{"id":5596,"date":"2026-10-09T07:47:19","date_gmt":"2026-10-09T07:47:19","guid":{"rendered":"https:\/\/jumpp.finance\/blog\/?p=5596"},"modified":"2026-10-09T07:47:20","modified_gmt":"2026-10-09T07:47:20","slug":"mutual-fund-terms","status":"publish","type":"post","link":"https:\/\/jumpp.finance\/blog\/financial-management\/personal-finance\/mutual-fund-terms\/","title":{"rendered":"Mutual Fund Terms: NAV, SIP, AUM & More"},"content":{"rendered":"
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Before investing in a mutual fund, you\u2019ll come across a few terms again and again: NAV, expense ratio, exit load, SIP, AUM and benchmark.<\/p>\n\n\n\n

Each tells you something different about the fund: what one unit is worth, what you may pay, how you can invest, where the money goes and how the fund\u2019s performance is measured.<\/strong><\/p>\n\n\n\n

So, if you\u2019re learning the mutual fund basics, here is everything you must know.<\/p>\n\n\n\n

<\/span>What are the Most Important Mutual Fund Terms for Beginners?<\/span><\/h2>\n\n\n\n

Before you start comparing mutual funds, it is important to understand this mutual fund terminology.<\/p>\n\n\n\n

Let’s look at seven essential mutual fund terms and what they mean. <\/p>\n\n\n\n

<\/span>1. NAV Meaning: What Is One Unit Worth?<\/span><\/h3>\n\n\n\n

NAV stands for Net Asset Value.<\/strong><\/p>\n\n\n\n

It is the per-unit value of a mutual fund. NAV is calculated using the total value of the fund\u2019s assets after deducting its liabilities and dividing it by the number of outstanding units.<\/p>\n\n\n\n

For example, if a mutual fund has an NAV of \u20b950, one unit of that fund is valued at \u20b950.<\/p>\n\n\n\n

Remember:<\/strong> A lower NAV does not mean a mutual fund is cheaper or better.<\/p>\n\n\n\n

Mutual funds vs stocks<\/a>– how do they differ?<\/em><\/p>\n\n\n\n

<\/span>2. Expense Ratio: What Does the Fund Cost?<\/span><\/h3>\n\n\n\n

The expense ratio represents the recurring cost of managing and operating a mutual fund scheme.<\/p>\n\n\n\n

It is expressed as a percentage of the scheme\u2019s assets and is reflected in its NAV.<\/p>\n\n\n\n

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  1. Low Expense Ratio (e.g., 0.5%): The fund charges lower management fees, around \u20b950 annually on \u20b910,000, leaving more of your returns with you.<\/li>\n\n\n\n
  2. High Expense Ratio (e.g., 2%): The fund charges higher management fees, around \u20b9200 annually on \u20b910,000, which can reduce your overall returns.<\/li>\n<\/ol>\n\n\n\n

    <\/span>3. Exit Load: Is There a Cost to Exit Early?<\/span><\/h3>\n\n\n\n

    An exit load<\/strong> is a charge that may apply if you redeem your mutual fund units within a specified period. For example, a scheme may charge a 1% exit load if units are redeemed within one year.<\/p>\n\n\n\n

    The exit load and applicable period can vary across schemes, and some schemes may not have one.<\/p>\n\n\n\n

    <\/span>4. SIP: How Can You Invest Regularly?<\/span><\/h3>\n\n\n\n

    SIP stands for Systematic Investment Plan.<\/strong> It is a method of investing a fixed amount in a mutual fund at regular intervals.<\/p>\n\n\n\n

    For example, instead of investing \u20b912,000 at once, you could invest \u20b91,000 every month through an SIP. <\/p>\n\n\n\n

