A highly regulated organization that pools money from many people into portfolio structured to achieve certain objectives. Typically an AMC manages several funds –open ended/ close ended across several categories- growth, income, balanced.
Balanced Fund: A hybrid portfolio of stocks and bonds.
Close Ended Fund
They neither issue nor redeem fresh units to investors. Some closed ended funds can be bought or sold over the stock exchange if the fund is listed. Else, investor have to wait till redemption date to exit. Most listed close ended funds trade at discount to the NAV.
Open Ended Fund
A diversified and professionally managed scheme, it issues fresh units to incoming investors at NAV plus any applicable sales charge, and it redeems shares at NAV from sellers, less any redemption fees.
Entry/ Exit Load
A charge paid when an investor buys/sells a fund. There could be a load at the time of entry or exit, but rarely at both times.
Expense Ratio
The annual expenses of the funds, including the management fee, administrative cost, divided by the fund under management.
Growth/Equity Fund
A fund holding stocks with good or improving profit prospects. The primary emphasis is on appreciation.
Liquidity
The ease with which an investment can be bought or sold. A person should be able to buy or sell a liquid asset quickly with virtually no adverse price impact.
Net Assets Value
A price or value of one unit of a fund. It is calculated by summing the current market values of all securities held by the fund, adding the cash and any accrued income, then subtracting liabilities and dividing the result by the number of units outstanding.
Interest Rate Risk
The risk borne by fixed-interest securities, and by borrowers with floating rate loans, when interest rates fluctuate. When interest rates rise, the market value of fixed-interest securities declines and vice versa.
Credit Risk
Credit risk involves the loss arising due to a customer’s or counter party’s inability or unwillingness to meet commitments in relation to lending, trading, hedging, settlement and other financial transactions.
Capital Market Risk
Capital Market Risk is the risk arising due to changes in the Stock Market conditions.
