Glossary

Aadhaar is a 12 digit identity number issued by UIDAI. It is widely used to verify who you are, including for a quick KYC when you start investing.

An AMC (Asset Management Company) is the company that manages a mutual fund’s schemes. It makes the investment decisions and runs the schemes day to day, but it works under the trustees and is approved by SEBI. It does not own your money, it only manages it.

AMFI (Association of Mutual Funds in India) is the industry body that mutual fund companies belong to. It sets industry standards and issues the ARN that distributors need. It is not a regulator, that role belongs to SEBI. Do not mix the two up, the exam likes to test it.

An ARN (AMFI Registration Number) is the number a person or firm needs to sell mutual funds in India. You get it from AMFI after you clear the NISM Series V-A exam and complete the steps. Without an ARN, you cannot legally distribute mutual funds.

AUM (assets under management) is the total value of money a scheme, or a whole fund house, is managing. A larger AUM means more investors and money are trusting that manager.

A benchmark has to match the scheme objective, its asset allocation and its strategy, and it is named in the scheme document. Funds are compared against the total return version of an index, which counts dividends as well as price movement, so the comparison is fair. Judging a fund on its return alone tells you little. A fund up 11% while its benchmark rose 13% has underperformed, even though the number looks positive.

A capital gain arises only when you actually sell. Until then the rise is on paper and is not taxed. Gains are usually split into short-term and long-term depending on how long you held the investment, and the two are taxed differently. The holding periods and rates differ by asset and are revised from time to time, so check the current position before you plan around them. A capital loss is the same thing in reverse.

Compounding is your money making money, and then that new money making more. It starts slow and gets powerful over long periods, which is why starting early matters more than starting big.

A credit bureau collects your loan and card repayment history and turns it into a credit score. Lenders check that score before giving you a loan. CIBIL is the best known in India.

A custodian keeps safe custody of the securities a scheme owns. It is appointed by the trustees and registered with SEBI, which keeps the assets separate from the company that manages them.

A demat account holds your investments in digital form, so you never deal with paper certificates. You open one through a broker or an investing app, and it is where your shares and funds live.

Every mutual fund must offer two plans. A regular plan pays commission to whoever sold it to you. A direct plan does not, so it carries a lower expense ratio and a slightly higher NAV over time. Same scheme, same portfolio, same fund manager, different cost. If you pick funds yourself, the direct plan leaves more money with you. A regular plan is what pays for genuine advice, so the thing to avoid is holding one while receiving no advice at all.

Diversification means spreading your money across many investments so that one bad one does not sink you. A mutual fund does this for you automatically by holding many companies at once.

A dividend is money a company chooses to hand its shareholders rather than reinvest. It is never guaranteed, even where a company has paid one for years. In a mutual fund, an equivalent payout option exists, and it matters that the NAV falls by the amount paid out on the payout date. That money came out of your own holding, so a payout is not free money.

ELSS stands for Equity Linked Savings Scheme. It invests mainly in shares and qualifies under Section 80C, with a three-year lock-in that is the shortest among the 80C options. Because it holds equity, the value can fall, so it suits a long horizon rather than money you need at the end of the lock-in. The deduction only helps under the old tax regime. Under the new regime there is no deduction, so an ELSS fund is just an equity fund with a lock-in.

EMI stands for Equated Monthly Instalment. It is the fixed amount you pay every month to slowly clear a loan, covering both the borrowed money and the interest. Easy EMIs feel small, but always check the total you will pay over the full term.

Equity means a stake in a business rather than a loan to one. Returns come from the business growing and, sometimes, from dividends. There is no promised return and no maturity date, which is why equity swings far more than debt in the short run and has historically rewarded patience over long periods. Money you need within a few years does not belong here.

An exit load is a charge some schemes apply when you redeem units before a set period, to discourage very short holding. It is deducted from the amount you get back.