    Here are some important SIP terms for beginners, explained simply:<\/p>\n\n\n\n

    SIP Term<\/strong><\/td>Meaning<\/strong><\/td><\/tr>
    SIP Amount<\/strong><\/td>The fixed amount you invest regularly, such as \u20b9500 or \u20b91,000.<\/td><\/tr>
    SIP Frequency<\/strong><\/td>How often you invest, such as weekly, monthly or quarterly.<\/td><\/tr>
    SIP Date<\/strong><\/td>The scheduled date on which your SIP investment is made.<\/td><\/tr>
    SIP Tenure<\/strong><\/td>The period for which you plan to continue your SIP.<\/td><\/tr>
    SIP Instalment<\/strong><\/td>Each individual payment made through your SIP.<\/td><\/tr>
    SIP Top-Up (Step-Up SIP)<\/strong><\/td>An option to increase your SIP amount periodically, such as from \u20b91,000 to \u20b91,500.<\/td><\/tr>
    SIP Cancellation<\/strong><\/td>Stopping future SIP investments. Existing mutual fund units remain invested unless redeemed.<\/td><\/tr>
    SIP Mandate<\/strong><\/td>An authorisation allowing scheduled SIP payments to be debited automatically from your bank account.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

    <\/p>\n\n\n\n

    <\/span>5. AUM: How Big Is the Fund?<\/span><\/h3>\n\n\n\n

    AUM stands for Assets Under Management.<\/strong><\/p>\n\n\n\n

    It represents the total market value of the assets managed by a mutual fund scheme or Asset Management Company (AMC).<\/p>\n\n\n\n

    AUM gives you an idea of the size of the assets being managed. However, a higher AUM does not automatically mean better performance.<\/p>\n\n\n\n

    <\/span>6. Portfolio: Where Is the Money Invested?<\/span><\/h3>\n\n\n\n

    A mutual fund portfolio is the collection of investments held by a scheme.<\/p>\n\n\n\n

    Depending on the type of fund, its portfolio may contain shares, bonds, government securities, money-market instruments or other eligible assets.<\/p>\n\n\n\n

    <\/span>7. Benchmark: What Is the Fund Compared Against?<\/span><\/h3>\n\n\n\n

    A benchmark<\/strong> is an index or standard against which a mutual fund\u2019s performance can be compared.<\/p>\n\n\n\n

    For example, an equity mutual fund may use the Nifty 50 or another relevant market index as its benchmark.<\/p>\n\n\n\n

    The benchmark gives you a reference point for understanding how the fund has performed over a particular period.<\/p>\n\n\n\n

    <\/span>Mutual Fund Glossary: Common Terms at a Glance<\/span><\/h2>\n\n\n\n

    Here\u2019s a quick reference to some important mutual fund terms and their meanings.<\/p>\n\n\n\n

    Term<\/strong><\/td>Simple Meaning<\/strong><\/td><\/tr>
    AMC (Asset Management Company)<\/strong><\/td>A company that manages mutual fund schemes and investors’ money.<\/td><\/tr>
    AUM (Assets Under Management)<\/strong><\/td>The total market value of assets managed by a fund or AMC.<\/td><\/tr>
    NAV (Net Asset Value)<\/strong><\/td>The per-unit value of a mutual fund.<\/td><\/tr>
    Expense Ratio<\/strong><\/td>The annual cost of managing and operating a mutual fund scheme.<\/td><\/tr>
    Benchmark<\/strong><\/td>A market index used to compare a fund’s performance.<\/td><\/tr>
    SIP (Systematic Investment Plan)<\/strong><\/td>A method of investing a fixed amount regularly.<\/td><\/tr>
    SWP (Systematic Withdrawal Plan)<\/strong><\/td>A facility to withdraw money from a mutual fund at regular intervals.<\/td><\/tr>
    STP (Systematic Transfer Plan)<\/strong><\/td>A facility to transfer money periodically between mutual fund schemes.<\/td><\/tr>
    Exit Load<\/strong><\/td>A charge that may apply when you redeem units within a specified period.<\/td><\/tr>
    NFO (New Fund Offer)<\/strong><\/td>The initial subscription offer of a new mutual fund scheme.<\/td><\/tr>
    IDCW (Income Distribution cum Capital Withdrawal)<\/strong><\/td>An option under which a mutual fund may distribute payouts to investors.<\/td><\/tr>
    Alpha<\/strong><\/td>A measure of a fund’s performance relative to its benchmark after accounting for market-related risk.<\/td><\/tr>
    Portfolio<\/strong><\/td>The collection of investments held by a mutual fund.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

