funds. Within hybrid funds, some invest predominantly in equity or debt
while there are some which dynamically allocate between equity and debt based on market conditions or a mathematical model.

Inception Date

The first date from which a fund's returns are calculated.

Income Funds

A fixed income mutual fund that primarily seeks interest income rather than growth of capital

Individual/ Independent Financial Distributor (IFA)

An IFA helps an investor plan for his financial goals like children's education, buying a house, retirement, etc. He helps decide the investor's portfolio
across asset classes and mutual funds as well as executes and monitors investments.

Index

A fixed pool of securities whose performance represents that of the overall market whether equity, debt or any other asset class. They are also referred to
as a benchmark and every asset class may have multiple benchmarks either from an exchange or from an independent research provider. Indian equity
indices are largely sourced from stock exchanges like BSE and NSE and debt indices are mainly from rating agencies like CRISIL.

Indexation 

All non-equity oriented mutual fund units if held for a period of more than 3 years are allowed to adjust their purchase price for inflation. In other words
only returns over and above inflation rate are taxed. This is known as indexation. Hence post tax returns are relatively higher if indexation benefits are

availed.

Indexing

An investment strategy that consists of the construction of a portfolio (generally stocks) based on an Index. Funds that follow this approach are designed
to track the total return of an index.

Inflation

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Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. Remember, the price of all goals be it buying a
house, college education, marriage of children, retirement, would keep rising because of inflation. Hence it is important to invest and earn returns higher
than inflation to maintain purchasing power over the years.

Interest Rate Risk

The risk that a security's value will change due to an increase or decrease in interest rates. A bond's price will always drop as interest rates rise and when
interest rates fall, a bond’s price will rise.

Investment Objective

Each mutual fund is guided by a broad investment objective like wealth creation, steady income, etc. so that the fund manager invests in the securities
which are in line with this broad objective.

Investment Style

This defines the way in which the fund manager would invest to meet the fund’s objective.

KIM or Key Information Memorandum

Accompanies the application form and contains key information required to take an informed decision. KIM is the summary of the offer document (SID
and SAI).

KYC

Know your Customer or KYC details are a must to start any financial transaction with a mutual fund, bank account, broker account, etc. SEBI has

mandated a common KYC for all capital market entities so that investors do not have multiple procedures across entities.

Liabilities

The claims of investors who have loaned to a company. The debts of a company.

Liquidity

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

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Lock-in Period

A period of time during which the investor is restricted from selling a particular investment.

Market Risk

The potential loss that is possible as a result of short-term volatility of the stock or bond market.

Mark to Market

It is the process of assigning a market value to a portfolio of securities. If the security has a market price then it is already marked to market. If it does not
have a market price, then it is assigned a value to reflect its fair and realizable value.

Maturity Date

Date on which the principal amount of a debt instrument or bond becomes due and payable in full.

Maturity Value

The amount the issuer agrees to pay out when the bond reaches its maturity date.

Modified Duration

Modified duration in years indicates the percentage change in the price of a bond for a given change in yield. The percentage change applies to the price
of the bond including accrued interest. If modified duration of 2 years and yields fall by 2%, the price will rise by 2 years*2%=4%.


Money Market Fund


A mutual fund that invests in short-term government securities, certificates of deposit and other highly liquid securities such as T-bills and short-term
commercial paper. Such funds generally pay money market rates of interest. An investment in a money market fund is not insured or guaranteed by the
government nor by any other entity or institution, so there is no assurance that the unit price will be maintained.

Mutual Fund

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A mutual fund is an investment that pools unitholders' money and invests it toward a specified goal. Each fund's investments are chosen and monitored by
qualified professionals who use this money to create a portfolio. That portfolio could consist of stocks, bonds, money market instruments or a combination
of those. Mutual funds offer investors the advantages of diversification, professional management, affordability, liquidity and convenience.

