Terminologies Involved In Mutual Fund!

Terminologies used in Mutual Fund are as follows:

• Mutual Fund

A mutual fund is a company that brings together money from many people and invests it in stocks, bonds or other assets. 

• Open Ended Funds

 Open-end funds are offered through a fund company that sells shares directly to investors. It enables investors to enter and exit  anytime after they are started.

• Close Ended Funds

 Closed-end funds can be traded at any time of the day when the market is open. It does not permit entry and exit of investors till maturity.

• Securities/Portfolio 

The combined holdings of stocks, bonds or other assets the fund owns are known as its Securities.

Whereas portfolio is a collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including closed-end funds and exchange traded funds (ETFs), it may contain a wide range of assets including real estate, art, and private investments.

• Unit Holder

A unit is equivalent to a share. A unitholder is an investor who owns one or more units in securities.

• Sponsor

The sponsor is the promoter of the mutual fund. They bring in capital and create a mutual fund trust.

• Asset Management Company (AMC) 

Sponsors sets up the AMC. AMC is a firm that invests the funds pooled from individual investors in securities with the objective of optimum return for investors in exchange for a fee.

• Transfer Agent

A transfer agent is a trust company, bank, or institution for the purposes of maintaining an investor's financial records and tracking each investor's account balance.

• Custodian 

A custodian can either be a bank or a trust those who take care of underlying securities (investments) to reduce the risk of unscrupulous brokers taking advantage of the fund.

• Trustee

 Trustee is a holding service who has administrative power for managing the money, property or assets used in mutual funds. The trustee can be an individual person, member of the board of directors, a company or a bank.

• Money Manager

A money manager is a person or financial firm that manages the securities portfolio of an individual or institutional investor.

• NAV (Net Asset Value)

      NAV is the per-unit market value of all the securities held by the mutual fund scheme. It is calculated in following ways:

1.      NAV = [Assets – (Liabilities + Expenses)] / Number of units outstanding
2.     Value per MF is =  Asset - Liability/ Total Units