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The five words on every statement
If you read nothing else on this page, read these. They show up on your account statement, your fund factsheet and every SIP confirmation message.
- NAVPrice of one unit, worked out every business day.
- UnitsWhat you actually own. Amount invested divided by NAV.
- Expense ratioYearly cost, taken out of the fund before NAV is shown.
- Exit loadSmall charge if you sell too early, often within a year.
- XIRRThe honest return figure for a SIP with many dates.
A
- Absolute return
- Simple gain as a percentage of what you put in, ignoring time. ₹1 lakh growing to ₹1.5 lakh is a 50% absolute return, whether it took two years or ten. Useful for holdings under a year, misleading beyond that.
- Alpha
- How much a fund did above or below its benchmark. If the benchmark rose 10% and the fund rose 11.5%, the rough alpha is 1.5 percentage points. Negative alpha means you paid a manager and got less than the index.
- AMC (asset management company)
- The company that runs a set of mutual fund schemes. It hires the fund managers, publishes NAVs and sends you statements. Your money sits with a separate custodian, not in the AMC's own account.
- Asset allocation
- How your money is split between equity, debt, gold and cash. For most families this one decision matters more than which individual fund they pick. A 60:40 equity to debt split is a common starting point, not a rule.
- AUM (assets under management)
- Total money a fund manages, shown in crores. A bigger AUM is not a sign of a better fund. Very large small cap funds can even find it harder to buy and sell without moving prices.
B
- Benchmark
- The index a fund compares itself with, such as a top 100 companies index for a large cap fund. Every factsheet shows fund return next to benchmark return. Compare the two over five years, not one.
- Beta
- How sharply a fund moves compared with its benchmark. A beta of 1.2 means that when the market falls 10%, the fund has tended to fall about 12%. Below 1 means calmer than the market.
C
- CAGR (compound annual growth rate)
- The steady yearly rate that would take you from the start value to the end value. ₹1 lakh becoming ₹2 lakh in 6 years is a CAGR of about 12.2%. Right for a single lumpsum, wrong for a SIP. Try the CAGR calculator.
- CAS (consolidated account statement)
- One statement listing every mutual fund you hold across all fund houses, linked to your PAN. It is the first thing we ask for in a portfolio review, because it shows the full picture in one PDF.
- Credit risk
- The chance that a company whose bonds a debt fund holds delays or misses its payments. Funds that hold lower rated papers usually pay a little more, in exchange for this risk.
- Cut-off time
- The time of day before which your purchase gets that day's NAV. For most equity funds it is 3 pm on a business day, and the money must reach the fund by then. Miss it and you get the next day's NAV.
D
- Duration
- For a debt fund, a rough guide to how much its NAV moves when interest rates change. A duration of 4 years means a 1 percentage point rise in rates can pull the NAV down by roughly 4%.
E
- ELSS (equity linked savings scheme)
- An equity fund with a three-year lock-in that qualifies for deduction under Section 80C, up to ₹1.5 lakh a year in the old tax regime. Each SIP instalment has its own three-year lock-in. Rules as of 2026, check current rules. More on our tax saving page.
- Exit load
- A charge, usually 1% of the amount, if you redeem units before a set period, commonly 12 months for equity funds. ₹50,000 redeemed in month 8 with a 1% exit load costs ₹500. Liquid funds have a tiny load only for the first few days.
- Expense ratio (TER)
- The yearly cost of running the fund, as a percentage of your money, taken out daily before the NAV is published. You never see a bill. On ₹10 lakh, a 1% expense ratio is roughly ₹10,000 a year.
F
- Factsheet
- A monthly two to four page summary of a scheme: top holdings, sector split, expense ratio, returns against benchmark, risk ratios. If you read one document per fund, read this.
- Folio number
- Your account number with one fund house. All your schemes with that house can sit under one folio. Quote it whenever you call or write to them.
- Fund manager
- The person or team who decides what an active fund buys and sells. A change of manager is worth noting, since the past record belonged partly to someone else.
G
- Growth option
- Profits stay inside the fund and show up as a rising NAV. Nothing is paid out. For long-term goals this is usually the cleaner choice, since tax is due only when you sell.
I
- IDCW (income distribution cum capital withdrawal)
- The new name for the old "dividend" option. Payouts come from your own invested money and profits, so the NAV drops by the amount paid. Payouts are taxed at your slab rate. Rules as of 2026, check current rules.
- Index fund
- A fund that copies an index in the same weights, with no stock picking. Low cost, no manager risk, and you get the market's return minus a small charge. See index funds.