NACH or National Automated Clearing House

Web based solution to facilitate interbank, high volume, electronic transactions which are repetitive and periodic in nature. NACH covers 95% of India’s
banking system and is ideal for investors outside the ECS (electronic clearing services) network of 90 locations.

Net Asset Value

The NAV is the market value of mutual fund units. It is calculated each business day based on the value of the assets of the fund minus its liabilities,
divided by the number of units outstanding.

Net Worth

The value found by subtracting total liabilities from total assets.

NISM

To start a career as a mutual fund distributor one needs to have an NISM (National Institute of Securities Markets) certification. Certain mutual fund
employees also need to be NISM certified. NISM has been established by SEBI.

Nomination

Facility of naming a person(s) to whom the assets may be distributed upon the death of the account holder.


NRI 

A Non-Resident Indian who is an Indian citizen or a person of Indian origin but who resides abroad. NRIs have to follow specific rules when investing in
India.

Offer Document

The Offer Document (OD) is the most important document for any prospective investor in mutual funds. It consists of 2 parts - Statement of Additional
Information (SAI) and Scheme Information Document (SID). It contains Fund House and Scheme details.

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Open-end Fund

Units of open ended mutual fund schemes are issued on a continuous basis at the prevailing net asset value (NAV). They are highly liquid and can also be
redeemed on any business day.

Passively Managed

There are two ways in which funds are managed. One is the discretionary style while the other is non-discretionary. The latter is also termed as Passive
Management and Index funds fall in this category.

Performance

How a fund’s returns have done in the past and how well it is doing at present. Past performance is often used to get an idea of future performance,
however, past performance does not guarantee future performance.

Portfolio

A pool of individual investments owned by an investor or mutual fund. Portfolios may include a combination of stocks, bonds, and money market
instruments. A list of the fund’s current portfolio will usually be contained in a mutual fund’s factsheet.

Portfolio Rebalancing

Seeks to reallocate gains from an overweight asset class into an underweight one. In short, one books profits in a well performing asset class and buys 
more of an underperforming asset class. It is an important part of Financial Planning.

Portfolio Turnover 

Portfolio turnover or portfolio churn is a measure of how frequently assets within a fund are bought and sold. 100% Portfolio turnover indicates that the 
entire portfolio was changed in one year. 200% would thus mean that it was done twice over in the same year indicating a high churning. Lower the
number, better it is.

Portfolio Yield

Portfolio yield is the weighted average yield to maturity (YTM) of all the securities in the fund’s portfolio.

Price-earnings ratio (P/E)

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It is the price of the share for every rupee earned by the company. One of the quantitative measures used by portfolio managers to help them value
companies. It is calculated by dividing a company’s share price by its earning per share.

Principal (or Capital)

Initial amount of money invested, excluding any subsequent earnings.

Product Label

The depiction of risk using a pictorial meter named "Riskometer" and this meter appropriately depicts the level of risk of principal in any specific scheme.
The riskometer denotes risk of principal at 5 levels, viz., low, moderately low, moderate, moderately high and high respectively for a mutual fund scheme.
Besides the pictorial depiction of the riskometer, the product label also mentions Nature of scheme and indicative time horizon besides a brief about the
investment objective and kind of product.

Prospectus (or Offer Document)

The prospectus is a legal document that contains important information about a fund's investment goals, sales charges, expenses and risks. Its purpose is
to provide investors with the information they need to make an informed decision about investing in the fund. An abridged offer document accompanies
the application.

Real Return

The rate of return earned on an investment after adjusting for the rate of inflation during the time the investment was held. 

Redeem

Cashing in units by selling them back to the mutual fund.

Redemption Price

The price at which a mutual fund’s units are redeemed or bought back by a fund. The redemption price is usually equal to the current net asset value per
unit and less the exit load if any.

Repo

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Repo or Repurchase Agreements or Ready Forward transactions are short-term money market instruments. Repo is nothing but collateralized borrowing
and lending. In a repo, securities (like Government securities and treasury bills) are sold in a temporary sale with an agreement to buy back the securities
at a future date at specified price.

