Ten important words for mutual fund investors :
Mutual fund schemes are the frontline safety shelters for the middle class investors.
Those who could not understand the tricks of Dalal street game watch the fickle
Sensex and its brother
Nifty on the business channels and newspapers with slight discomfort.
Salaried class, therefore, increasingly turn to fund managers for help. That is quite understandable. Their hard-earned money needs to be sown on the right land to fetch fleshy fruits.
An investor may feel at home if he / she understands
the jargons of investment world. Here shivamaha has given ten important financial terms that are not the ten commandments of personal finance but surely will be helpful when you flip through the newspapers next time.
1. Asset Mix :
How much amount has been collected under a scheme by the mutual fund?
Of the total amount how much have they invested? Where?
Asset mix gives you the exact ratio of allocation of the corpus amount in three broad asset classifications. For instance, the asset mix of 80:15:5 shows that eighty percent of the total amount is invested in capital markets, 15 percent in bond markets and 5 percent in money market instruments. Got it?
2. Beta :
How much rise in points did the stock markets saw on any particular day?
How much rise or fall did the price of your fund experienced on the same day?
Beta value is a measure of price volatility with respect to the particular stock market index on historical basis.
3. Discount :
4. Expense Ratio :
How much are the net assets of the scheme?
How much are the annual recurring costs ? You can calculate the expense ratio or annual recurring costs as a percentage of the net assets of the scheme if these details are available.
Annual recurring expenses include :
Investment management and advisory fees charged by the Asset management company of the mutual fund.
Marketing and selling expenses
Brokerage costs paid by the mutual fund
Trustee fees
Custodian fees
Audit fees
Communication expenses
Statutory Advertisement costs
Costs of providing account statements, dividend or redemption cheques, warrants etc.
5. Ex-Mark or
R2 :
Ex- means
explanation.
Mark means financial
market.
Statistically it is called R-squared. In simpler terms, ex-mark gives you an idea of the extent to which a return of the mutual fund is explained by a particular financial market.
John C. Bogle was the first to explain this term.
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