Capital Gains

Capital Gain is an increase in an investment's value, which gives it a higher value than the purchase price. These may be short-term or long-term, so income taxes must be reported.

Profit that occurs when a mutual fund's value of a secuirty increases above its purchase price. If the security is sold, the capital gain is realized; the gain is not realized if the security is still retained. The gain is long-term if the security has been held for more than a year; otherwise it will be shorter-term. A capital loss occurs when a security's price drops below its purchase price.

Capital Growth

An increase in the market value of the securities of a mutual fund, reflected in its net value of assets per share. This is a specific goal of many mutual funds in the long term.

Certificate of Deposit

A short-term, interest-bearing debt tool issued by banks and thrifts.

Close-Ended Fund/Schemes

Investors can only purchase units from the fund house during the NFO (New Fund Offer) era in Close-Ended Mutual Fund schemes.

Neither can new investors enter a close scheme, nor can existing investors exit the scheme until its maturity. However, the scheme is listed on a stock exchange post NFO where its units can be traded in order to provide interim liquidity to investors. When buying and selling through the exchange, the number of outstanding units of a close-ended scheme does not change. The units may sell the fund's NAV at a premium or discount depending on market conditions, the expectations of investors about the fund's future performance, and the fund's demand and supply units.

Closed-ended Mutual Fund

Close-ended Mutual funds are available for a fixed time span.

Compounded Annualised Growth Rate (CAGR)

It is the return of the fund from one point to the next after factoring in the investment holding time. It gives an idea during its tenure of the value of the investment. Although investments typically do not rise at a steady rate, the annual compound return smoothes returns by assuming steady growth. For example, an investment of Rs 5,000 over a five-year period has grown to Rs 6,500 and given absolute returns of 30%, which is very high, but the gains are over five years and therefore the CAGR is 5.38% obtained as follows — ((6500/5000)^(1/5))-1. By considering the compounding effect, CAGR calculates the growth rate of investment per year.


The income starts earning you more income when you decide to reinvest your investment income back into the investment. This is known as compounding.

Consolidated Account Statement (CAS)

CAS refers to a single account statement that combines transactions across all mutual fund schemes / fund houses in all of an investor's folios. SEBI has mandated all asset management companies to ensure that each month a CAS is issued to investors whose folio transactions occurred during the month. For those folios that have a) monthly financial transactions and b) equivalent unit holders (identified by a valid PAN), CAS is given. In addition, in December 2012, AMFI released CAS replacing the paper statements in the digital form-'eCAS. '


The interest rate paid (indicated as a percentage of its face value) by a bond or debenture. Of example, if a bond's face value is Rs 100 and it pays interest at 8 percent, the coupon is called the interest rate.

Coupon payments

Coupon payments are bond-related. Bonds are a kind of debt instrument issued by state, companies, and banks when they want investors to borrow money to finance large projects. They issue bonds with a certain rate of coupon or interest to investors. A power company, for example, Energy Grid Pvt. Ltd. can issue 5-year maturity bonds with a coupon rate of 8 percent. This ensures that by purchasing their debt, Energy Grid will pay its bond holders at an interest rate of 8 percent for the money they lend to it. The explanation is clear. When investors do not earn an attractive interest rate from these securities, they would prefer to invest their money in another bond or other avenues that would give them a better return on the same level of risk.

Each shareholder who purchases the Energy Grid bonds will earn an annual interest payment of 8 percent from Energy Grid. Since coupon payments are typically semi-annual in nature, bond investors would receive a coupon saying ' 40 if each bond's face value is ' 1,000. ' Bonds are sold at a certain face value at all times. At the time of issuance, investors who purchase the bonds pay the face value to own each bond. If the Energy Grid bond's face value is ' 1,000, each bond owner receives a coupon payment of 4 percent every six months until the bonds mature. Thus, in this case, every bond holder receives a ' 40 semi-annual coupon payment. These semi-annual payments that the bond issuer promises are called the underlying bond coupons.

The coupons are usually simply reinvested at the prevailing rates (interest rates) and the accumulated interest / coupon is paid at maturity along with the initial major investment.

Coupon Rate

The interest rate was on the coupon's head.

Credit Quality

Investors should assess the credit quality of the portfolio instruments while investing in debt funds. Investors can go through the report of the deal and the fact sheets released by fund houses to test this. A fund that has invested a large corpus in a poor quality paper may find it hard to sell this paper on the market, putting the money of the investor at risk. Given the importance of capital security for debt investors, they should not opt for funds with a large proportion of low-quality investments.

Credit risk

There are two parties in any transaction in which one party owes money to the other party. There is a contractual agreement between the two parties when the compensation is not immediate but is likely to occur in the future. At some point in the future the creditor is expected to meet his compensation duty. The lender being the counterparty faces a risk that, for a variety of reasons, the borrower may not be in an appropriate position to return his money or pay the future periodic interest payments. This risk faced by the lender is called credit risk if the borrower fails to keep his promise of payment in the future.

In the event that banks disburse loans or issue credit cards to their customers, credit risk can arise. Similarly, in the case of a bond, the bond issuer promised to pay a fixed or floating interest rate to the bond investors on a regular basis and to return their principal when the bonds mature. Bond investors (bond buyers or lenders) face a credit risk that these payments may not be made in future by the entity that issued them the bonds.

Credit risk can occur due to many factors in the case of bond investments. Due to unfavorable business environment resulting in low profitability or poor business performance, the bond issuer could face a financial crisis. In such a case, at maturity, the bond issuer may not be able to fulfill its payment obligations of annual interest or principal redemption to its bond holders. Credit risk may also arise when the bond issuer borrows money from banks in the form of loans and has to prioritize such payments over payments to their bond holders. Therefore, credit risk occurs in circumstances where a bond issuer is not in a sound financial situation in order to satisfy its payment obligations on the securities it sold to investors.

The bond issuer can then end up with a credit risk in default. In the event of a bond issuer default, the bond issuer either fails to make the regular coupon (interest) payments or repay the principal invested at maturity by the bond holders. Thus, before buying their bonds, investors must assess the creditworthiness of bond issuers. For example, debt mutual funds investing their pool of investor money in debt instruments must carefully assess the credit value of a bond before it is included in the portfolio of the fund, i.e. before buying such a bond.

You can determine a bond issuer's creditworthiness by looking at a credible credit rating agency's credit rating assigned to its securities. After a complete analysis of their accounts, the credit rating is assigned to bond issuers.


A bank or trust that provides on behalf of investors safeguarding of assets. The bank or investment company that holds the assets of a mutual fund, including, or some record of, the portfolio of securities. The custodian provides security but has no role in the management of the portfolio.

Cut-off time

This is the period defined by SEBI to calculate the NAV that will be used to make your investment / redeem. You will apply your application to the mutual fund when you decide to invest in / redeem from a mutual fund scheme. If your application is submitted before the cut-off date, that day's NAV will make your investment / redeem.