RBI

Reserve Bank of India or RBI is India's central bank, established under the Reserve Bank of India Act, 1934. It is also the money manager of the
government as well as prints India’s currency. It is headed by the RBI Governor who also sets the monetary policy which mainly involves taking interest
rate decisions.

Record Date

Stipulated date which is used as a cut-off to distribute corporate actions like dividends, rights, bonus etc. All unit holders whose name is present on the
record date would receive the corporate action.

Residual Maturity

The remaining period until maturity date of a debt security is its residual maturity. For example, a debt security issued for an original term to maturity of
10 years, after 2 years, will have a residual maturity of 8 years.

Return

The sum of the income of a fund plus its capital gains. 

Risk

In general, risk is the possibility of suffering loss. There are many types of risk, such as credit risk, principal risk, inflation risk, interest rate risk, and
investment risk. If you are prepared to accept greater risk, you have the chance of earning higher returns or profits on your money. Low-risk investments, 
while are generally safer, often don't keep investors ahead of inflation.

Riskometer

Pictorial meter which appropriately depicts the level of risk in any specific scheme. The riskometer denotes risk of principal at 5 levels, viz., low,
moderately low, moderate, moderately high and high respectively for a mutual fund scheme.

Risk/reward Trade-off

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The compromise made between high- and low-risk investments. High-risk investments generally have greater potential for high returns than low-risk
investments.

Risk Tolerance

The willingness of an investor to tolerate the risk of losing money for the potential to make money.

RTA or Registrar and Transfer Agent

RTA or Registrar and Transfer agents maintain a registry of unit holders of a fund and their unit ownership. Normally the registrar also distributes dividends
and provides periodic statements to unit holders. Some fund houses also maintain this function in-house.

R-squared

Statistical measure of how closely the portfolio's performance correlates with the performance of a benchmark index. R-squared is a proportion that ranges
between 0.00 and 1.00. For example, an R-squared of 1.00 indicates perfect correlation to the benchmark index, while an R-squared of 0.00 indicates
no correlation. Therefore, a lower R-squared indicates that fund performance is significantly affected by factors other than the market.

Rupee Cost Averaging

An investment strategy based on investing equal amounts in a fund at regular intervals. Because more units are bought when prices are low and fewer
units when prices are high, the average cost of your units may be lower than the average price over the period you bought them. Rupee- cost averaging
cannot guarantee a profit or protect against loss in declining markets. 

SEBI

Securities and Exchange Board of India established under Securities and Exchange Board of India Act, 1992. It is the regulator for capital markets and
market intermediaries like mutual funds, stock brokers, portfolio managers, etc. 

Sector Funds

Funds that concentrate on one industry or sector of the economy such as information technology, pharmaceuticals, FMCG etc. These funds tend to be

more volatile than funds holding a diversified portfolio of securities in many industries, but may offer greater potential returns when the sector booms.
Avoid these types of funds unless you have a fair amount of investment expertise and a higher risk appetite.

Securities

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The holdings of a mutual fund, such as stocks or bonds. Stocks are securities representing ownership shares. Bonds are securities representing a
contractual debt obligation of the issuer to repay the holder, with interest.

Securities Transaction Tax or STT

Levied on purchase or sale of securities listed on stock exchanges. This includes shares, derivatives or equity-oriented mutual funds. Rate of tax varies
with transactions and securities. STT is deducted at source by the stock broker or AMC.

Sharpe Ratio

Statistical measure of a portfolio's historic "risk-adjusted" performance. Calculated by dividing a fund's excess return by the standard deviation of those
returns. As a measure of reward per unit of total risk, the higher the ratio, the better.

Sponsor

Sponsors are the promoters who establish the mutual fund. . The application to SEBI for registration of the mutual fund is made by the sponsors. The
sponsor needs to have a minimum 40% shareholding in the capital of the AMC.

