Finance Glossary

A method of investing a fixed amount regularly (usually monthly) in mutual funds. It averages out market ups and downs over time.

The per-unit price of a mutual fund. Calculated daily by dividing total fund assets minus liabilities by the number of units.

The average annual return of an investment over a period, assuming profits are reinvested. The true measure of investment performance.

Stock price divided by earnings per share. A high P/E means investors expect high growth. A low P/E may indicate undervaluation.

Fixed monthly payment for a loan that includes both principal and interest. Calculated based on loan amount, rate, and tenure.

A bank deposit where you lock money for a fixed period at a guaranteed interest rate. Safe but returns are lower than equity.

Government-backed retirement savings scheme with tax benefits under Section 80CCD. Partially invested in equity for higher returns.

Tax-saving mutual fund with a 3-year lock-in. Qualifies for ₹1.5L deduction under Section 80C. Best tax-saving investment option.

Total market value of investments managed by a fund. Larger AUM generally indicates more investor trust.

Annual fee charged by a mutual fund as a percentage of your investment. Lower is better. Index funds: 0.1-0.2%. Active funds: 0.5-2%.

A portion of company profits distributed to shareholders. Can be in cash or additional shares. Not guaranteed.

Total value of a company's shares. Large cap: top 100 companies. Mid cap: 101-250. Small cap: 251+.

A market condition where prices are rising or expected to rise. Investor confidence is high.

A market condition where prices fall 20%+ from recent highs. Investor sentiment is negative.

The rate at which prices increase over time, reducing purchasing power. India's average: 5-7% per year.

How quickly an asset can be converted to cash without losing value. Cash is most liquid. Real estate is least.

Your collection of all investments — stocks, mutual funds, FDs, gold, real estate. Diversification reduces risk.

Electronic account that holds your shares and securities in digital form. Required to buy/sell stocks in India.

When a private company sells shares to the public for the first time. Can be profitable but also risky.

A pool of money collected from many investors, managed by professionals who invest in stocks, bonds, or other assets.

A mutual fund that mirrors a market index (like Nifty 50). Low fees, no active management, beats most active funds over time.

Similar to index funds but traded on stock exchanges like regular shares. Can be bought/sold anytime during market hours.

Interest earned on both the original amount AND previously earned interest. The most powerful wealth-building force.

Investing a fixed amount regularly regardless of market price. You buy more units when prices are low, fewer when high.

Profit from selling an investment for more than you paid. Short-term (< 1 year) and long-term (> 1 year) are taxed differently.

Income tax deduction up to ₹1.5 Lakh per year. Covers ELSS, PPF, EPF, life insurance, tuition fees, and more.

Government savings scheme with 15-year lock-in. Tax-free returns (~7.1%). One of the safest long-term investments.

Pure life insurance — pays your family if you die during the policy term. Cheapest form of life insurance. No maturity benefit.

Covers medical expenses including hospitalization, surgery, and treatments. Essential — one hospital visit can cost ₹3-10 Lakh.

Regular withdrawal from a mutual fund investment. Used to create monthly income from your corpus in retirement.

Mutual fund that invests in bonds and government securities. Lower risk than equity, returns 6-8%. Good for short-term goals.

Shares of large, well-established, financially stable companies. Examples: Reliance, TCS, HDFC Bank, Infosys.

Spreading investments across different assets to reduce risk. Don't put all eggs in one basket.

Your willingness and ability to lose money on investments. Higher risk = potentially higher returns, but also bigger losses.

The income return on an investment, expressed as a percentage. For bonds: annual interest / price. For stocks: annual dividend / price.