    <\/p>\n\n\n\n

    <\/span>What are the Different Types of Mutual Funds?<\/span><\/h2>\n\n\n\n

    Mutual funds are divided into different categories based on where they invest and their investment objectives. <\/p>\n\n\n\n

    Here are the main types of mutual funds:<\/p>\n\n\n\n

    Type of Mutual Fund<\/strong><\/td>What Does It Mean?<\/strong><\/td><\/tr>
    Equity Mutual Funds<\/td>Invest mainly in company shares and aim for long-term capital growth.<\/td><\/tr>
    Debt Mutual Funds<\/td>Invest in fixed-income instruments such as government securities and corporate bonds.<\/td><\/tr>
    Hybrid Mutual Funds<\/td>Invest in a mix of equity and debt instruments to balance growth potential and risk.<\/td><\/tr>
    Index Mutual Funds<\/td>Track a market index, such as the Nifty 50, by investing in securities that reflect the index.<\/td><\/tr>
    Solution-Oriented Mutual Funds<\/td>Are designed around specific goals, such as retirement or children’s future needs.<\/td><\/tr>
    Other Mutual Funds<\/td>Include categories such as Fund of Funds (FoFs), which invest in other mutual fund schemes.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

    <\/p>\n\n\n\n

    \"Start<\/a><\/figure>\n\n\n\n

    Remember: Different mutual funds carry different levels of risk, costs and investment requirements. Once you understand what a fund is worth, what it costs, where it invests and how its performance is measured, the rest of the terminology becomes easier to follow.<\/p>\n\n\n\n

    Build Your Mutual Fund Portfolio with jUMPP!<\/strong>
    Choose from 1,000+ direct mutual funds and start investing with the beginner-friendly     mutual fund investment app<\/a>.<\/em><\/p>\n\n\n\n

    <\/span>FAQs<\/span><\/h2>\n\n\n\n
    What are the common terms used in mutual funds?<\/strong><\/strong>

    Common mutual fund terms include NAV, SIP, expense ratio, exit load, AUM, portfolio and benchmark. These terms help investors understand how mutual funds work.<\/p> <\/div>

    What is NAV in a mutual fund?<\/strong><\/strong>

    NAV (Net Asset Value) is the per-unit value of a mutual fund, calculated by dividing its net assets by the total outstanding units.<\/p> <\/div>

    What is an SIP and how does it work?<\/strong><\/strong>

    SIP (Systematic Investment Plan) allows you to invest a fixed amount in a mutual fund at regular intervals, such as monthly. Each instalment purchases units based on the applicable NAV.<\/p> <\/div>

    What is the difference between SIP and lump-sum investment?<\/strong><\/strong>

    SIP involves investing smaller amounts regularly, while lump-sum investment means investing a larger amount at once.<\/p> <\/div>

    What is an expense ratio in mutual funds?<\/strong><\/strong>

    The expense ratio is the annual cost of managing and operating a mutual fund scheme. It is expressed as a percentage of the scheme’s assets and reflected in its NAV.<\/p> <\/div>

    What is an exit load in a mutual fund?<\/strong><\/strong>

    An exit load is a charge that may apply when you redeem mutual fund units within a specified period. It varies across schemes.<\/p> <\/div>

    What is the difference between direct and regular mutual funds?<\/strong><\/strong>

    Direct mutual funds are purchased without a distributor and generally have lower expense ratios. Regular mutual funds involve a distributor and typically have higher expense ratios.<\/p> <\/div>

    What is AUM in mutual funds<\/strong>?<\/strong>

    AUM (Assets Under Management) is the total market value of assets managed by a mutual fund scheme or Asset Management Company (AMC).<\/p> <\/div>

    What is the difference between growth and dividend options in mutual funds?<\/strong><\/strong>

    The growth option keeps earnings invested in the scheme, while the IDCW option (earlier called the dividend option) may distribute payouts to investors. IDCW payouts are not guaranteed.<\/p> <\/div>

    What is a mutual fund portfolio?<\/strong><\/strong>

    A mutual fund portfolio is the collection of investments held by a scheme, such as shares, bonds and government securities.<\/p> <\/div> <\/div>\n<\/div>

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