Funds, ETFs & Index Investing

Hybrid Fund

A mutual fund that invests across both equity and debt, in proportions set by its stated category.

Test: the scheme holds a defined mix of equity and debt, with the allocation range specified in the scheme document %

IDCW Option

The plan option under which a fund periodically distributes part of the NAV to unit holders as income distribution cum capital withdrawal.

Post-Payout NAV = Pre-Payout NAV - Amount Distributed per Unit ₹

Funds, ETFs & Index Investing

iNAV

The indicative net asset value of an ETF, computed and published continuously through the trading day.

iNAV = (Live Value of the Underlying Basket + Cash Component) / Units Outstanding ₹

Funds, ETFs & Index Investing

Index

A rule-based measure of the value of a defined group of securities, used to represent a market or segment.

Index Value = (Current Free-Float Market Capitalisation of Constituents / Base Market Capitalisation) x Base Index Value index points

Funds, ETFs & Index Investing

Index Fund

A mutual fund that seeks to replicate an index's holdings and return rather than to beat it.

Test: the fund holds constituents in index proportions and measures itself by tracking difference rather than by outperformance qualitative

Funds, ETFs & Index Investing

Index Rebalancing

The periodic revision of an index's constituents and weights according to its published rules.

Test: constituents are reviewed on a stated schedule against eligibility criteria, with additions and deletions announced in advance qualitative

Funds, ETFs & Index Investing

Index Weighting

The rule determining how much of an index each constituent represents.

Free-Float Weight = Constituent's Free-Float Market Capitalisation / Sum of All Constituents' Free-Float Market Capitalisations %

Funds, ETFs & Index Investing

International Fund

A fund giving Indian investors exposure to securities listed outside India.

Return in Rupees = (1 + Foreign Market Return) x (1 + Currency Change) - 1 %

Funds, ETFs & Index Investing

Liquid Fund

A debt mutual fund investing in money-market instruments maturing within 91 days.

Test: every instrument in the portfolio has a residual maturity of 91 days or less qualitative

Funds, ETFs & Index Investing

Lump Sum Investment

Investing an entire amount at one time rather than spreading it across instalments.

Future Value = Amount x (1 + Annual Return) raised to the number of years ₹

Funds, ETFs & Index Investing

Multi-Cap Fund

An equity fund required to hold a minimum allocation to each of the large, mid and small-cap segments.

Test: at least 25% each in large-cap, mid-cap and small-cap, totalling a minimum of 75% in equity %

Funds, ETFs & Index Investing

Mutual Fund

A pooled investment vehicle that collects money from many investors and invests it in securities according to a stated objective.

Investor's Value = Units Held x Net Asset Value per Unit ₹

Funds, ETFs & Index Investing

Net Asset Value

The per-unit value of a fund, computed as its assets less liabilities divided by units outstanding.

NAV = (Market Value of Assets - Liabilities) / Number of Units Outstanding ₹

Funds, ETFs & Index Investing

New Fund Offer

The initial subscription period during which units of a newly launched scheme are sold, usually at ₹10.

Test: the scheme has no prior track record and units are offered at a fixed initial price during a stated window qualitative

Funds, ETFs & Index Investing

Passive Investing

An approach that seeks to match an index's return rather than to beat it, by holding the index's constituents.

Test: security selection is determined by index rules rather than by judgement, and success is measured by tracking rather than by outperformance qualitative

Funds, ETFs & Index Investing

Portfolio Management Service

A SEBI-registered service managing a separate portfolio of securities for a single client, with a high minimum investment.

Test: securities are held in the client's own name or demat account and managed under a discretionary or non-discretionary agreement ₹

Funds, ETFs & Index Investing

Portfolio Overlap

The proportion of holdings, by weight, that two funds have in common.

Overlap % = Sum over all common holdings of the minimum of the two funds' weights in that holding %

Funds, ETFs & Index Investing

Portfolio Turnover Ratio

The proportion of a fund's portfolio replaced over a year, measuring how actively it trades.

Portfolio Turnover = Lesser of Total Purchases or Total Sales / Average Assets Under Management x 100 %

Funds, ETFs & Index Investing

Regular Plan

A version of a mutual fund scheme bought through a distributor, whose commission is embedded in a higher expense ratio.

Regular Plan Expense Ratio = Direct Plan Expense Ratio + Distributor Commission %

Funds, ETFs & Index Investing

Riskometer

SEBI's mandated six-level graphic indicating a mutual fund scheme's risk, disclosed monthly.

Levels: Low, Low to Moderate, Moderate, Moderately High, High, Very High, computed from the portfolio's own risk characteristics qualitative

Funds, ETFs & Index Investing

Rupee Cost Averaging

The effect by which investing a fixed amount regularly buys more units when prices are low and fewer when they are high.

Average Cost per Unit = Total Amount Invested / Total Units Purchased ₹

Funds, ETFs & Index Investing

Scheme Categorisation

SEBI's framework defining standard mutual fund categories with mandated investment characteristics.

Test: the scheme's holdings satisfy the allocation and eligibility rules prescribed for its declared category qualitative

Funds, ETFs & Index Investing

Sectoral Fund

An equity fund that invests at least 80% of its assets in companies from a single sector.

Test: minimum 80% allocation to one defined sector, such as banking, pharmaceuticals or technology qualitative

Funds, ETFs & Index Investing

Smart Beta

A rules-based index strategy that weights constituents by a chosen factor rather than by market capitalisation.

Test: constituent weights are determined by a published rule based on a factor such as value, quality, momentum, low volatility or equal weight qualitative