The organization employed by a mutual fund to give professional advice on the fund's
investments and to supervise the management of its assets.
Asked or Offering Price
The price at which a mutual fund's shares can be purchased. The asked or offering
price means the current net asset value (NAV) per share plus sales charge, if any.
For a no-load fund, the asked price is the same as the NAV.
Asset Allocation Fund
A fund that spreads its portfolio among a wide variety of investments, including
domestic and foreign stocks and bonds, government securities, gold bullion and real
estate stocks. This gives small investors far more diversification than they could
get allocating money on their own. Some of these funds keep the proportions allocated
between different sectors relatively constant, while others alter the mix as market
A service offered by most mutual funds whereby income dividends and capital gain
distributions are automatically invested into the fund by buying additional shares
and thus building up holdings through the effects of compounding.
A mutual fund that maintains a balanced portfolio, generally 60% bonds or preferred
stocks and 40% common stocks.
Bid or Sell Price
The price at which a mutual fund's shares are redeemed (bought back) by the fund.
The bid or redemption price means the current net asset value per share, less any
redemption fee or back-end load.
A mutual fund whose portfolio consists primarily of corporate, municipal or U.S.
Government bonds. These funds generally emphasize income rather than growth.
System of evaluating the probability of whether a bond issuer will default. Standard
and Poor's Corp. and Moody's Investors Services, among other firms, analyze the
financial stability of both corporate and government bond issuers. Ratings range
from AAA or Aaa (extremely unlikely to default) to D (currently in default). Bonds
rated BBB or below by S&P or Baa or below by Moody's are not considered to be
of investment grade. Mutual funds generally restrict their bond purchases to issues
of certain quality ratings, which are specified in their prospectuses.
Capital Appreciation Fund
A mutual fund that seeks maximum capital appreciation through the use of investment
techniques involving greater than ordinary risk, such as borrowing money in order
to provide leverage, short-selling and high portfolio turnover.
Capital Gains Distributions
Payments (usually annually) to mutual fund shareholders of gains realized on the
sale of portfolio securities.
A rise in market value of a mutual fund's securities, reflected in its net asset
value per share. This is a specific long-term objective of many mutual funds.
Certificate of Deposit
Interest-bearing, short-term debt instrument issued by banks and thrifts.
Closed-End Investment Company
An investment company that offers a limited number of shares. They are traded in
the securities markets, usually through brokers. Price is determined by supply and
demand. Unlike open-end investment companies (mutual funds), closed-end funds do
not redeem their shares.
Short-term, unsecured promissory notes with maturities no longer than 270 days.
They are issued by corporations, in denominations starting at $10,000, to fund short-term
Common Stock Fund
An open-end investment company whose holdings consist mainly of common stocks and
usually emphasize growth.
The date the fund processed your transaction, typically the same day or the day
after your trade date.
Contingent Deferred Sales Charge (CDSC)
A fee (or back-end load) imposed by certain funds on shares redeemed within a specific
period following their purchase. These charges are usually assessed on a sliding
scale, such as four percent to one percent of the amounts redeemed, with the fee
reduced each year the units are held.
The bank or trust company that maintains a mutual fund's assets, including its portfolio
of securities or some record of them. Provides safekeeping of securities but has
no role in portfolio management.
Daily Dividend Fund
This term applies to funds that declare their income dividends on a daily basis
and reinvest or distribute monthly.
Deferred Compensation Plan
A tax-sheltered investment plan to which employees of state and local governments
can defer a percentage of their salary.
An individual or a corporation serving as principal underwriter of a mutual fund's
shares, buying shares directly from the fund, and reselling them to other investors.
The policy of spreading investments among a range of different securities to reduce
the risks inherent in investing.
Exchange Privilege (Or switching privilege)
The right to transfer investments from one fund into another, generally within the
same fund group, at nominal cost.
The date on which a fund's Net Asset Value (NAV) will fall by an amount equal to
the dividend and/or capital gains distribution (although market movements may alter
the fund's closing NAV somewhat). Most publications which list closing NAVs place
an "X" after a fund' name on its ex-dividend date.