Spread

The difference in yields between two securities is called Spread and is usually measured between the security and its benchmark or a government bond of
similar maturity. It helps to know the risk premium or higher interest rate that a corporate entity pays for the same tenure loan over a sovereign bond.
Spreads can also be calculated for bonds of the same maturity but different credit rating. 

Standard Deviation

Statistical measure of the historic volatility of a portfolio. It measures the fluctuation of a fund's periodic returns from the mean or average. The larger the
deviation, the larger the standard deviation and the higher the risk. 

Stocks

A share or stock represents ownership, or equity, in a corporation. When a company needs money to grow and expand, it may sell part of its ownership to

the public in the form of shares of stock. In exchange for the money received from the sale, the company gives shareholders a portion of its profits as
dividends, as well as a measure of its decision-making power. These securities generally have the most potential for capital appreciation, but their rights
are subordinated in the event of a company liquidation or bankruptcy. It does not provide any assurance on returns.

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Statement of Additional Information or SAI

All details about investor's rights and services in a mutual fund are available in the SAI or Statement of Additional Information which in turn is part of the
offer document. It is also a statutory document.

Style Box

The pictorial depiction (in the form of a matrix) of the basic investment mix of a mutual fund scheme is known as a Style Box. A simple equity style box is
a 3x3 matrix - vertical boxes denote market capitalisation (large, medium, small), horizontal boxes denote investment style (value, blend, growth). For a
debt fund, a style box depicts credit quality on the horizontal axis and interest rate sensitivity on the vertical axis.

Switch

A Switch would necessitate redemption from one scheme and deploying the proceeds or purchase in another. Remember all of this happens with the
applicable NAV.

Systematic Investment Plan (SIP)

Under STP or Systematic Transfer Plan, a single instruction can be given to transfer a fixed amount at regular intervals from one mutual fund scheme to
another. This is typically done to transfer from a liquid fund to an equity fund where a lump sum amount is invested in a liquid fund. It could also be used
to transfer from equity to debt funds in case one is nearing his/her goal where de-risking is needed.

Systematic Transfer Plan (STP) 

Under STP or Systematic Transfer Plan, a single instruction can be given to transfer a fixed amount at regular intervals from one mutual fund scheme to
another. This is typically done to transfer from a liquid fund to an equity fund where a lump sum amount is invested in a liquid fund. It could also be used 
to transfer from equity to debt funds in case one is nearing his/her goal where de-risking is needed.


Systematic Withdrawal Plan (SWP)

A Systematic Withdrawal Plan permits the investor to receive regular payments of a fixed amount from his investment in a mutual fund scheme on a
periodic basis. Retirees in need of a regular income often opt for this. 
Tax Deducted at Source (TDS)

Net amount paid to unit-holders after adjusting for taxes before payout is made is said to be with TDS or tax deducted at source. Dividend Distribution Tax
charged in case of dividends paid on debt oriented funds is a TDS and dividends to unit holders are net of taxes.
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TER or Total Expense Ratio

Each category of mutual funds is allowed to charge a particular percent of its AUM as scheme expenses. The term is commonly called Total Expense Ratio
(TER). Generally equity funds have a higher expense ratio vis-à-vis debt funds. The expense ratio is capped by SEBI. Returns provided are always post
expense ratio. The factsheet displays 2 expense ratios – one is for the regular plan and the second is for the Direct Plan. The latter is lower because
commissions paid to distributors are not included in the same.

Time Stamp

There is a cut off time associated with a mutual fund application being filed for purchase or redemption. This cut-off time decides the applicability of the
current day's NAV or the NAV of the next day to the investment.

Top-down Investing

There are broadly 2 ways in which stock-picking is done by fund managers - Top Down and bottom up. In a top down approach, the fund manager
researches the sector and picks the best stocks in that sector.

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.

Tracking Error

The objective of an index fund is to exactly replicate the benchmark index by portfolio and returns. Any deviation from this objective is tracked by a
mathematical formula called tracking error. A lower tracking error means the fund is tracking the index very well.

