Glossary

    A Monthly Income Plan (MIP) is a mutual fund that invests about 80% money in debt and the rest in equity. There is nothing 'monthly income'ish about a Monthly Income Plan.

    That said, the MIP is an extremely useful product in the portfolio of a retiree. It gives her a relatively safe investment avenue, since 80% of the money is in debt. The 20% in equity ensures that the long term returns beat inflation, so that the retiree does not find her purchasing power getting eroded by the 25-odd years of retired life that she has to live. By choosing the dividend option, the retiree can make sure the money is received on a monthly basis, just like a pension.

    A hedge fund is a private investment fund that participates in a range of assets and a variety of investment strategies intended to protect the fund's investors from downturns in the market while maximizing returns on market upswings. Wealthy investors use hedge funds. In India hedge funds are not very popular though.

    Hedge funds are different from mutual funds and other types of traditional investment portfolios in that they undertake a wider range of investment and trading activities than traditional long-only investment funds, and invest in a broader range of assets, including equities, bonds and commodities.

    International mutual funds are those mutual funds that allocate money of investors in equities or commodities listed in foreign countries. They could do this by their own research or through investing in foreign mutual funds.

    A fixed maturity plan (FMP or interval fund) is a debt mutual fund, with a fixed investment and maturity date. It provides a fixed return in this period, though the rate of return is not known in advance. Money cannot be withdrawn in the interim.

    A FMP usually provides a slightly higher return than a bank fixed deposit. Also, if the tenure of investment is greater than one year, the FMP is more tax efficient. FMP gains are then taxed at only 10%. The interest on fixed deposit is taxed based on your income for the year. This can be as high as 20% or even 30%.

    Equity funds are mutual funds which allocate most (typically well over 90%) of your money invested in them to equity shares of various companies.

    Global mutual funds, also called as international mutual funds invest pooled money of investors in equities or commodities listed in foreign countries directly or by buying units of other foreign mutual funds.

    Systematic Transfer Plan is a mode of mutual fund investment which allows an investor to regularly transfer fixed amount of funds from one scheme to another one chosen.

    Systematic Investment Plan is a mode of mutual fund investment which allows periodic investment of fixed amount in a scheme for a chosen period.

    A depository is a financial institution that stores financial securities like shares, mutual fund units and bonds of investors traded on stock exchanges. Depositories work like banks that keep money of account holders.

    Offer document is the prospectus giving details of terms and features of any public issue of equity shares, mutual fund scheme or bonds. In case of rights issue or takeover the offer document refers to offer for sale of shares. Offer document could be a draft or final one.

    Addendum refers to a document giving additional information on a security's main document that has already been issued. They usually contain changes or additions to the first document issued. Addendums are commonly issued for mutual fund Scheme Information Document (SID) or Key Information Memorandum (KIM).

    Micro SIPs refer to Systematic Investment Plan in mutual funds of very small amounts. Earlier SIPs that did not exceed Rs 50,000 per year were exempted from KYC norms and were called as micro SIPs. But from 2011 all mutual fund investments need to satisfy KYC norms. Although the size of investment for micro SIP is not defined some mutual funds have SIP of Rs 50 or Rs 100 under micro SIP.

    Open ended mutual fund schemes are those that impose no entry or exit restrictions on investors. There is no specific investment period or maturity date for such schemes. Investors can buy or redeem units of such mutual fund schemes at any time from the fund house.

    A close ended mutual fund scheme has specific maturity period. Investors can buy units of a closed ended mutual fund scheme only during its initial subscription period and redeem them at maturity from the fund house. Close ended funds are listed on stock exchanges where interested unit holders can trade them with others.

    A folio number is an unique number designated to each Mutual fund house. By unique it means that no two fund houses have the same folio number. Once you invest in any scheme of that fund house you will be assigned the folio number and post that you can buy multiple schemes under that folio number. This helps in tracking the Mutual funds. 

    There is another provision available wherein you can consolidate multiple folio numbers (when you have schemes from different fund houses) and have one single target folio. You can do this through CAMS/Karvy centres.


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