- Interest rate risk
- Bond prices fall when interest rates rise, and rise when rates fall. Debt funds with a longer duration feel this more. It is the main reason a debt fund NAV can dip for a few months.
K
- KYC (know your customer)
- One-time identity check using PAN, address proof and a photo, done before your first investment. Once your KYC is validated, it works across all fund houses. Steps are in our KYC guide.
L
- Large, mid and small cap
- Company size bands. The top 100 listed companies by market value are large cap, 101 to 250 are mid cap, and the rest are small cap. Smaller usually means bigger swings both ways.
- Liquid fund
- A debt fund holding very short papers of up to 91 days. Used for parking money for days or months, and for an emergency fund. Redemptions usually reach your bank the next business day.
- Lock-in period
- Time during which you cannot redeem at all. ELSS has three years. Most other open-ended funds have none, only an exit load if you leave early.
- LTCG (long-term capital gains)
- Profit on equity fund units held over 12 months. Gains above ₹1.25 lakh in a financial year are taxed at 12.5%. Rules as of 2026, check current rules.
- Lumpsum
- Investing a single amount in one go, instead of spreading it over months. Common with bonuses or maturity proceeds. Often paired with an STP to spread the entry into equity.
M
- Market capitalisation
- Share price multiplied by the number of shares, which is the market's value of a company. It decides whether a stock counts as large, mid or small cap.
N
- NFO (new fund offer)
- The launch period of a new scheme, when units are sold at ₹10. A ₹10 price does not make it a bargain. A new fund has no track record to judge.
- Nominee
- The person who receives your units if something happens to you. Add one to every folio. It saves your family months of paperwork.
P
- Portfolio turnover
- How much of the fund's holdings were bought and sold in a year. 100% turnover means it replaced roughly its whole portfolio. High turnover adds hidden trading costs.
R
- Rebalancing
- Bringing your equity and debt split back to the plan. If a 60:40 mix drifts to 72:28 after a good year, you move some equity back to debt. We check this at every annual review.
- Redemption
- Selling units back to the fund. You get the NAV of the day your request is accepted, minus any exit load. Equity fund money usually lands in two to three business days.
- Regular plan
- A version of the scheme bought through a distributor. Its expense ratio includes the distributor's commission, which pays for the advice, paperwork and reviews.
- Riskometer
- A six-level dial printed on every scheme, from low to very high. Almost every equity fund sits at very high. Match it to how much of a fall you can sit through.
- Rolling returns
- Returns measured over every possible 3 or 5 year window, not just one start date. They show how often a fund did well, which is fairer than a single "5-year return" figure.
- Rupee cost averaging
- With a fixed monthly SIP you buy more units when the NAV is low and fewer when it is high. Over time your average cost per unit tends to smooth out. It lowers timing risk. It does not remove market risk.
S
- Sharpe ratio
- Return earned per unit of risk taken. Between two funds of the same category, the one with the higher Sharpe ratio gave more return for the bumps you had to sit through.
- SIP (systematic investment plan)
- A fixed amount invested automatically every month, from ₹500. It builds the habit and spreads your entry over time. Start with what a SIP is or our SIP page.
- Standard deviation
- How widely a fund's returns have swung around their average. A higher figure means a bumpier ride. Compare it only within the same category.
- STCG (short-term capital gains)
- Profit on equity fund units sold within 12 months, taxed at 20%. Debt fund gains on units bought from April 2023 are taxed at your slab rate however long you hold. Rules as of 2026, check current rules.
- Step-up SIP
- A SIP that rises by a fixed percentage or amount every year, say 10%, in line with salary hikes. ₹5,000 a month stepped up 10% becomes about ₹5,500 in year two and ₹6,050 in year three.
- STP (systematic transfer plan)
- Moves a fixed amount every week or month from one fund to another, usually from a liquid or debt fund into equity. Handy for investing a large sum gradually. See STP.
- Switch
- Moving money from one scheme to another in the same fund house in one request. For tax, a switch is a sale plus a purchase, so gains and exit load apply.
- SWP (systematic withdrawal plan)
- A fixed amount paid out to your bank every month from your fund. Used in retirement as a regular income. Only the gain part of each withdrawal is taxed. See SWP.
T
- Tracking error
- How closely an index fund follows its index. Lower is better. A fund with a low expense ratio but high tracking error may still lag the index more than you expect.
U
- Units
- Your share of the fund. Amount invested divided by NAV. ₹5,000 at a NAV of ₹50 buys 100 units. Your value on any day is units multiplied by that day's NAV.
