These are working definitions for general understanding. The precise meaning of a term for a particular scheme is the one given in its scheme documents.
A to D
AMC (Asset Management Company). The company that manages a mutual fund’s schemes. The mutual fund is registered with SEBI, and the AMC is approved by SEBI to manage it. The AMC is often called the fund house.
AMFI (Association of Mutual Funds in India). The industry body for mutual funds. It registers mutual fund distributors and publishes NAV data and investor education material.
ARN (AMFI Registration Number). The number issued to a registered mutual fund distributor. It can be checked on the AMFI website.
Asset allocation. How money is divided between asset types such as equity and debt, either within a scheme or across an investor’s whole portfolio.
AUM (Assets Under Management). The total market value of the investments a scheme or fund house manages.
Benchmark. The index against which a scheme’s performance is compared, as stated in its scheme documents.
Cut-off time. The time by which a transaction request and the money must be received for a particular day’s NAV to apply. The rules are set by the regulator.
Debt fund. A scheme that invests mainly in bonds, government securities and money market instruments.
Direct plan. The plan of a scheme bought from the AMC without a distributor. Its expense ratio excludes distributor commission.
Diversification. Spreading investments across many securities, sectors or issuers so that the result does not depend on any one of them.
E to K
ELSS (Equity Linked Savings Scheme). An equity scheme with a mandatory lock-in period. Investments may qualify for a tax deduction under prevailing income-tax provisions.
Equity fund. A scheme that invests mainly in shares of companies.
ETF (Exchange Traded Fund). A fund that tracks an index or asset and whose units are bought and sold on a stock exchange.
EUIN (Employee Unique Identification Number). A number that identifies the individual at a distributor who dealt with the investor on a transaction.
Exit load. A charge that some schemes deduct if units are redeemed or switched out within a stated period.
Expense ratio. The annual cost of running a scheme, expressed as a percentage of its assets. It is deducted from the scheme’s assets and reflected in the NAV. The terms changed when the SEBI (Mutual Funds) Regulations, 2026 came into force on 1 April 2026: the Total Expense Ratio (TER) is now the total of the base expense ratio, brokerage, transaction costs and statutory levies.
Folio. The account number under which an investor’s holdings with a fund house are recorded.
Growth option. The option in which gains stay invested in the scheme and are reflected in the NAV. Nothing is paid out until units are redeemed.
Hybrid fund. A scheme that holds a mix of equity and debt in proportions set out in its scheme documents.
IDCW (Income Distribution cum Capital Withdrawal). The option in which a scheme may pay out amounts from time to time. The NAV falls by the amount paid, and a payout can include part of the investor’s own capital. Payouts are not guaranteed.
Index fund. A scheme that aims to track a stated market index instead of selecting securities actively.
KIM (Key Information Memorandum). A short summary of the Scheme Information Document that accompanies the application form.
KYC (Know Your Client). The identity and address verification that is mandatory before investing in mutual funds.
L to R
Liquid fund. A debt scheme that invests in very short-term money market instruments. It is market-linked and carries risk, though generally less volatility than other categories.
Lock-in period. A period during which units cannot be redeemed.
Lumpsum. A single one-time investment, as opposed to regular instalments.
NAV (Net Asset Value). The value of one unit of a scheme, declared for every business day.
NFO (New Fund Offer). The initial period during which a new scheme is opened for subscription.
Nominee. The person named by an investor to receive the units in the event of the investor’s death. Under the SEBI (Mutual Funds) Regulations, 2026, the nominee receives them as trustee on behalf of the legal heirs. A nomination is not a Will.
Open-ended scheme. A scheme that accepts purchases and redemptions on every business day.
Redemption. Selling units back to the scheme at the applicable NAV, less any exit load.
Regular plan. The plan of a scheme bought through a distributor. Its expense ratio includes the distributor’s commission.
Riskometer. The dial that shows a scheme’s level of risk on a six-level scale from Low to Very High.
RTA (Registrar and Transfer Agent). The agency that maintains investor records and processes transactions on behalf of a fund house.
S to Z
SAI (Statement of Additional Information). The document covering the mutual fund as a whole: sponsor, trustees, AMC and general legal and tax information.
SEBI (Securities and Exchange Board of India). The regulator of the securities market, including mutual funds.
SID (Scheme Information Document). The main document for a scheme, setting out its objective, asset allocation, risks, costs and procedures.
SIP (Systematic Investment Plan). Investing a fixed amount in a scheme at regular intervals.
Step-up SIP. A SIP whose instalment increases by a set amount or percentage at set intervals.
STP (Systematic Transfer Plan). Moving a fixed amount at regular intervals from one scheme to another scheme of the same fund house.
Switch. Moving money from one scheme or plan to another within the same fund house. It is treated as a redemption and a fresh purchase.
SWP (Systematic Withdrawal Plan). Redeeming a fixed amount, or a fixed number of units, from a scheme at regular intervals.
Tracking difference. The gap between the return of an index fund or ETF and the return of the index it tracks.
Unit. The measure of an investor’s holding in a scheme. The value of a holding is the number of units multiplied by the NAV.
If a term you need is missing, ask us, or look it up in the investor education material on the AMFI and SEBI websites.