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Understanding Important Terms In Mutual Funds

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Created on
July 8, 2022


What’s Inside

Savvy investors not only invest wisely but also keep track of their investments via statements. But most mutual fund statements come with a bunch of definitions that might sometimes confuse you.

In this blog, we cover some basic mutual fund definitions you may come across.


Asset management companies (AMC) acquire funds from a variety of investors. This money is then pooled and invested in various types of market securities and asset classes. They regularly track the investment and rebalance it based on the prevailing market conditions.

If you hear terms like money managers or fund houses, remember they are nothing but AMCs. Some examples of AMCs are:

  • ICICI Prudential Mutual Fund
  • Nippon India Mutual Fund
  • DSP Mutual Fund
  • UTI Mutual Fund


AUM stands for Assets Under Management.

  • This is the total value of all investments being managed by the AMC.
  • Typically, AUM, funds performance, and overall company experience are key factors for comparing AMCs. For some, a higher AUM may mean that the fund house is more stable and experienced in dealing with large cash inflows and outflows.

Below are the top 5 AMCs in India with the highest AUM. 


NAV stands for Net Asset Value. The NAV of a particular mutual fund is the value it holds in the market, resulting from all its assets minus all the liabilities. To put it simply, NAV is the per-unit price of the mutual fund. So, multiply the NAV by the number of units you hold, and you will arrive at the total value of your investment in that fund.

NAV calculation is done by the AMC at the end of each trading day and relies on the market prices of the various securities that the fund house has invested in as part of the fund’s portfolio balance. 

Exit Load

An exit load may also be referred to as commission or charges paid to the AMC by the investor in the case of redeeming their holdings before the maturity date.

For example, you purchased units in an equity fund with a three-year lock-in period. However, due to some emergency, you wish to redeem them at the end of the 2nd year. In such a case, you will be obligated to pay the exit load to the AMC, just like you would pay premature withdrawal charges in a bank fixed deposit. Although not all mutual funds levy an exit load, it is worth noting this clause and the associated charges before investing.

Funds with no exit load are known as open-ended funds.

Expense Ratio

Expense Ratio or Total Expense Ratio (TER) is the annual charges that each investor pays for owning units of that mutual fund. The major chunk of this money goes to the fund manager and the team that works on devising the investment strategy, tracking its progress and re-allocating the portfolio to minimise risk and maximise gain for investors. 

  • TER is an essential consideration while deciding on a fund since it affects your net returns. For example, if you invest in a mutual fund that provides 10% absolute returns and has a TER of 1%, your net returns will be 9% due to the deduction of the expense ratio.
  • This is one reason why many investors have started preferring index funds that aim to replicate the performance of a specific market index like the Nifty 50 or BSE Sensex.

These index funds don’t demand great attention from the fund managers and have very low expense ratios as well.


Consolidated Account Statement (CAS) is the account statement of your holdings and the transactions that have taken place in your account. Generated on a monthly basis, the electronic version of this statement is known as eCAS. Since it is linked to your PAN, it can fetch details of all your mutual fund and stock holdings under the combination of your name and PAN. The NSDL or CDSL, India’s two main depositories, are responsible for generating the statement.

Folio Number

A folio number helps track investments from a specific mutual fund house. It is akin to your account number for that particular mutual fund house. Hence, you will have different folio numbers if you’ve made investments across different fund houses.


SIP (Systematic Investment Plan) needs no introduction. But not many people may be aware of the Systematic Withdrawal Plan (SWP and the Systematic Transfer Plan (STP). Just like how SIP allows you to keep investing regularly through small amounts deducted directly from your account, in SWP and STP, you can withdraw a monthly fixed amount or transfer it systematically to another fund from the same AMC. STP can also allow you to earn a bit extra by parking a chunk of money in one scheme (most commonly a debt scheme) and moving small amounts to another scheme (most commonly an equity scheme) every month. SWP, on the other hand, gives you a monthly fixed source of income, ideal for retirement.

Fund Manager

Large AMCs may have several schemes or types of mutual funds under their umbrella. Herein lies the need for fund managers responsible for the adequate performance of these mutual funds. They ensure that the underlying investment strategy is on course and also indulge in rebalancing the portfolio mix whenever there is a sharp departure from the set path. It is common for people to check the fund manager’s experience and track record as it instils a sense of trust among investors before deciding. 

This definitions list is not exhaustive. As you learn, you will come across many more such definitions, but if you’re new to investing or are generally unaware of it, the above explanations should act as a good starting point to begin your investment journey.


By regularly following up on mutual fund statements and familiarising yourself with common mutual fund definitions, you can become a more informed investor. Understanding terms such as AMC, AUM, NAV, exit load, expense ratio, eCAS, folio number, SWP, STP, and fund manager can help you make sound investment decisions and track the performance of your investments. With this knowledge, you can confidently embark on your investment journey and navigate the world of mutual funds like a pro.

Frequently Asked Questions

1. What is a mutual fund statement?

A mutual fund statement, just like your bank statement, is a summary of your transactions and purchases in a fund within a specific time period. It’s generally sent to you at the end of every month by the AMC to your registered email address. It’s meant to give you an overview of your fund’s performance - whether your investment has grown or not, and by how much. Apart from these details, it also has your bank account details to and from which money can be transferred if you choose to purchase more units of the fund or withdraw from it. You can use the mutual fund statement as proof of solvency or savings when you need to take out a loan or travel abroad. This also gives you a summary of your capital gains which you may need for your tax filing every year. The mutual fund statement, just like a bank statement, can be generated from the AMC’s or the broker’s website and the time period can be customised. 

2. How do you read a mutual fund statement?

You will find the following definitions in your mutual fund statement.

  • Mutual fund folio number: this is a unique number assigned to you by the AMC.
  • Statement period: similar to a bank account statement, this tells you all the transactions you’ve done on your mutual fund within a particular period.
  • Bank account details: This is the bank account number from and to which the money will be transferred if you invest or withdraw money from your mutual fund account.
  • Unit balance: This tells you how many units you have remaining after the transactions have been carried out. In a mutual fund, units are comparable to holding shares in a stock.
  • Cost: This tells you how much you’ve invested in that particular fund.
  • Current value: This is how much your investment is worth at the time of generating the statement
  • NAV: this tells you the price of each unit at the time of generating the statement
  • IDCW Reinvested/IDCW Paid: This is only applicable to you if you’ve taken an IDCW plan, which is different from a growth plan. IDCW in a mutual fund is comparable to dividends in stocks. 

3. What is the simple definition of a mutual fund?

A mutual fund is a pool of funds. As against stocks, where each stock is held by one investor, a mutual fund is a collection of stocks, bonds or other asset classes that a group of investors can get together and invest in. This amount of money is managed by a professional fund manager supported by a team of researchers who decide what proportion of the money should be invested in which assets. Assets here could refer to stocks, bonds, commodities, and such.


Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.
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