The expense ratio covers fund management, administration and distribution costs. You never pay it as a separate bill. It is deducted before the NAV is declared, so the return you see is already net of it. Small differences matter enormously over long periods, because the fee compounds against you exactly as returns compound for you. Over thirty years, one extra percentage point a year can cost lakhs.

Financial literacy means understanding the basics of money well enough to make good everyday decisions. It covers simple ideas like saving, budgeting, interest, inflation, and avoiding scams. Surveys test it with a few basic questions. In India, only about 27% of adults pass, which is exactly the gap GreenFunds exists to close.

A financial year, often shortened to FY, is the 12 month period a country uses for money and tax. In India it runs from 1 April to 31 March. So FY25 is the year from April 2024 to March 2025. News reports and government data usually count money over a financial year, not a calendar year.

A fixed deposit promises a known return over a known period, which is its whole appeal. Breaking it early usually costs a penalty and a lower rate. The interest is generally taxable, and if the rate after tax is below inflation your buying power quietly shrinks even though the balance grows. A sweep deposit is a variant that converts back to cash automatically when your account runs short.

A folio is your account with a mutual fund, much like a bank account number. The RTA records your units and transactions against your folio.

IDCW stands for Income Distribution cum Capital Withdrawal, and it replaced the older label of dividend option, because the old name misled people. The payout comes out of your own NAV, which falls by exactly that amount on the record date. Nothing was added to your wealth. The alternative is the growth option, where gains stay inside the scheme and keep compounding, which usually suits a long-term goal better.

An index fund buys the companies in an index in the same weights, so its return closely tracks that index. Nobody is picking stocks, so the expense ratio is usually far lower than an actively managed fund. You give up the chance of beating the market and in exchange you avoid the risk of badly trailing it, at a low cost. The gap between the fund and the index it copies is called tracking error.

Inflation is how fast prices go up. A little inflation is normal, but it quietly eats the value of cash sitting idle, which is why money you do not need soon should be somewhere it can grow.

KYC stands for Know Your Customer. It is a quick, one time identity check that banks and investing apps must do before you can start. You usually finish it by uploading your PAN and Aadhaar.

A liquid fund invests in debt instruments maturing within 91 days. Because the holdings mature so quickly, the value barely moves when interest rates change, which is why people use these funds for an emergency cushion or for money waiting to be invested. Low risk is not the same as no risk. A credit problem in the portfolio can still hurt. Redemption money normally reaches your bank the next working day, and some liquid schemes offer same-day credit up to a capped amount.

A load is a charge linked to buying or selling fund units. SEBI banned entry loads, so entering costs nothing extra, but some funds still charge an exit load if you leave early.

A lock-in is a hard rule, not a fee. During it, redemption is simply not allowed, which is different from an exit load where you can leave but pay for it. Lock-ins usually accompany a tax benefit, because the government wants the money to stay put. Check the lock-in before you invest money you might need, since no amount of urgency unlocks it early.

Mark to market means a scheme values everything it holds at the current market price each day, not the price it paid. This daily valuation is what produces a fresh NAV.

Market capitalisation is the share price multiplied by the number of shares. In India, companies are ranked by it: the largest 100 are large-cap, the next 150 are mid-cap, and everything from the 251st onwards is small-cap. The pattern as you move down is consistent. More room to grow, and more volatility and business risk along the way. Fund categories are defined by these bands, so the label on a fund tells you roughly how bumpy the ride is likely to be.

The minimum due is the smallest amount your credit card asks for each month. Paying only that keeps the account regular, but the unpaid rest carries very high interest, which is how card debt snowballs.

A mutual fund pools money from many people and a professional manager invests it across many companies. It lets a small amount get spread across lots of shares, which lowers your risk compared to buying a single share.

NCFE (National Centre for Financial Education) was set up by India’s financial regulators to spread financial education. Its national surveys are a common, citable source for financial-literacy numbers.

