NISM Series V-A key terms

A marketplace where financial instruments such as shares, bonds and debentures are issued and traded, connecting investors who supply capital with companies and governments that need it.

The segment of the securities market where new securities are issued and sold for the first time, raising fresh capital for the issuer rather than merely transferring ownership between investors.

The segment where already-issued securities are bought and sold among investors on exchanges or over the counter, providing liquidity and price discovery without raising new money for the issuer.

The Securities and Exchange Board of India, the statutory regulator that frames and enforces rules for securities markets and mutual funds to protect investors and promote orderly market development.

A pooled investment vehicle that collects money from many investors and invests it in a diversified portfolio of securities, managed professionally and held as units of equal value.

The market value of a scheme's assets minus its liabilities, divided by the number of units outstanding; it is the price at which units are bought or redeemed.

The total market value of all investments that a fund house, or a particular scheme, currently manages on behalf of its investors.

The promoter of a mutual fund, usually a bank or financial institution, which establishes the trust, appoints the trustees and the asset management company, and contributes the initial capital.

A person or company that holds the fund's assets in trust for unit holders and oversees the asset management company to ensure it always acts in investors' interest.

The entity appointed by the trustees to run the mutual fund's investment operations, manage portfolios and employ fund managers, operating under SEBI approval and supervision.

A SEBI-registered entity that safekeeps the fund's securities, settles trades and handles corporate actions, keeping fund assets separate from the AMC's own holdings.

A scheme that continuously offers units for sale and redemption at net asset value on every business day, with no fixed maturity date or capped fund size.

A scheme that raises a fixed amount through a one-time new fund offer and has a stated maturity; units generally cannot be redeemed from the fund before maturity, though they may be listed.

An open-ended scheme whose units are listed and traded on a stock exchange at prices close to net asset value, typically tracking an index or a defined basket of securities.

A scheme that invests predominantly in shares of companies, seeking capital appreciation, and must keep at least 65 percent of its assets in equity and equity-related instruments.

A scheme that invests mainly in fixed-income instruments such as bonds, government securities and money market papers, aiming for steady income with lower volatility than equity funds.

An individual or firm registered with AMFI and holding an ARN who markets and sells mutual fund schemes to investors and earns commissions from the AMC for assets sourced.

A recurring payment from the AMC to the distributor, calculated as a small percentage of the investor's assets in the scheme and paid for as long as the money stays invested.

A one-time payment made by the AMC to the distributor when an investment first enters a scheme; for most schemes in India it has largely been discontinued.

The process of assessing an investor's ability and willingness to take risk using factors such as income, age, investment experience and goals, in order to assign a suitable risk category.

The practice of dividing an investment across asset classes such as equity, debt and cash, chosen according to the investor's goals, time horizon and comfort with risk.

A clear statement in a scheme's offer document describing what the scheme aims to achieve, such as long-term capital growth or regular income, and the assets it will use.

A statistical measure of how much a scheme's returns vary from their average over a period; a higher figure indicates wider swings and therefore greater volatility of returns.

A measure of how sensitive a scheme's returns are to movements in the market index; a beta above one suggests the fund is more volatile than the market.

A risk-adjusted performance measure equal to the scheme's excess return over the risk-free rate divided by its standard deviation; a higher value suggests better return per unit of risk.

The risk that a bond issuer fails to pay interest or principal on time, or that its credit rating is downgraded, reducing the value of securities held by the scheme.

The risk that bond prices fall when interest rates rise; schemes holding longer-maturity securities are generally more sensitive to such changes in market rates.

An independent index or market measure against which a scheme's performance is compared, helping investors judge whether the fund has added value or lagged the market.

Compound annual growth rate is the constant yearly rate at which an investment would have grown from its starting value to its ending value over a given period.

The excess return a scheme earns beyond what its benchmark would predict for its level of market risk; positive alpha suggests the fund manager added value.

Know your customer is the mandatory process of verifying an investor's identity, address and financial details before accepting an investment, to prevent fraud and money laundering.

A facility that lets an investor commit a fixed amount at regular intervals into a scheme, buying units at varying net asset values and averaging out the purchase cost.

A fee charged to an investor who redeems units before a specified holding period, deducted from the redemption proceeds and credited back into the scheme's assets.

The deadline on a business day by which a purchase or redemption application must reach the fund's official collection point to receive that day's applicable net asset value.

The annual percentage of a scheme's average assets charged towards management fees, administrative costs and other expenses, which reduces the returns credited to investors.

The profit made when units or securities are sold for more than their purchase cost; gains held beyond the stated period are long-term and taxed at different rates.

A levy payable on transactions in listed securities and on redemption of certain mutual fund units, collected by the exchange or the fund and paid over to the government.

The practice of valuing a scheme's holdings at their current market price rather than at purchase cost, so that net asset value reflects present values on each valuation day.