Glossary

Money words, made simple

The words you meet in statements, calculators and our articles, explained in plain language with a short example.

Mutual fund basics

Mutual fund: Money from many investors pooled together and invested by a professional fund manager in shares, bonds or both.; Example: You and lakhs of others invest; the fund buys shares of 50 companies on behalf of all of you.
NAV (net asset value): The price of one unit of a mutual fund, worked out at the end of every business day.; Example: If the NAV is ₹50 and you invest ₹5,000, you get 100 units.
Units: Your share of a mutual fund. Their value is the number of units × the NAV.; Example: 100 units at an NAV of ₹60 are worth ₹6,000.
Fund house (AMC): The company that runs mutual funds, also called an asset management company.; Example: SBI Mutual Fund and HDFC Mutual Fund are fund houses.
Folio number: Your account number with a fund house. One folio can hold several of its funds.
Equity fund: A fund that invests mainly in company shares. It can grow more over time, but its value goes up and down more along the way.; Example: Suited to goals five years or more away, like retirement.
Debt fund: A fund that lends money to governments and companies through bonds. Steadier than equity funds, with lower returns.; Example: Suited to money you need within a few years, like a car next year.
Hybrid fund: A fund that holds both shares and bonds, so its ups and downs are milder than an equity fund.
Liquid fund: A debt fund that invests for very short periods. A place to park money for days or months; withdrawals usually reach your bank the next working day.; Example: A common home for an emergency fund.
Index fund: A fund that simply copies a market index, such as the Nifty 50, so its costs are low.
ELSS (tax-saving fund): An equity fund that can lower your tax under the old tax regime. Each investment is locked in for three years.; Example: A SIP made in March 2027 can be taken out from March 2030.
Direct and regular plans: Two versions of the same fund. A regular plan includes a commission for the distributor who helps and services you, so its yearly cost is a little higher; a direct plan has no commission.
Growth and IDCW options: In the growth option, gains stay invested and keep compounding. In the IDCW option, the fund pays part of your money out from time to time, and the payout is taxed as income.

Ways to invest

SIP (systematic investment plan): A fixed amount invested automatically every month from your bank account.; Example: ₹5,000 on the 5th of every month.
Step-up SIP: A SIP that rises by a set percentage every year, usually in step with your salary.; Example: ₹5,000 a month this year, ₹5,500 next year with a 10% step-up.
Lumpsum: A one-time investment of a larger amount.; Example: Investing a ₹3 lakh bonus in one go.
SWP (systematic withdrawal plan): A fixed amount taken out of your investment every month and paid to your bank, like a pension.; Example: ₹20 lakh invested, paying you ₹15,000 a month.
STP (systematic transfer plan): A fixed amount moved every month from one fund to another, often from a liquid fund into an equity fund.; Example: Park ₹6 lakh in a liquid fund and move ₹50,000 a month into an equity fund.
Rupee cost averaging: With a SIP, the same amount buys more units when prices are low and fewer when they are high, which evens out your cost.; Example: ₹1,000 buys 20 units at an NAV of ₹50, and 25 units at ₹40.
Compounding: Earning returns on your past returns, so money grows faster the longer it stays invested.; Example: ₹1 lakh growing at 12% a year becomes ₹1.12 lakh after one year; the next year, it earns on ₹1.12 lakh.

Returns and risk

Absolute return: Your total gain as a percentage, however long it took.; Example: ₹1 lakh that grows to ₹1.5 lakh is a 50% absolute return.
CAGR: The average yearly growth of a one-time investment.; Example: ₹1 lakh that doubles to ₹2 lakh in 6 years grew at about 12.2% a year.
XIRR: The yearly return when money goes in (or out) at different times, as with a SIP. Your statement shows it.; Example: An XIRR of 11% means your SIP grew as if every rupee earned 11% a year.
Inflation: Prices rising over time, so the same money buys less each year.; Example: At 6% a year, spending of ₹50,000 a month today becomes about ₹90,000 in 10 years.
Market risk: The chance that your investment’s value falls for a while because markets fall. It matters less the longer you can wait.
Asset allocation: How your money is split between shares, bonds, gold and cash.; Example: 60% equity, 30% debt and 10% gold.
Rebalancing: Bringing your mix back to plan after markets move it.; Example: Markets rose and equity is now 70% instead of 60%, so 10% is moved back to debt.
Benchmark: The market index a fund is compared with, to see whether it is doing well.; Example: A large-cap fund is often compared with the Nifty 100.

