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An investment company that continually offers new shares and buys existing shares back at the request of
the shareholder and uses its capital to invest in diversified securities of other companies.Mutual funds have
become extremely popular over the last 20 years. What was once just another obscure financial instrument is now
a part of our daily lives. More than 80 million people, or one half of the households in America, invest in mutual
funds. That means that, in the United States alone, trillions of dollars are invested in mutual funds.In fact, to many
people, investing means buying mutual funds. After all, it's common knowledge that investing in mutual funds is
(or at least should be) better than simply letting your cash waste away in a savings account, but, for most people,
that's where the understanding of funds ends. It doesn't help that mutual fund salespeople speak a strange language
that is interspersed with jargon that many investors don't understand. Originally, mutual funds were heralded as a
way for the little guy to get a piece of the market. Instead of spending all your free time buried in the financial
pages of the Wall Street Journal, all you had to do was buy a mutual fund and you'd be set on your way to financial
freedom. As you might have guessed, it's not that easy. Mutual funds are an excellent idea in theory, but, in reality,
they haven't always delivered. Not all mutual funds are created equal, and investing in mutual fund isn¶t as easy as
throwing your money at the first salesperson who solicits your business.

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A company that invests its clients' pooled fund into securities that match its declared financial objectives.
Asset management companies provide investors with more diversification and investing options than they would
have by themselves.Mutual funds, hedge funds and pension plans are all run by asset management
companies. These companies earn income by charging service fees to their clients. AMCs offer their clients more
diversification because they have a larger pool of resources than the individual investor. Pooling assets together
and paying out proportional returns allows investors to avoid minimum investment requirements often required
when purchasing securities on their own, as well as the ability to invest in a larger set of securities with a smaller
investment.

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A mutual fund's price per share or exchange-traded fund's (ETF) per-share value. In both cases, the per-
share dollar amount of the fund is calculated by dividing the total value of all the securities in its portfolio, less any
liabilities, by the number of fund shares outstanding. In the context of mutual funds, NAV per share is computed
once a day based on the closing market prices of the securities in the fund's portfolio. All mutual funds' buy and
sell orders are processed at the NAV of the trade date. However, investors must wait until the following day to get
the trade price.Mutual funds pay out virtually all of their income and capital gains. As a result, changes in NAV
are not the best gauge of mutual fund performance, which is best measured by annual total return.Because ETFs
and closed-end funds trade like stocks, their shares trade at market value, which can be a dollar value above
(trading at a premium) or below (trading at a discount) NAV.
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A sales charge or commission charged to an investor when buying or redeeming shares in a mutual fund.
The fee may be a one-time charge at the time the investor buys into the mutual fund (front-end load), when the
investor redeems the mutual fund shares (back-end load), or on an annual basis as a 12b-1 fee.A large number of
mutual funds carry sales charges. These are paid directly by the investor in the case of the front-end and back-end
variety, and indirectly through a deduction to the net assets of the investor's fund if of the 12b-1, or level-load,
variety.Oftentimes, these sales charges will be waived if a load mutual fund is included as an investment option in
an employer-sponsored retirement plan.Unlike 12b-1 fees, front-end and back-end loads are not included in the
calculation of a fund's operating expenses.


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ic The amount borrowed or the amount still owed on a loan, separate from
interest.
ic
The original amount invested, separate from earnings.
ic
The face value of a bond.
ic
The owner of a private company.
ic
The main party to a transaction, acting as either a buyer or seller for his/her
own account and risk. Be sure to take into account the context in which this
term is used, as the exact meaning of the term has many variations. Also
referred to as "corpus".


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The market value of assets that an investment company manages on behalf of investors. An asset under
management (AUM) is looked at as a measure of success against the competition and consists of
growth/decline due to both capital appreciation/losses and new money inflow/outflow. There are widely differing
views on what "assets under management" refers to. Some financial institutions include bank deposits, mutual
funds and institutional money in their calculations; others limit it to funds under discretionary management, where
the client delegates responsibility to the company.

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A financial institution that has the legal responsibility for a customer's securities. This implies
management as well as safekeeping. Also known as "custody".There are additional fees associated with
this special attention.
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A security offering in which investors may purchase units of a closed-end mutual fund. A new fund offer
occurs when a mutual fund is launched, allowing the firm to raise capital for purchasing securities.A new fund
offer is similar to an initial public offering. Both represent attempts to raise capital to further operations. New fund
offers are often accompanied by aggressive marketing campaigns, created to entice investors to purchase units in
the fund. However, unlike an initial public offering (IPO), the price paid for shares or units is often close to a fair
value. This is because the net asset value of the mutual fund typically prevails. Because the future is less certain
for companies engaging in an IPO, investors have a better chance to purchase undervalued shares.


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A mutual fund that invests principally in stocks. It can be actively or passively (index fund) managed.
Also known as a "stock fund".Stock mutual funds are principally categorized according to company size,
the investment style of the holdings in the portfolio and geography.Size is determined by a company's market
capitalization, while the investment style, reflected in the fund's stock holdings, is also used to categorize equity
mutual funds.Stock funds are also categorized by whether they are domestic (U.S.) or international. These can be
broad market, regional or single-country funds.There are so-called "specialty" stock funds that target business
sectors such as healthcare, commodities and real estate.

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An investment pool, such as a mutual fund or exchange-traded fund, in which core holdings are fixed
income investments. A debt fund may invest in short-term or long-term bonds, securitized products,
money market instruments or floating rate debt. The fee ratios on debt funds are lower, on average,
than equity funds because the overall management costs are lower.The main investing objectives of a debt
fund will usually be preservation of capital and generation of income. Performance against a benchmark is
considered to be a secondary consideration to absolute return when investing in a debt fund.

