Resources

Finance glossary

60+ terms every Indian investor will run into. Plain English, with links to deeper reading where it helps.

A

AIF: Alternative Investment Fund — SEBI-regulated pooled vehicle with ₹1 Cr minimum. Three categories: I (startups/infra), II (PE/RE/debt), III (hedge). Read more →
AMC: Asset Management Company — the firm that manages mutual fund schemes (HDFC AMC, ICICI Prudential, etc.).
AMFI: Association of Mutual Funds in India — the self-regulatory organisation that maintains the ARN registry and industry standards.
AUM: Assets Under Management — total value of assets a fund or manager handles. Often used as a proxy for credibility, but not infallible.

B

Bond yield: The annual return on a bond, expressed as percentage. Inversely related to bond prices — when prices fall, yields rise.

C

CAGR: Compound Annual Growth Rate — the smoothed annual growth rate of an investment over a period. The most useful single number for long-term return comparison.
Capital gain: Profit from selling an asset for more than you paid. Taxed as short-term or long-term depending on holding period.
CIN: Corporate Identification Number — unique 21-character identifier for every company registered in India.

D

DTAA: Double Tax Avoidance Agreement — bilateral tax treaty preventing the same income from being taxed twice across two countries.
Demat: Dematerialised — electronic form of holding shares and securities. Required for trading on Indian exchanges.
Direct plan: A mutual fund variant with no distributor commission — saves 0.5-1% per year vs Regular plan. Buy via Coin, Kuvera, MFCentral, or AMC directly.

E

ELSS: Equity Linked Savings Scheme — tax-saving mutual fund under Section 80C with 3-year lock-in (shortest of all 80C options).
EPF: Employees' Provident Fund — mandatory savings for salaried employees, with 8.25% (current) tax-free returns on employee + employer contributions.
ETF: Exchange Traded Fund — a mutual fund that trades on the stock exchange like a stock. Often the cheapest way to track an index.
Expense ratio: Annual fee charged by a mutual fund as % of AUM. Index funds: 0.1-0.5%. Active funds: 1-2%. Higher fees = lower net returns over decades.

F

FATCA: US tax law requiring foreign financial institutions to report on US persons' accounts. Relevant for NRIs in the US who hold Indian investments.
FCNR: Foreign Currency Non-Resident account — NRI deposit account in USD/GBP/etc. Repatriable, no currency risk.
FEMA: Foreign Exchange Management Act — governs cross-border investment flows for Indian residents and NRIs.
FIRE: Financial Independence, Retire Early — saving aggressively to build a corpus that lets you stop working long before traditional retirement age. Read more →
Folio: An account number assigned to a mutual fund investor by an AMC. You can have multiple folios within one AMC — best to consolidate.

G

GIFT City: Gujarat International Finance Tec-City — India's IFSC, offering tax benefits on certain financial activities for non-residents and specific structures.
Goal-based investing: Approach where each goal (retirement, kid's college, home) gets its own portfolio with appropriate horizon and risk.

H

Hurdle rate: The minimum return a PMS or AIF must achieve before charging a performance fee. Common: 6-10%.

I

Index fund: Mutual fund that passively tracks an index (Nifty 50, Sensex). Low cost, no manager risk, beats most active funds over 10+ years.
Indexation: Adjusting cost basis for inflation when computing long-term capital gains. Removed from most debt funds after April 2023.
InvIT: Infrastructure Investment Trust — listed vehicle holding income-producing infrastructure (power, roads, telecom). Like REIT but for infra.
IRA: Individual Retirement Account — US tax-advantaged retirement account. Relevant for NRIs in the US.
ITR: Income Tax Return — annual filing with Indian tax department. Different forms for different income types (ITR-1 through ITR-7).

L

LTCG: Long Term Capital Gains — gains on assets held beyond the defined long-term period (12 months for equity, 24 months for debt/real estate/unlisted).
Lumpsum: One-time investment vs SIP (monthly). For large amounts, STP from a liquid fund into target equity over 6-12 months often beats deploying all at once. Read more →

M

Mutual fund: Pooled investment vehicle where investor money is collectively invested in a basket of securities managed by a professional fund manager. Read more →

N

NAV: Net Asset Value — per-unit value of a mutual fund, calculated daily based on the value of underlying holdings minus expenses.
NPS: National Pension System — government-backed retirement scheme with tax benefits under 80C and 80CCD(1B). Equity exposure up to 75% allowed.
NRE: Non-Resident External account — NRI rupee account where deposits come from foreign income. Fully repatriable, interest tax-free in India.
NRI: Non-Resident Indian — Indian citizen residing outside India. Has specific tax and investment rules under FEMA and IT Act. Read more →
NRO: Non-Resident Ordinary account — NRI rupee account for India-source income (rent, dividends, pension). Limited repatriability, interest taxable.

P

PE ratio: Price to Earnings — a stock's price divided by its annual earnings per share. Quick valuation gauge, but should be compared within sector and over time.
PFIC: Passive Foreign Investment Company — US tax classification for foreign mutual funds. Punitive tax regime — relevant for NRIs in US holding Indian MFs.
PPF: Public Provident Fund — government scheme with 15-year lock-in, tax-free returns (currently 7.1%), and 80C deduction.
PMS: Portfolio Management Service — SEBI-regulated managed account with ₹50L minimum, where you own stocks directly in demat. Read more →

R

REIT: Real Estate Investment Trust — listed vehicle holding income-producing commercial real estate. Distributes 90%+ of income to unitholders.
RIA: Registered Investment Adviser — SEBI category for fee-only investment advisers (no commissions). Different from distributors (who earn from products).
Risk profile: Investor's tolerance for market volatility and capital loss. Determines target asset allocation between equity, debt, and other assets.

S

Sensex: BSE Sensitive Index — 30 large-cap Indian stocks, India's oldest equity benchmark.
SEBI: Securities and Exchange Board of India — the regulator for Indian capital markets, mutual funds, PMS, AIF, and investment advisers.
SGB: Sovereign Gold Bond — government-issued bond denominated in grams of gold. Pays 2.5% interest plus gold price appreciation. LTCG-exempt if held to maturity.
SIP: Systematic Investment Plan — fixed amount invested monthly into a mutual fund. Enforces discipline; averages purchase cost over time. Read more →
STP: Systematic Transfer Plan — periodic transfer from one mutual fund (typically liquid) to another (typically equity). Smooths deployment of lumpsum.
STCG: Short Term Capital Gains — gains on assets held less than the long-term period. Higher tax rates than LTCG.
SWP: Systematic Withdrawal Plan — fixed monthly withdrawal from a mutual fund. Common retirement income strategy.

T

Tax harvesting: Selling and re-buying units to realise long-term capital gains within the annual ₹1.25L LTCG exemption, permanently saving 12.5% tax on those gains. Read more →
Term insurance: Pure life insurance with no investment component. Pays out if you die during the term. Cheapest form of life cover. Read more →
TWRR: Time-Weighted Rate of Return — strategy-level return that strips out the timing of cashflows. Used to compare PMS/fund manager performance across investors.

U

ULIP: Unit Linked Insurance Plan — hybrid product combining insurance and investment. Generally underperforms term + MF combination after charges.
Unlisted shares: Shares of companies not yet listed on stock exchanges. Includes pre-IPO and private equity. ₹50k+ tickets via platforms like UnlistedArena, Stockify. Read more →

V

VDA: Virtual Digital Asset — Indian tax law category covering cryptocurrencies and NFTs. Taxed at 30% flat with 1% TDS over ₹50k/yr.

Y

Yield: Annual income from an investment as % of its current price. Dividend yield, bond yield, rental yield are common variants.