A comprehensive glossary of financial terms every Indian investor should know. From mutual funds to tax planning, understand the language of money.
A
AMC (Asset Management Company)
A company that manages mutual fund schemes and invests pooled money from investors in stocks, bonds, and other securities. Examples in India: SBI Mutual Fund, HDFC AMC, ICICI Prudential AMC. AMCs charge an expense ratio (typically 0.5-2.5%) for managing your money.
Annuity
A financial product that provides regular income payments, typically after retirement. In India, NPS requires 40% of corpus to be used for purchasing an annuity. Annuity rates in India currently range from 6-8% depending on the type (life annuity, joint life, etc.).
AUM (Assets Under Management)
The total market value of investments managed by a mutual fund or AMC. Higher AUM generally indicates investor trust. India’s mutual fund industry AUM crossed Rs. 65 lakh crore in 2026.
B
Balanced Fund / Hybrid Fund
A mutual fund that invests in both equity and debt instruments, providing a balance between growth and stability. Aggressive hybrid funds invest 65-80% in equity; conservative hybrid funds invest 10-25% in equity.
Blue Chip Stocks
Shares of large, well-established companies with a history of stable earnings, strong balance sheets, and regular dividends. In India, companies like Reliance, TCS, HDFC Bank, and Infosys are considered blue chips.
Bull Market / Bear Market
A bull market is a period of rising stock prices (typically 20%+ gain). A bear market is a period of falling prices (20%+ decline). The Indian stock market experienced a major bull run from 2020-2024.
C
CAGR (Compound Annual Growth Rate)
The annualized rate of return that shows how an investment grew from its beginning value to its ending value over a specific period, assuming profits were reinvested. CAGR smooths out volatility and gives a “true” annual return rate. Formula: CAGR = (End Value / Start Value)^(1/years) – 1
Capital Gains
Profit earned from selling an asset (stocks, mutual funds, property) at a higher price than the purchase price. In India: Short-Term Capital Gains (STCG) on equity held under 1 year is taxed at 20%. Long-Term Capital Gains (LTCG) above Rs. 1.25 lakh is taxed at 12.5%.
CIBIL Score
A 3-digit credit score (300-900) maintained by TransUnion CIBIL that reflects your creditworthiness. Banks use this to approve loans and set interest rates. A score of 750+ is considered good; 800+ gets the best rates. Factors: repayment history (35%), credit utilization (30%), credit age (15%), credit mix (10%), inquiries (10%).
Compounding
The process where investment returns generate their own returns over time. Often called the “eighth wonder of the world.” Example: Rs. 1 lakh at 12% CAGR becomes Rs. 10.9 lakh in 20 years — your money grows 10.9x without any additional investment.
D
Debt Fund
A mutual fund that invests primarily in fixed-income securities like government bonds, corporate bonds, and money market instruments. Lower risk than equity funds, suitable for 1-3 year goals. Returns typically range from 6-9% annually.
Demat Account
A dematerialized account that holds your shares and securities in electronic form (instead of physical certificates). Required for stock trading in India. Major depositories: NSDL and CDSL. Brokers like Zerodha, Groww, and Angel One provide free demat accounts.
Dividend
A portion of a company’s profits distributed to shareholders. In India, dividends are taxable in the hands of investors at their income tax slab rate (since 2020). Dividend yield is calculated as: Annual Dividend per Share / Current Market Price x 100.
E
ELSS (Equity Linked Savings Scheme)
A type of equity mutual fund that qualifies for tax deduction under Section 80C (up to Rs. 1.5 lakh). Has the shortest lock-in period (3 years) among all 80C investments. Historically delivers 12-15% returns, making it the most tax-efficient 80C option for growth.
EMI (Equated Monthly Installment)
The fixed monthly payment made to repay a loan, consisting of both principal and interest components. Calculated using the reducing balance method in India. Use our EMI Calculator to compute your monthly payments.
EPF (Employee Provident Fund)
A mandatory retirement savings scheme for salaried employees in India. Both employer and employee contribute 12% of basic salary. EPF earns interest (8.25% for FY 2025-26) and qualifies for tax deduction under Section 80C. Read our EPF guide for withdrawal rules.
Expense Ratio
The annual fee charged by mutual funds as a percentage of AUM. Covers fund management, administration, and distribution costs. SEBI caps expense ratios: equity funds max 2.25%, debt funds max 2%. Direct plans have lower expense ratios than regular plans (typically 0.5-1% less).
F
FD (Fixed Deposit)
A bank deposit for a fixed tenure at a predetermined interest rate. Offers guaranteed returns (6.5-7.5% in 2026) with high safety. Interest is taxable as per income slab. TDS is deducted at 10% on interest exceeding Rs. 40,000/year. Use our FD Calculator to estimate returns.