The ratio of total expenses to net assets of the fund. Expenses include management
fees, 12(b)1 charges, if any, the cost of shareholder mailings and other administrative
expenses. The ratio is listed in a fund's prospectus. Expense ratios may be a function
of a fund's size rather than of its success in controlling expenses.
Fannie Mae (Federal Mortgage Association)
An agency established by the federal government, but owned by private stockholders,
which issues mortgage-backed certificates in $25,000 denominations. Timely payment
of both interest and principal are insured. A growing number of mutual funds emphasize
investments in these and other mortgage-backed securities.
An accounting period consisting of 12 consecutive months.
A fund that invests in both Indian. and foreign securities.
A mutual fund whose primary investment objective is long-term growth of capital.
It invests principally in common stocks with significant growth potential.
A device used by traders and sophisticated investors to reduce loss due to market
fluctuations. This is done by counter balancing a current sale or purchase by another,
usually future, purchase or sale. The desired result is that the profit or loss
on the current sale or purchase will be set off by the loss or profit on the future
sale or purchase.
Payment of interest and dividends earned on the fund's portfolio securities after
operating expenses are deducted.
A mutual fund that primarily seeks current income rather than growth of capital.
It will tend to invest in stocks and bonds that normally pay high dividends and
A mutual fund that seeks to mirror general stock-market performance by matching
its portfolio to a broad-based index, most often the Standard & Poor's 500-stock
A fund that invests in securities traded in markets outside India.
A corporation, partnership or trust that invests the pooled monies of many investors.
It provides greater professional management and diversification of investments than
most investors can obtain independently. Mutual funds, or "open-end" investment
companies, are the most popular form of investment company.
The financial goal (long-term growth, current income, etc.) that an investor or
a mutual fund pursues.
A speculative bond rated BB or below by Standard & Poor's Corp. and Ba or below
by Moody's Investor Service. "Junk bonds" are generally issued by corporations
of questionable financial strength or without proven track records. They tend to
be more volatile and higher yielding than bonds with superior quality ratings. "Junk
bond funds" emphasize diversified investments in these low-rated, high-yielding
A sales charge or commission assessed by certain mutual funds ("load funds,")
to cover their selling costs. The commission is generally stated as a portion of
the fund's offering price, usually on a sliding scale from one to 8.5%.
A mutual fund that levies a sales charge up to 8.5%, which is included in the offering
price of its shares, and is sold by a broker or salesman. A front-end load is the
fee charged when buying into a fund; a back-end load is the fee charged when getting
out of a fund.
A mutual fund that charges a small sales commission, usually 3.5% or less, for the
purchase of its shares.
The amount a mutual fund pays to its investment adviser for services rendered, including
management of the fund's portfolio. In general, this fee ranges from .5% to 1% of
the fund's asset value.
Money Market Fund
A mutual fund that aims to pay money market interest rates. This is accomplished
by investing in safe, highly liquid securities, including bank certificates of deposit,
commercial paper, government securities and repurchase agreements. Money Market
funds make these high interest securities available to the average investor seeking
immediate income and high investment safety.
Certificates backed by pooled mortgages (e.g., Freddie Mac or Ginnie Mae). Issuing
agencies buy mortgages from lending institutions and repackage them as securities
that they sell to investors. They are generally issued in denominations of $25,000
or above. Yields, which stem from interest and principal on underlying mortgages,
are generally higher than those of Treasury bonds that provide comparable liquidity
and safety. A growing number of income mutual funds concentrate their holdings in
Municipal Bond Fund
A mutual fund that invests in a broad range of short, intermediate or long-term
tax-exempt bonds issued by states, cities and other local governments. The interest
obtained from these bonds is passed through to shareholders free of tax. The objective
of these funds is current tax-free income.
An open-end investment company that buys back or redeems its shares at current net
asset value. Most mutual funds continuously offer new shares to investors.
Net Asset Value Per Share
The current market worth of a mutual fund share. Calculated daily by taking the
funds total assets securities, cash and any accrued earnings deducting liabilities,
and dividing the remainder by the number of shares outstanding.
A commission-free mutual fund that sells its shares at net asset value, either directly
to the public or through an affiliated distributor, without the addition of a sales
Option Income Fund
A fund that invests primarily in dividend-paying common stocks on which call options
are traded on national securities exchanges. These funds seek high current return
consisting of dividends, premiums from selling options, net short-term gains (including
those from the exercising of options) and any profits from closing purchase transactions.
