If you are interested in investing in mutual funds, here are some terms you need to understand.

As you probably know, a mutual fund is an investment that pools together money from a number of investors. It then uses professionals to manage and invest this money?with the aim of achieving a return.


The mutual funds industry is regulated by the Securities and Exchange Board of India.


If you are interested in investing in mutual funds, here are?some terms you need to understand.


AMC
An Asset Management Company is the fund house or the company that manages the money.


The mutual fund is a trust registered under the Indian Trust Act. It is initiated by a sponsor. A sponsor is a person who acts alone or with a corporate to?establish a mutual fund. The sponsor then appoints an AMC to manage the investment, marketing, accounting and other functions pertaining to the fund.


For instance, ABN AMRO Trustee (India) Private Limited is appointed as the trustee to the ABN AMRO mutual fundABN AMRO Asset Management (India) Limited is appointed as its investment manager.
Various funds with different objectives can be floated under the umbrella of one parent.
So ABN AMRO Equity Fund, ABN AMRO Opportunities Fund and ABN AMRO Flexi Debt Fund are all independent schemes of ABN AMRO Mutual Fund. They are managed by the ABN AMRO AMC.


NAV
The Net Asset Value is the price of a unit of a fund. When a fund comes out with an NFO, it is priced Rs 10. Later, depending on the value of the investments, this price could rise or fall.


Portfolio
This is the term given to all the investments made by the fund as well as the amount held in cash.


Corpus
Let's assume a very small mutual fund has an initial investment of 1,000 units and each unit is worth Rs 10. Hence, the total amount with the fund is Rs 10,000. This is referred to as the corpus. Later, some other investors invest Rs 2,000. Now the corpus will be Rs 12,000 (Rs 10,000 + Rs 2,000).
The total amount invested (Rs 12,000) is called the corpus or the total amount of?money invested in the fund.


AUM
Assets Under Management is the total value of all the investments currently being managed by the fund.
Let's say?the corpus is Rs 12,000 but, due to a rise in the price of the shares it has invested in, the value of the units has increased. So the Rs 12,000 invested is now worth Rs 15,000. This figure is referred to as AUM.


Diversified equity mutual fund
This is a mutual fund that invests in stocks of various companies in various sectors.


ELSS
Equity Linked Saving Schemes are diversified equity mutual funds with a tax benefit under Section 80C of the Income Tax Act.
To avail of the tax benefit, your money must be locked up for at least three years.


Balanced fundA fund that invests in both equity (shares) and debt (fixed return investments) is known as a balanced fund.


Debt fund
These are funds that invest in fixed return investments like bonds. A liquid fund is one that invests in money market instruments these are fixed return investments of a very short tenure.

NFO
A New Fund Offering is the term given to a new mutual fund scheme.

SIP
A Systematic Investment Plan refers to periodic investing in a mutual fund. Every month or every three months, the investor will have to commit to putting in a fixed amount. This will go towards the purchase of units.
Let's say that every month you commit to investing, say,Rs 1,000 in your fund. At the end of a year, you would have invested Rs 12,000.
If the NAV on the day you invest in the first month is Rs 20, you will get 50 units.
The next month, the NAV is Rs 25. You will get 40 units.
The following month, the NAV is Rs 18. You will get 55.56 units.
So, after three months, you would have 145.56 units. On an average, you would have paid around Rs 21 per unit. This is because, when the NAV is high, you get fewer units per Rs 1,000. When the NAV falls, you get more units per Rs 1,000.