Financial glossary

Annuity — Income stream purchase

A product that converts a lump sum into periodic payments. NPS and retirement plans may require or offer annuity purchase for a portion of corpus—rules vary.

Asset allocation — Mix of asset classes

How a portfolio is split across equity, debt, cash and other assets based on goals, timeline and risk capacity.

Guides: Asset allocation basics

CAGR — Compound Annual Growth Rate

A smoothed annualised growth rate between two values over time. Best for single start/end points—not irregular cash flows (use XIRR instead).

Compounding — Earning on reinvested returns

When returns themselves earn returns. Frequency (monthly/quarterly/annual) and contribution timing change outcomes.

Corpus — Total invested pot

The pool of money accumulated for a goal (retirement, education, etc.). Target corpus depends on expenses and withdrawal assumptions.

Diversification — Spreading risk

Holding exposures that do not all move together, to reduce the impact of any single holding or sector. Does not remove market-wide risk.

Guides: Diversification basics

Emergency fund — Liquid cash buffer

Money set aside for unexpected essential expenses or income shocks, kept accessible and relatively safe rather than maximising return.

Guides: Emergency fund basics

EMI — Equated Monthly Instalment

A fixed monthly payment on a reducing-balance loan covering interest and principal. Early EMIs are typically interest-heavy.

Calculators: EMI Calculator

Guides: How EMI works

EPF — Employee Provident Fund

Retirement savings contribution framework for eligible employees, administered with notified rates and withdrawal rules.

Calculators: EPF Calculator

Expense ratio — Fund operating cost

Annual fund management and operating costs charged within a mutual fund’s NAV. Higher expenses reduce investor returns, all else equal.

FD — Fixed Deposit

A bank (or similar) deposit of a lump sum for a fixed tenure at a quoted rate. Interest taxation depends on current rules and your slab.

Calculators: FD / RD Calculator

FIRE — Financial Independence, Retire Early

A planning approach aiming for a portfolio that can fund living costs without traditional employment income.

Calculators: FIRE Planner

Guides: What is FIRE?

Flat rate — Interest quoted on original principal

A quoting method where interest may be calculated on the original loan amount for the full tenure—often looking lower than the equivalent reducing rate. Always compare effective cost.

Inflation — Rising prices over time

Erodes purchasing power. Long-term goals should compare corpus in today’s rupees using an inflation assumption.

LTCG — Long-Term Capital Gains

Gains on assets held beyond a specified holding period defined in tax law. Rates and holding periods vary by asset class and can change—verify officially.

Calculators: Capital Gains

NAV — Net Asset Value

Per-unit value of a mutual fund scheme after assets and liabilities. SIP instalments buy units based on NAV on the allotment day.

NPS — National Pension System

A contribution-based pension system with market-linked returns and regulated withdrawal/annuity features (see PFRDA).

Calculators: NPS Calculator

PPF — Public Provident Fund

A long-term government-backed savings scheme with notified interest rates and contribution rules. Confirm current terms officially.

Calculators: PPF Calculator

Prepayment — Extra loan repayment

Paying more than the scheduled EMI to reduce principal early. May shorten tenure or lower EMI depending on lender options and fees.

Calculators: Advanced Prepayment

RD — Recurring Deposit

A deposit product where you contribute fixed amounts on a schedule for a tenure, earning interest as per the quote.

Reducing balance — Interest on outstanding principal

Interest is charged on the remaining loan principal. As you repay, interest cost falls. Contrast with flat-rate quotes.

Calculators: Flat vs Reducing

Section 80C — Deduction umbrella (illustrative)

A commonly discussed deduction section for eligible investments/expenses subject to limits and regime choice. Eligibility and limits change—verify officially.

SIP — Systematic Investment Plan

A schedule of fixed investments (often monthly) into a mutual fund. Each instalment buys units at the prevailing NAV. Returns are not guaranteed.

Calculators: SIP Calculator

Guides: How SIP works

STCG — Short-Term Capital Gains

Gains on assets sold before the long-term holding period. Treatment depends on asset type and current tax rules.

Sum assured — Stated life cover amount

The amount an insurer agrees to pay on a covered event as defined in the policy. Riders and conditions can affect what is actually paid.

SWR — Safe Withdrawal Rate

An assumed percentage of corpus withdrawn annually in retirement planning. Common illustrations use ~3–4%; not a guarantee.

TDS — Tax Deducted at Source

Tax withheld by a payer (employer, bank, etc.) and deposited with the government. It is not always your final tax liability.

Term insurance — Pure life cover

Life insurance that pays a sum assured on death during the policy term, typically without a large savings component. Confirm exclusions and claim rules in the policy document.

Guides: Term cover vs traditional life plans · How much life cover? A simple framework

XIRR — Extended Internal Rate of Return

Annualised return that accounts for multiple cash flows on different dates. Useful for SIP + redemption histories.

Calculators: XIRR Calculator

Guides: XIRR explained