X
- XIRR (extended internal rate of return)
- A yearly return that accounts for each SIP instalment going in on a different date. It is the right figure for a SIP. Your statement and our review always show XIRR, not absolute return. Worked example below.
Y
- YTM (yield to maturity)
- For a debt fund, the yearly return its current bonds would give if all were held to maturity and paid on time. A rough guide to what the fund may earn before expenses, not a promise.
No term matches that yet.
Send it to us and we will explain it on WhatsApp, and add it here.
Ask on WhatsAppThe most misread number
Absolute return, CAGR and XIRR on the same SIP
A ₹5,000 monthly SIP for 12 months. You put in ₹60,000. At the end of month 12 the value is ₹64,000.
The absolute return says 6.7%, which sounds poor for equity. But your first ₹5,000 was invested for a full year and your last ₹5,000 for barely a month. On average, your money was in the fund for about six months. XIRR weighs each instalment by how long it stayed, and comes out at about 12.5% a year.
CAGR does not fit here at all, because it assumes all ₹60,000 went in on day one. Use CAGR for a lumpsum, XIRR for a SIP, and absolute return only for holdings under a year.
- Monthly SIP
- ₹5,000
- Total invested (12 months)
- ₹60,000
- Value at end of month 12
- ₹64,000
- Absolute return
- 6.7%
- XIRR
- about 12.5% a year
Figures are an assumed rate for illustration, worked out by us. Real values can be lower, including a loss. Mutual fund investments are subject to market risks, read all scheme related documents carefully.
Easily confused
Pairs people mix up
Most wrong decisions we see in a first review come from one of these pairs. One line each, and the question to ask yourself.
| This | Versus this | The difference that matters |
|---|---|---|
| CAGR | XIRR | CAGR for one lumpsum on one date. XIRR when money went in or came out on many dates, as with a SIP. |
| Exit load | Lock-in | Exit load is a charge for leaving early. Lock-in means you cannot leave at all until the period ends. |
| Growth | IDCW | Growth keeps profits in the NAV. IDCW pays some out, and the NAV drops by the same amount. |
| NAV | Share price | A low NAV is not a cheap fund. Two funds holding the same stocks grow by the same percentage whatever their NAV. |
| Expense ratio | Exit load | Expense ratio is charged every year you stay. Exit load is charged once, only if you leave early. |
| STP | SWP | STP moves money between two funds. SWP moves money out of a fund into your bank. |
Why half a percent matters
Expense ratio over 20 years
Take ₹10 lakh invested once and left alone for 20 years. Suppose one version of the fund earns 11.5% a year after costs and another earns 11% because its expense ratio is half a percent higher.
The gap at the end is around ₹7.6 lakh. Cost is the one part of return you know in advance, which is why we always show it in a review, along with what you get for it.
Common questions
About the jargon
Still stuck on a word? Ask on WhatsApp and we reply in plain language, usually the same day.
Is a fund with a lower NAV a better buy?
No. NAV only tells you the price of one unit today. If two funds both rise 10%, ₹10,000 grows to ₹11,000 in each, whether the NAV was ₹15 or ₹150. Judge a fund by its category, cost, and record against its benchmark.
Which return figure should I look at for my SIP?
XIRR. Absolute return ignores time, and CAGR assumes all the money went in on one day. XIRR handles a SIP's many dates correctly. Your consolidated account statement and our review report both show it.
Where do I find a fund's expense ratio and exit load?
On the monthly factsheet and the scheme information document. Both are on the fund house website. When we suggest a fund category, we list the expense ratio and exit load for each option side by side.
Do I pay the expense ratio separately?
No. It is deducted from the fund every day, so the NAV you see is already after costs. You will never get a separate bill for it, which is exactly why it is easy to forget.
Are the tax figures on this page fixed?
No. They are rules as of 2026, check current rules before you act. Tax rates and limits change with budgets. We confirm the current position with you before any sale or switch.
Ask us a term
Seen a word on your statement you do not get?
Tell us the word, or what is confusing you on your account statement. We explain it on WhatsApp, with your own numbers where possible.
Read next
Put the words to use
Pages where these terms come up most.
Nine categories side by side, in plain words.Read SIP
Monthly investing from ₹500, step-up and lumpsum.Read CAGR calculator
Work out the yearly rate between two values.Open Debt funds
Duration, YTM and credit risk in practice.Read KYC guide
What you need before your first investment.Read Portfolio review
We read your statement and explain it back to you.Book
Mutual fund investments are subject to market risks, read all scheme related documents carefully. Past performance may or may not be sustained in future.