An NFO is a launch, not a bargain. The ₹10 starting price says nothing about value, because a new scheme has no track record, no portfolio to examine and no performance to compare. An existing scheme with years of history is usually easier to judge. The normal cut-off timing rules for deciding which NAV applies do not apply during an NFO.

NISM (National Institute of Securities Markets) is an institution set up by SEBI. It runs the certification exams that people working in India’s securities markets must pass. For mutual fund distributors, the relevant one is the NISM Series V-A exam.

ODR (online dispute resolution) is a way to resolve an unresolved money dispute online, through mediation or arbitration. In the grievance ladder it comes after raising the issue with the fund and with SEBI.

The offer document describes a scheme so you can decide before investing. The Scheme Information Document (SID) is the detailed version; the Key Information Memorandum (KIM) is the short summary that comes with the application form.

An overnight fund holds securities that mature the next day, so it carries almost no interest rate risk and very little credit risk. Returns are correspondingly low. It suits money that needs somewhere safe to sit for a few days rather than money you want to grow.

PAN (Permanent Account Number) is a ten-character tax identity number from the income tax department. It is required for most financial transactions, including investing in a fund.

The word works at two levels. Your portfolio is every investment you own across accounts and asset types. A fund portfolio is the list of securities that fund holds, published every month. Thinking at portfolio level matters, because risk lives in the combination rather than in any single holding. Six funds holding the same companies is one bet wearing six hats.

RBI stands for Reserve Bank of India. It is the central bank, which means it manages the country’s money supply, sets key interest rates, and regulates all the other banks. When you read that the RBI changed rates, it affects your loan EMIs and your savings interest.

The nominal return is the headline number an investment advertises. The real return is what survives inflation, and it is the only one that decides whether your buying power grew. An option paying 6% while inflation runs 6% left you exactly where you started. It gets sharper after tax, because tax is charged on the nominal gain, so you can pay tax on a return that made you no better off.

Redemption is when you sell your mutual fund units back to the scheme and receive money. Open-ended funds allow it on any business day, priced at that day’s NAV.

An RTA (Registrar and Transfer Agent) keeps the investor records for a mutual fund and processes purchases, redemptions and updates. Names you may have seen, such as CAMS and KFintech, are RTAs. The AMC appoints the RTA, and every RTA registers with SEBI.

SCORES is SEBI’s complaints redress system. If a mutual fund or its RTA does not resolve your complaint, you can lodge and track it with SEBI through the SCORES portal.

SEBI (Securities and Exchange Board of India) is the regulator for India’s securities markets, including mutual funds. It registers funds, sets the rules, inspects them, and can penalise anyone who breaks them.

Section 80C lets you reduce your taxable income by up to ₹1.5 lakh a year, if you put that money into approved options like EPF, PPF, ELSS funds, or life insurance. It applies under the old tax system, so check which system fits you.

SIP stands for Systematic Investment Plan. It is the simple habit of putting the same amount into an investment every month, on autopilot, so you do not have to time the market or remember to do it.

The sponsor is the party that establishes a mutual fund. SEBI checks its track record, and it must contribute a set share of the AMC’s net worth. It starts the fund, then steps back.

Term insurance is the simplest kind of life cover. You pay a small premium, and if you die during the policy term, your family gets the sum assured. It has no investment part, which is why it is cheap.

Trustees hold a mutual fund’s property in trust for the unit holders. They do not manage the money, they oversee the AMC and make sure it follows the rules. A fund needs at least four trustees, most of them independent.

When you invest in a mutual fund you do not buy the fund itself, you buy units of it. The number you get is your money divided by that day NAV, and you can hold fractions of a unit, so nothing is rounded away. Your holding is simply units multiplied by the current NAV. This is why a low NAV does not mean a cheap fund. You just get more units, each worth less.

UPI stands for Unified Payments Interface. It lets you send money from one bank account to another in seconds, using just a phone, a UPI ID or a QR code. You approve a payment with a secret UPI PIN. Remember, you only ever need your PIN to send money, never to receive it.