The date on which distributions are paid to shareholders who do not want to reinvest
them. This date can be anywhere from one week to one month after the Record Date.
Payroll Deduction Plan
An arrangement between an employer and a mutual fund, authorized by the employee,
through which a specified sum is deducted from an employee's salary to buy shares
in the fund.
Portfolio Turnover Rate
The rate at which the fund's portfolio securities are changed each year. If a fund's
assets total $100 million and the fund bought and sold $100 million worth of securities
that year, its portfolio turnover rate would be 100%. Aggressively managed funds
generally have higher portfolio turnover rates than do conservative funds that invest
for the long term. High portfolio turnover rates generally add to the expenses of
An official document that each investment company must publish, describing the mutual
fund and offering its shares for sale. It contains information required by the Securities
and Exchange Commission.
The market price of a given security.
The date the fund determines who its shareholders are; "shareholders of record"
who will receive the fund's income dividend and/or net capital gains distribution.
Frequently the business day immediately prior to the Ex-Dividend Date.
A fee charged by a limited number of funds for redeeming, or buying back, fund shares.
The price at which a mutual fund's shares are redeemed (bought back) by the less
expensive fund. The redemption price is usually equal to the current net asset value
A mutual fund that concentrates its investments within a specific geographic area,
usually the fund's local region. The objective is to take advantage of regional
growth potential before the national investment community does.
Reinvestment Date (Payable Date)
The date on which a share's dividend and/or capital gains will be reinvested (if
requested) in additional fund shares.
A service that most mutual funds offer whereby a shareholder's income dividends
and capital gains distributions are automatically reinvested in additional shares.
The technique of investing a fixed sum at regular intervals regardless of stock
market movements. This reduces average share costs to the investor, who acquires
more shares in periods of lower securities prices and fewer shares in periods of
high prices. In this way, investing risk is spread over time.
A fund that operates several specialized industry sector portfolios under one umbrella.
Transfers between the various portfolios can usually be executed by telephone at
little or no cost.
A mutual fund whose prospectus allows for more than one portfolio. Portfolios may
be specialized (Sector Fund) or broad (growth stock, along with a money market portfolio).
Management can create additional portfolios as it sees fit.
The sale of a security which is not owned by the seller. The "short seller"
borrows stock for delivery to the buyer, and must eventually purchase the security
for return to the lender.
Short-Term Municipal Bond Fund
A fund that invests in municipal bonds with maturities not exceeding two years.
See Municipal Bond Fund.
Simplified Employee Pension
An alternative to a Keogh plan that allows employers who have not established qualified
retirement plans to contribute to their employee's Individual Retirement Accounts.
A mutual fund specializing in the securities of a particular industry or group of
industries or special types of securities.
Systematic Withdrawal Plans
Many mutual funds offer withdrawal programs whereby shareholders receive payments
from their investments. These payments are usually drawn from the fund's dividend
income and capital gain distributions, if any, and from principal only when necessary.
Date on which assets of scheme will be liquidated and divided pro rata to unit holders
proportionate to their holding. ( After providing for contingency and winding up
The institution which maintains administrative control over another's assets: a
commercial bank, savings and loan association, mutual savings bank, trust company
The organization that acts as the distributor of a mutual fund's shares to broker/dealers
and the public.
A type of insurance contract that guarantees future payments to the holder, or annuitant,
usually at retirement. The annuity's value varies with that of the underlying portfolio
securities, which may include mutual fund shares. All monies held in the annuity
A flexible plan for capital accumulation, involving no specified time frame or total
sum to be invested.
A mutual fund plan that allows a specified amount of money to be withdrawn at specified
Income or return received from an investment, usually expressed as a percentage
of market price, over a designated period. For a mutual fund, yield is interest
or dividend before any gain or loss in the price per share.
Zero Coupon Bond
Bond sold at a fraction of its face value. It appreciates gradually, but no periodic
interest payments are made. Earnings accumulate until maturity, when the bond is
redeemable at full face value. Nonetheless, interest is taxable as it accrues. As
a result, zero coupon bonds are often used for IRAs, Keoghs and other tax-deferred