Trail Commission

A mutual fund distributor may be paid commission in two forms - upfront and trail. Trail commission is paid at the end of pre-defined periods and is
calculated on the basis of the outstanding AUM of the distributor in the fund.

Transaction Costs

The costs incurred by the buying and selling of securities including broker/ distributor commissions/ fees.

Treasury bills (T-bills)

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A short-term debt instrument issued by the government with a maturity of one year or less.

Trigger Option

The Trigger option is a useful facility for investors who wish to say, book profit at a certain index level or buy more units when there is a fall in markets by
say 100 points.

Trust Deed

The operations of the mutual fund trust are governed by a Trust Deed, which is executed by the sponsors. SEBI has laid down various clauses that need to
be part of the Trust Deed. The responsibility of the trustees towards the investors is also laid down in the trust deed.

Units

A portion of ownership in a mutual fund. The value of each unit is called Net Asset Value or NAV and is calculated by dividing net assets of the scheme by
the number of units.

Unitholder

The owner of units of a mutual fund.

Value Investing

The investment approach which favours buying under-priced stocks that are inexpensive relative to their intrinsic value and that may have the potential to
perform well and increase in price in the future. It first seeks individual companies with attractive investment potential, then considers the economic and
industry trends affecting those companies. Value managers usually begin their search with fundamental analysis, in order to find companies whose current

prices may fail to reflect their potential longer-term value.

Volatility

The tendency of an investment or market to rise or fall sharply in price within a short-term period. Volatility is measured by various measures such as beta,
Standard Deviation, R-squared, Sharpe Ratio. It is also used interchangeably with risk.

Yield Curve

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The relationship between time and yield on securities is called the Yield Curve. The relationship represents the time value of money - showing that people
would demand a positive rate of return on the money they are willing to part today for a payback into the future.

Year to Date (YTD)

A time period in a calendar year starting from the first of January and ending on the current date.

Yield to Maturity (YTM)

Rate of return anticipated on a bond if held until maturity. YTM is expressed as an annual rate. The YTM factors in the bond's current market price, par
value, coupon interest rate and time to maturity. Portfolio yield is weighted average YTM of the securities.

Zero Coupon Bond

A bond that is sold at a fraction of its face value. It does not, however, provide periodic interest payments but pays principal upon maturity.

An investor education and awareness initiative by Franklin Templeton Mutual Fund

1. One-time KYC (Know Your Customer) : One-time KYC registration is mandatory to invest in mutual funds. You can complete the same by submitting the following
at any of our branches or collection centres: a) Duly filled and signed Central-KYC application form. b) Proof of Identity: Any document notified by the central
government. c) Proof of Address: Same as identity proof (except PAN). d) Recent Passport Size Photograph. Copies of all documents submitted must be self-attested
by the applicant and accompanied by originals for verification. You may also avail our Online KYC Registration facility while opening an online account with us, for
more details please visit our website www.franklintempletonindia.com. (https://www.franklintempletonindia.com) In case you are KYC verified and want to update any 
information, please submit a completed KYC details change form with the required self-attested documents as proof to our nearest branch or collection centre
2. Details of SEBI registered Mutual Funds: Investors must deal/ invest only with SEBI registered Mutual Funds. Details available on the SEBI website

www.sebi.gov.in. (http://www.sebi.gov.in. )
3. Complaint Redressal: Investors can reach us on our toll-free helpline 1800 425 4255 OR write to us at grievanceredressal@franklintempleton.com.
(mailto:grievanceredressal@franklintempleton.com) For escalation, write to us at headofcustomerservice@franklintempleton.com

(mailto:headofcustomerservice@franklintempleton.com); president@franklintempleton.com (mailto:president@franklintempleton.com) or lodge your grievance with
SEBI through their SCORES (SEBI Complaint Redress System) Portal at https://scores.gov.in (https://scores.gov.in)

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

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