![Learn key terms about mutual funds Learn key terms about mutual funds](https://images.news18.com/ibnlive/uploads/2021/07/1627283897_news18_logo-1200x800.jpg?impolicy=website&width=510&height=383)
Learn key terms about mutual funds
Entering the world of mutual funds can be exciting, but all the financial jargon can feel like a different language.
Imagine this: you are in a bustling Diwali market, your eyes wide open, looking at the dazzling array of sweets and delicacies. Jalebis On one side they tempt you, on the other the rasgullas wink. You want to try everything, but there's only so much your stomach can handle! Investing in mutual funds can feel a bit like early Diwali overload. With so many options and so many terms like SIP and NAV, you might be wondering where to start. Don't worry, friend. snack Enthusiast (and soon-to-be investment expert!). This guide is your shoppers' guide to the exciting world of mutual funds.
Entering the world of mutual funds can be exciting, but all the financial jargon can feel like a different language! Understanding key terms can help you make informed decisions, choose the right fund for your goals, and avoid hidden surprises. We'll help you understand the meaning behind the terms so you can invest with confidence right away.
- Systematic Investment Plan (SIP): SIP allows you to invest a fixed amount in mutual funds at regular intervals (weekly, monthly, quarterly, etc.). This is a systematic way to invest and helps you average out your investment costs over time.
- Systematic Withdrawal Plan (SWP): SWP allows you to withdraw a fixed amount from a mutual fund plan on a regular basis. This can be a great way to generate regular income through investments.
- NAV (Net Asset Value): NAV is the market value of units of a mutual fund scheme. This is calculated by dividing the total net assets of the scheme by the number of units outstanding. The NAV of mutual fund schemes fluctuates daily.
- Asset Management Company (AMC): An AMC is a company that manages mutual funds. The AMC is responsible for investing the funds raised from investors in accordance with the investment objectives of the plan.
- Expense Ratio: Expense ratio is the annual fee charged by a mutual fund scheme to cover its operating expenses. Generally, the lower the expense ratio, the better for investors.
- Dividend Option: Mutual funds offer two options to investors – growth option and dividend option. In a growth option, dividends declared by the plan are reinvested in the plan itself. In dividend options, dividends are paid to investors.
- Exit Load: Exit load is the charge levied by a mutual fund scheme on redemption of units within a certain period from the date of investment.
- Lock-in Period: Some mutual funds have a lock-in period. This means that your units cannot be redeemed before the lock-in period expires.
- Asset Allocation: Asset allocation refers to how a mutual fund plan invests its assets across different asset classes such as equity, liabilities and cash. The asset allocation of a mutual fund scheme determines its risk profile. There are various types of mutual funds, including stock funds, bond funds, and hybrid funds. Each category has investment objectives and risk profiles.
- Risk Profile: Risk profile is an assessment of an investor’s risk tolerance. It is important to choose a mutual fund plan that suits your risk profile.
- Fund Manager: A person responsible for making investment decisions for a mutual fund. A good fund manager is critical to fund performance.
Understanding these terms can help you make informed decisions while investing in mutual funds. If you are unsure or lack expertise in investing in mutual funds, consider speaking with a financial advisor who can provide tailored guidance based on your financial situation and goals.
disclaimer: The expert views and investment tips contained in this News18.com report are the opinions of experts and not the opinions of the website or its management. Readers are advised to check with certified professionals before making any investment decisions.