Important Mutual Funds Terms You Must Know

Mutual fund investments have become quite common lately. Those who know how it works can earn substantial dividends over a long term. However, newcomers often have trouble understanding the system itself and it comes in their way of making sound decisions regarding their investments.

Image Source

Below are some of the most common terms associated with mutual funds that can help you understand its various aspects:

AMC

An Asset Management Company, commonly known by its acronym AMC, is essentially the fund house that manages the investors’ funds. It employs a fund manager or a group of fund managers who invest the funds pooled by several investors in a way that maximizes the chance of meeting the financial goals.

Load

The load is the fee you pay when selling (called exit load) or buying (called entry load) mutual funds units. So, if you want to invest Rs. 20,000 in mutual funds and the entry loan is 3%, it means Rs. 600 will be deducted from the amount and the remaining Rs. 19,400 will be invested. Similarly, on selling if the exit loan is again 3% and your invested Rs. 19,400 has increased to Rs. 25,000 then you will receive Rs. 25,250.

NAV

NAV stands for Net Asset Value. It’s the price of a unit of a mutual fund and can be considered similar to stock prices. Just like stock prices go up and down, NAV also fluctuates from time to time. However, unlike stock prices that can change several times a day, NAV changes only once per day.

NFO

A New Fund Offering (NFO) is referred to a new mutual fund scheme you can purchase the units of.

AUM

Assets Under Management refers to the total value of the investments under a fund. So, if you invested Rs. 10,000 in a mutual fund and they grew to Rs. 15,000 over time then this figure would be referred to as AUM.