Key Financial Terms

Mutual Fund

An investment vehicle made up of a pool of money collected from many investors to invest in securities such as stocks, bonds, and other assets.

Lump Sum Investment

A one-time investment of a large amount of money as opposed to periodic smaller investments over time.

Systematic Investment Plan (SIP)

A method of investing a fixed amount regularly in a mutual fund, similar to a recurring deposit.

Expense Ratio

The annual fee that mutual funds charge their shareholders, expressed as a percentage of assets under management.

Front-End Load

A sales charge or commission paid when you purchase mutual fund shares, reducing the initial investment amount.

Compound Annual Growth Rate (CAGR)

The annual rate of return that would be required for an investment to grow from its beginning value to its ending value, assuming profits are reinvested.

Net Asset Value (NAV)

The per-share value of a mutual fund, calculated by dividing the total value of all the fund's assets, minus liabilities, by the number of outstanding shares.

Capital Gains

The profit realized when you sell an investment for more than its purchase price.

Smart Tips for Mutual Fund Investing

• Start early: The power of compounding works best over long periods, so start investing as early as possible.
• Invest regularly: Using a SIP approach can help smooth out market volatility through dollar-cost averaging.
• Check the fund's history: While past performance doesn't guarantee future results, a fund's long-term track record can provide valuable insights.
• Understand your risk tolerance: Choose funds that align with your risk profile and investment goals.
• Be aware of tax implications: Different mutual funds have different tax consequences, especially when held in taxable accounts.