Costs and tax

Expense ratio: The yearly fee a fund charges, as a percentage. It is taken out of the NAV each day, not billed to you separately.; Example: 1% on ₹1 lakh is about ₹1,000 a year.
Exit load: A small charge if you take money out of a fund too early.; Example: With a 1% exit load within one year, taking out ₹1 lakh after six months costs ₹1,000.
Capital gains tax: Tax on the profit when you sell. For equity funds held over a year, the first ₹1.25 lakh of profit a year is tax-free and the rest is taxed at 12.5%; held a year or less, 20%. (FY 2026-27 rules; check with your tax adviser.)
Lock-in: A period during which you cannot take your money out.; Example: ELSS has a 3-year lock-in; PPF runs for 15 years.

Insurance

Term insurance: Pure life cover for a fixed number of years. If you die during that time, your family gets the cover amount; nothing is paid back if you live. It is the cheapest way to get large cover.; Example: A ₹1 crore term plan to age 60 pays your family ₹1 crore if you die before 60.
Sum assured: The amount a life insurance policy pays your family.
Sum insured: The most a health policy pays towards hospital bills in a year.; Example: With ₹5 lakh sum insured, a ₹7 lakh bill leaves ₹2 lakh for you to pay.
Super top-up: Extra health cover that pays once your bills in a year cross a set amount (the deductible). A low-cost way to raise your cover.; Example: A ₹5 lakh policy plus a ₹20 lakh super top-up with a ₹5 lakh deductible.
Nominee: The person who receives your investments or insurance money if something happens to you.; Example: Add your spouse or children as nominees in every folio and policy.

Planning and loans

Emergency fund: Money kept aside for a job loss or a medical bill, in places you can reach within days.; Example: Six months of expenses and EMIs in a savings account and a liquid fund.
Corpus: The total amount you build up for a goal.; Example: A retirement corpus of ₹3 crore by age 60.
Goal-based investing: Investing separately for each goal, with the amount and type of fund set by how much you need and when.
Risk profile: How much your investments can go up and down before it worries you or upsets your plans.
Net worth: Everything you own minus everything you owe.; Example: A ₹80 lakh home and ₹20 lakh of investments, less a ₹40 lakh loan: ₹60 lakh.
EMI: The equal monthly instalment on a loan. Each one pays some interest and some of the loan itself.; Example: A ₹20 lakh home loan at 8.5% for 20 years has an EMI of about ₹17,400.

Other products and paperwork

PPF: Public Provident Fund: a government savings scheme with a 15-year term and tax-free interest.
EPF: Employees’ Provident Fund: retirement savings that you and your employer pay into from your salary.
NPS: National Pension System: a government-regulated retirement scheme invested in shares and bonds.
SIF (specialised investment fund): A newer kind of fund, run by mutual fund houses, that can use more flexible strategies. The minimum investment is ₹10 lakh.
PMS (portfolio management services): A professional manages a portfolio of shares for you, held directly in your own demat account. The minimum investment is ₹50 lakh.
CAS (consolidated account statement): One statement listing all your mutual funds across fund houses. You can get it free from CAMS or MF Central.
KYC: “Know your customer”: the one-time identity and address check needed before you can invest.; Example: Done once with your PAN, Aadhaar and a photo, then valid for all fund houses.

For education only, not financial or tax advice. Tax rules are for FY 2026-27 and can change. Mutual fund investments are subject to market risks; read all scheme-related documents carefully.