Investing comes with its own language. Here's what the common terms actually mean — in plain English, without the textbook definitions.
A
AMC (Asset Management Company)
The company that actually runs a mutual fund — pools investor money, manages the portfolio, and is regulated by SEBI. HDFC AMC and SBI Mutual Fund are examples of AMCs.
AUM (Assets Under Management)
The total market value of all the investments a fund or AMC currently manages. A rising AUM generally reflects investor confidence, but a large AUM alone doesn't guarantee better performance.
B
Benchmark
An index (like Nifty 50 or Sensex) a fund's performance is compared against, so investors can judge whether the fund manager is adding value over simply tracking the market.
C
CAGR (Compound Annual Growth Rate)
The year-on-year growth rate that would take an investment from its starting value to its ending value, smoothed into a single average annual figure — useful for comparing investments over different time periods.
D
Direct Plan
A version of a mutual fund bought straight from the AMC, with no distributor commission built in. This means a slightly lower expense ratio, but no distributor support for selection, paperwork, or servicing.
E
ELSS (Equity Linked Savings Scheme)
An equity mutual fund that qualifies for tax deduction under Section 80C, with a mandatory 3-year lock-in — the shortest lock-in among common tax-saving options.
Exit Load
A small fee charged if you redeem your units before a specified period, meant to discourage short-term in-and-out trading. It varies by scheme and typically applies only in the first year or so.
Expense Ratio
The annual fee, expressed as a percentage of your investment, that a fund charges to cover management and operating costs. It's deducted from the fund's returns automatically — you never pay it separately.
F
Folio Number
A unique account number assigned to you the first time you invest in a fund house, used to track and consolidate all your investments with that AMC.
K
KYC (Know Your Customer)
A one-time identity and address verification process required by SEBI before you can invest in any mutual fund in India, done once and valid across all AMCs.
L
Lock-in Period
A fixed duration during which you cannot redeem your investment. Most mutual funds have none; ELSS is a notable exception, with a mandatory 3-year lock-in.
Lumpsum
Investing a large amount in a single transaction, as opposed to spreading it out via a SIP. Suits money you already have in hand and don't need in the near term.
N
NAV (Net Asset Value)
The per-unit value of a mutual fund, calculated once a day from the market value of everything the fund holds. A higher or lower NAV says nothing about whether a fund is expensive or a bargain.
NFO (New Fund Offer)
The initial subscription window when a new mutual fund scheme is launched, similar in concept to an IPO for stocks. An NFO isn't inherently better value than an existing fund with a track record.
R
Regular Plan
A version of a mutual fund bought through a distributor, where the expense ratio includes a commission that pays for the distributor's guidance, paperwork support, and ongoing servicing.
Riskometer
A SEBI-mandated visual gauge on every scheme document showing its risk level, from 'Low' to 'Very High', based on the fund's underlying holdings and strategy.
Rupee Cost Averaging
The natural effect of investing a fixed amount at regular intervals — you buy more units when prices are low and fewer when prices are high, averaging out your purchase cost over time. This is what a SIP does automatically.
S
SIP (Systematic Investment Plan)
A facility to invest a fixed amount in a mutual fund at regular intervals, usually monthly, instead of investing a lump sum all at once.
Step-Up SIP
A SIP that automatically increases your monthly investment by a fixed amount or percentage at set intervals, commonly annually, so your contributions can rise in line with your income.
STP (Systematic Transfer Plan)
A facility to automatically move a fixed amount at regular intervals from one mutual fund scheme to another, often used to shift a lumpsum gradually from a liquid fund into an equity fund.
SWP (Systematic Withdrawal Plan)
The reverse of a SIP — a facility to withdraw a fixed amount at regular intervals from an existing investment, commonly used to create a regular income stream.
X
XIRR (Extended Internal Rate of Return)
A method for calculating the annualised return of an investment made through multiple transactions at different dates and amounts, such as a SIP — a plain CAGR can't handle irregular cash flows the way XIRR can.