SIP Glossary: A-Z Financial Terms

Asset Management Company — the entity that manages mutual fund schemes. Examples: HDFC AMC, SBI Mutual Fund, ICICI Prudential.

Association of Mutual Funds in India — the self-regulatory body for mutual funds in India. Regulates distributors and promotes investor education.

AMFI Registration Number — a unique ID assigned to registered mutual fund distributors. Required to distribute mutual fund products in India.

Assets Under Management — the total market value of all investments managed by a mutual fund scheme or AMC.

A hybrid mutual fund that invests in both equity and debt instruments, providing a balance of growth and income with moderate risk.

A standard index (like Nifty 50, Sensex) against which a mutual fund's performance is compared to evaluate the fund manager's effectiveness.

Compound Annual Growth Rate — the annualized rate of return that smooths out year-to-year fluctuations. Used to compare fund performance over different periods.

The total accumulated value of your mutual fund investment at any given point. Also refers to the target amount in goal-based investing.

A mutual fund that invests primarily in fixed-income securities like bonds, government securities, and corporate deposits. Lower risk and lower returns than equity funds.

Now called IDCW (Income Distribution cum Capital Withdrawal) — a fund option where profits are distributed to investors periodically instead of being reinvested.

Equity Linked Savings Scheme — a type of equity mutual fund that qualifies for tax deduction under Section 80C (up to ₹1.5L/year). Has a mandatory 3-year lock-in period.

A fee charged when purchasing mutual fund units. SEBI abolished entry load in August 2009. No mutual fund in India charges entry load today.

A mutual fund that invests primarily (minimum 65%) in stocks/shares of companies. Categories include large cap, mid cap, small cap, flexi cap, and sector funds.

A fee charged when redeeming mutual fund units before a specified period (usually 1 year for equity funds). Typically 1% if redeemed within 12 months.

The annual fee charged by a mutual fund for managing the fund, expressed as a percentage of AUM. Includes fund management fees, administrative costs, and distribution expenses.

First In, First Out — the method used for calculating capital gains tax on mutual fund redemptions. Units purchased first are considered sold first.

A mutual fund that can invest across all market capitalizations (large, mid, small) without any fixed allocation mandate, giving the fund manager maximum flexibility.

A unique account number assigned to each mutual fund investor by the AMC. Used to identify and track all transactions and holdings.

A fund option where all profits are reinvested back into the fund, compounding the investment over time. Preferred for long-term wealth creation via SIP.

A mutual fund that invests in a mix of equity and debt instruments. Types include Aggressive Hybrid, Balanced Advantage, Conservative Hybrid, and Multi-Asset.

A mutual fund that replicates a specific market index (like Nifty 50). Passively managed with lower expense ratios than actively managed funds.

A mutual fund that invests minimum 80% in the top 100 companies by market capitalization. Lower risk and moderate returns compared to mid/small cap.

Long Term Capital Gains — gains from selling equity funds held for more than 12 months. Taxed at 12.5% above ₹1.25 Lakh annual exemption.

A one-time investment of a large amount in a mutual fund, as opposed to SIP which invests small amounts regularly.

A mutual fund investing minimum 65% in companies ranked 101st to 250th by market capitalization. Higher growth potential but more volatile than large cap.

A professionally managed investment vehicle that pools money from many investors to invest in securities like stocks, bonds, and other assets.

National Automated Clearing House — the payment system used for SIP auto-debit from bank accounts. Replaced the older ECS system.

Net Asset Value — the per-unit price of a mutual fund, calculated by dividing total net assets by the number of units outstanding. NAV changes daily based on market value of holdings.

India's benchmark stock market index comprising the top 50 companies listed on the National Stock Exchange (NSE), representing about 66% of free-float market capitalization.

One Time Mandate — a bank authorization for SIP auto-debit. OTM allows the mutual fund to debit a specified maximum amount from your bank account periodically.

The collection of all your investments across different mutual funds, stocks, and other assets. Diversification across your portfolio reduces risk.

The process of selling (withdrawing) mutual fund units. Units are redeemed at the prevailing NAV, and proceeds are credited to your bank account.

The annualized returns calculated for every possible period of a given duration. For example, 5-year rolling returns show every possible 5-year return from the fund's inception.

The investment principle behind SIP — investing a fixed amount regularly results in buying more units when prices are low and fewer when high, lowering the average cost per unit.

Securities and Exchange Board of India — the regulatory authority for the Indian securities market, including mutual funds. SEBI protects investor interests and regulates market participants.

S&P BSE Sensex — India's oldest stock market index comprising 30 leading companies listed on the Bombay Stock Exchange (BSE).

Systematic Investment Plan — a method of investing a fixed amount at regular intervals (monthly) in a mutual fund. It enables disciplined investing and benefits from Rupee Cost Averaging.

A mutual fund investing minimum 65% in companies ranked 251st and below by market capitalization. Highest growth potential but highest volatility and risk.

Short Term Capital Gains — gains from selling equity funds held for 12 months or less. Taxed at 20% flat rate for equity funds.

A SIP variant where the monthly investment amount is automatically increased by a fixed percentage or amount at regular intervals (usually annually), mirroring income growth.

Systematic Transfer Plan — transferring a fixed amount from one mutual fund to another at regular intervals. Used to stagger lump sum investments from debt to equity.

Systematic Withdrawal Plan — withdrawing a fixed amount from a mutual fund at regular intervals. Used during retirement for regular income generation.

The measurement of your holding in a mutual fund. When you invest, you receive units at the prevailing NAV. Total value = Number of units × Current NAV.

Extended Internal Rate of Return — the most accurate method to calculate SIP returns as it accounts for the timing and amount of each cash flow (installment). Standard for SIP return calculation.