JARGON SIMPLIFIED

Consolidated Account Statement (CAS)

CAS refers to a single account statement which combines the transactions in all folios of an investor across all the mutual fund schemes/ fund houses. SEBI has mandated all asset management companies to ensure that a CAS will be issued every month to investors in whose folios transactions have taken place during the month. CAS is issued for those folios which have a) financial transactions in a month and, b) identical unit holders (identified by a valid PAN). Further, in December 2012, AMFI launched CAS in the electronic form-'eCAS'-replacing the paper statements.

Credit Quality

While investing in debt funds, investors should gauge the credit quality of the instruments in the portfolio. The credit rating of the instruments indicates the level of default risk. The higher the rating, the safer is the instrument. To check this, investors can go through the offer document and the fact sheets published by fund houses. Generally, a debt fund invests in several instruments, ranging from risk-free government securities to high-risk corporate papers. A fund that has invested a large corpus in a poor quality paper may find it difficult to sell this paper in the market, thereby putting the investor's money at risk. As the safety of capital is of utmost importance to debt investors, they should not opt for funds with a large proportion of low quality investments.

Indexation Benefit

Indexation is an option available for investors to manage their inflation-adjusted returns. It is a provision in the Indian Income Tax Act, which allows investors to use inflation as a tool to reduce their tax liability from income generated through debt mutual funds and bonds. The indexation benefit applies if such investments are held for more than 12 months. The same does not apply to bank fixed deposits (FDs) and other small savings where the interest earned is taxed as per applicable marginal tax slabs of 10%, 20% and 30%.