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A type of mutual fund that does not have restrictions on the amount of shares the fund will issue. If
demand is high enough, the fund will continue to issue shares no matter how many investors there are.
Open-end funds also buy back shares when investors wish to sell.The majority of mutual funds are open-
end. By continuously selling and buying back fund shares, these funds provide investors with a very
useful and convenient investing vehicle. It should be noted that when a fund's investment manager(s)
determine that a fund's total assets have become too large to effectively execute its stated objective, the
fund will be closed to new investors and in extreme cases, be closed to new investment by existing fund
investors.
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A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through
an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock
exchange. Also known as a "closed-end investment" or "closed-end mutual fund."Despite the name
similarities, a closed-end fund has little in common with a conventional mutual fund, which is technically
known as an open-end fund. The former raises a prescribed amount of capital only once through an
IPO by issuing a fixed number of shares, which are purchased by investors in the closed-end fund as
stock. Unlike regular stocks, closed-end fund stock represents an interest in a specialized portfolio of
securities that is actively managed by an investment advisor and which typically concentrates on a specific
industry, geographic market, or sector. The stock prices of a closed-end fund fluctuate according to market
forces (supply and demand) as well as the changing values of the securities in the fund's holdings.

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The price that an investor pays for a security. This price is important as it is the main component in
calculating the returns achieved by the investor. Essentially, it can be thought of as the price that is paid
for anything that is bought.For example, if an investor buys Ford stock at $15, then this would be the
purchase price. When looking at the return on the investment, the investor would compare the purchase
price of $15 to the price the investment was sold at or the current market price for Ford. Purchase price
can also refer to the price that a company pays for an item, such as another company. For example, if Ford
bought Kia for $3.5 billion, this would be Ford's purchase price.

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Repurchase price is different from redemption price and refers to the price at which a close-ended scheme
repurchases its units. Repurchase can either be at NAV or can have an exit load.

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redemption price is the price received by the customer on selling units of an open-ended scheme to the
fund. If the fund does not levy an exit load, the redemption price will be same as the NAV. The
redemption price will be lower than the NAV in case the fund levies an exit load.

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Some Mutual Funds provide the investor with an option to shift his investment from one scheme to
another within that fund. For this option the fund may levy a switching fee. Switching allows the Investor
to alter the allocation of their investment among the schemes in order to meet their changed investment
needs, risk profiles or changing circumstances during their lifetime.

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An individual who holds or manages assets for the benefit of another.For example, an indenture trustee is
the agent of a bond issuer who handles all the administrative aspects of a loan, including ensuring that the
borrower complies with the terms in the indenture.c

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Time period, usually 30 to 60 days, a mortgage lender agrees to hold the mortgage rate and points payable
by the borrower to the rate quoted when the application was taken. Also called j
It is not the same
as a loan Commitment although some commitments may contain a lock-in provision. This protects the
borrower against rate increases if interest rates rise before the loan closing takes place. Lenders may
charge a flat fee or a percentage of the mortgage loan, or add a fraction of a percentage point to the loan's
interest rate.Period of time in which a mortgagor cannot refinance a mortgage without paying a penalty to
the lender.

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A risk management technique that mixes a wide variety of investments within a portfolio. The rationale
behind this technique contends that a portfolio of different kinds of investments will, on average, yield
higher returns and pose a lower risk than any individual investment found within the
portfolio. Diversification strives to smooth out unsystematic risk events in a portfolio so that the
positive performance of some investments will neutralize the negative performance of others. Therefore,
the benefits of diversification will hold only if the securities in the portfolio are not perfectly
correlated.For example, an economic downturn in the U.S. economy may not affect Japan's economy in
the same way; therefore, having Japanese investments would allow an investor to have a small cushion of
protection against losses due to an American economic downturn.Most non-institutional investors have a
limited investment budget, and may find it difficult to create an adequately diversified portfolio. This fact
alone can explain why mutual funds have been increasing in popularity. Buying shares in a mutual
fund can provide investors with an inexpensive source of diversification.

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This is a plan where investors make regular, equal payments into a mutual fund, trading account or
retirement account, such as a 401k. By using a systematic investment plan (SIP), investors are benefitting
from the long-term advantages of dollar-cost averaging and the convenience of saving regularly without
taking any actions except the initial setup of the SIP.Dollar-cost averaging involves buying a fixed-dollar
amount of a security regardless of its price. Therefore, shares are bought at various prices over time and
the average cost per share of the security will decrease over time. Dollar-cost averaging lessens the risk of
investing a large amount of money into a security. In addition to SIPs, many investors reinvest dividends
received from their holdings back into purchasing more stock, called dividend reinvestment plans
(DRIPs).
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A fund that combines a stock component, a bond component and, sometimes, a money market component,
in a single portfolio. Generally, these hybrid funds stick to a relatively fixed mix of stocks and bonds that
reflects either a moderate (higher equity component) or conservative (higher fixed-income component)
orientation. A balanced fund is geared toward investors who are looking for a mixture of safety, income
and modest capital appreciation. The amounts that such a mutual fund invests into each asset class usually
must remain within a set minimum and maximum. Although they are in the "asset allocation" family,
balanced fund portfolios do not materially change their asset mix. This is unlike life-cycle, target-date and
actively managed asset-allocation funds, which make changes in response to an investor's changing risk-
return appetite and age, or overall investment market conditions.