FOIR (Fixed Obligations to Income Ratio)
The percentage of your monthly income that goes toward EMIs and other fixed payments. Banks use FOIR (typically max 50-65%) to determine loan eligibility. Lower FOIR = higher loan eligibility.
G – I
Gratuity
A lump-sum payment made by employers to employees who have completed 5+ years of service. Calculated as: (Basic Salary x 15 x Years of Service) / 26. Exempt from tax up to Rs. 20 lakh. Use our Gratuity Calculator.
GST (Goods and Services Tax)
India’s unified indirect tax that replaced multiple central and state taxes in July 2017. GST has four main slabs: 5%, 12%, 18%, and 28%. Essential items are either exempt or taxed at 5%, while luxury goods attract 28%.
HRA (House Rent Allowance)
A salary component that provides tax exemption for rent paid by salaried employees. The exemption is the minimum of: actual HRA received, rent paid minus 10% of basic salary, or 50% of basic salary (metro) / 40% (non-metro). Use our HRA Calculator.
Index Fund
A mutual fund that passively replicates a market index (like Nifty 50 or Sensex). Has very low expense ratios (0.1-0.5%) and delivers market returns. Popular index funds in India track Nifty 50, Nifty Next 50, and Sensex.
L – N
LTCG (Long-Term Capital Gains)
Profit from selling equity/equity mutual funds held for more than 1 year. LTCG above Rs. 1.25 lakh in a financial year is taxed at 12.5% (no indexation). For debt funds and property, the holding period for LTCG qualification is 2+ years and 3+ years respectively.
Mutual Fund
A professionally managed investment vehicle that pools money from multiple investors to purchase securities. In India, mutual funds are regulated by SEBI. Categories include equity, debt, hybrid, and solution-oriented funds.
NAV (Net Asset Value)
The per-unit price of a mutual fund, calculated daily as: (Total Assets – Total Liabilities) / Number of Units Outstanding. When you invest Rs. 10,000 in a fund with NAV of Rs. 50, you get 200 units.
Nifty 50
India’s benchmark stock market index comprising 50 of the largest and most liquid companies listed on the National Stock Exchange (NSE). The Nifty 50 represents approximately 65% of the total market capitalization of NSE-listed companies.
NPS (National Pension System)
A government retirement savings scheme offering market-linked returns with additional tax benefit of Rs. 50,000 under Section 80CCD(1B). Mandatory 40% annuity purchase at retirement. Use our NPS Calculator.
P – R
PPF (Public Provident Fund)
A 15-year government savings scheme with EEE tax status (invest, interest, and maturity all tax-free). Current rate: 7.1%. Maximum deposit: Rs. 1.5 lakh/year. One of India’s safest long-term investments. Use our PPF Calculator.
Rupee Cost Averaging
The investment strategy of investing fixed amounts at regular intervals (like SIP), which automatically buys more units when prices are low and fewer when prices are high. Over time, this averages out the purchase cost and reduces timing risk.
S
Section 80C
A provision under the Indian Income Tax Act that allows deductions up to Rs 1.5 lakh per financial year for specified investments and expenses including ELSS, PPF, EPF, NSC, life insurance premium, home loan principal, tuition fees, and fixed deposits with 5-year lock-in. See our full Section 80C guide.
Sensex
The S&P BSE Sensex is India’s oldest stock market index, comprising 30 of the largest and most actively traded companies on the Bombay Stock Exchange (BSE). It was first compiled in 1986 with a base year of 1978-79.
SIP (Systematic Investment Plan)
A method of investing a fixed amount in mutual funds at regular intervals (usually monthly). Harnesses rupee cost averaging and compounding. India has 9+ crore active SIP accounts with monthly inflows exceeding Rs. 20,000 crore. Use our SIP Calculator.
STCG (Short-Term Capital Gains)
Profit from selling equity/equity mutual funds held for less than 1 year. Taxed at 20% (from Budget 2024). For debt instruments, any gain on holdings under 2 years is considered STCG and taxed at your income tax slab rate.
SWP (Systematic Withdrawal Plan)
The opposite of SIP — regular withdrawals from a mutual fund investment. Used to generate periodic income while keeping capital invested. Ideal for retirees who want monthly income from their mutual fund corpus. Use our SWP Calculator.
T – Z
TDS (Tax Deducted at Source)
Tax automatically deducted by the payer before making certain payments. Banks deduct TDS on FD interest (10%), employers on salary, and companies on dividends. If your total income is below taxable limit, submit Form 15G/15H to avoid TDS.
XIRR (Extended Internal Rate of Return)
A method to calculate the actual annualized return on investments with irregular cash flows (like SIPs with different amounts or dates). More accurate than CAGR for real-world mutual fund returns where investments happen on different dates.
