The plain-words money glossary
Every money conversation has jargon standing guard at the door. This page removes the guard: the most-used financial terms in India, each explained in one or two lines a smart person with zero finance background can use immediately. Bookmark it; we'll keep adding terms.
Jump to: Everyday money · Saving & deposits · Insurance · Mutual funds & markets · The big doors · Tax
Everyday money
Inflation — The quiet yearly rise in prices — the reason a ₹5 thali became ₹30. At ~6% a year, prices roughly double every 12 years. Full story here.
Compounding — Earning returns on your returns. Slow at first, explosive later — the third decade of investing typically earns more than the first two combined.
Emergency fund — 3–6 months of expenses kept safe and instantly reachable (savings/FD). The cushion that stops one bad month from breaking your whole plan.
Net worth — Everything you own minus everything you owe. The single number that tracks whether your money life is actually moving forward.
Liquidity — How fast something turns into spendable cash. A savings account is liquid; a flat is not — a family with all its wealth in property can be rich and still struggle in an emergency.
CAGR — Compound Annual Growth Rate — the one honest speed of an investment over several years, smoothing out the yearly zig-zag so different options can be compared fairly.
Saving & deposits
FD (Fixed Deposit) — Lock a lump sum with a bank for a fixed period at a fixed rate. Great for safety and emergencies; after inflation, it mostly protects money rather than growing it.
RD (Recurring Deposit) — An FD in monthly instalments — a fixed amount saved every month at a fixed rate. The training wheels of monthly discipline; a SIP is its market-linked cousin.
PPF (Public Provident Fund) — Government-backed long-term savings with tax benefits and a 15-year lock-in. Safe and steady — the tortoise of Indian saving.
NPS (National Pension System) — A government-regulated retirement account that invests in a mix of equity and debt, locked till age 60, with its own tax benefits.
Insurance
Premium — What you pay the insurer, usually yearly or monthly, to keep the protection alive.
Sum assured — The amount the insurer pays when the insured event happens — the real size of your protection. Judge every policy by this number, not the brochure.
Term plan — Pure life insurance: large cover, small premium, nothing back if you outlive it — which is the point, like car insurance you're glad you never used. How much cover you need.
Endowment plan — Insurance and savings mixed in one policy — heavy premiums, small cover, modest returns. Doing two jobs at once, usually both modestly.
ULIP — Insurance mixed with market investing, with its own charge structure. The same separation logic applies: know exactly what you're paying for protection vs investment.
Health insurance — Pays hospital bills so your savings don't have to. Medical costs inflate at ~12–14% a year — double normal inflation. How much is enough.
Family floater — One health cover shared by the whole family — efficient while everyone's healthy; worth splitting as parents age.
Super top-up — A cheap upper layer of health cover that activates only above a threshold — how a family holds ₹25 lakh of protection at a mid-range premium.
Rider — A small add-on to a policy — accidental death, critical illness, premium waiver — bolted onto the main cover for a little extra premium.
Claim settlement ratio — Of every 100 claims an insurer received, how many it paid. One of the first numbers to check before buying.
Mutual funds & markets
Mutual fund — Thousands of people pool money; a professional invests it; you own units. SEBI-regulated, open from about ₹500 a month. The full family tree.
NAV — Net Asset Value — the daily price of one unit of a mutual fund. A low NAV is not “cheap” and a high NAV is not “expensive”; only growth matters.
SIP — Systematic Investment Plan — a fixed amount invests itself into a fund every month, automatically. A method, not a product. Why it beats timing.
SWP — Systematic Withdrawal Plan — SIP's mirror: a fixed amount comes out of your fund every month. How a retirement corpus becomes a monthly salary.
STP — Systematic Transfer Plan — money moves monthly from one fund to another (commonly debt to equity), used to enter markets gradually with a lump sum.
ELSS — An equity fund with a tax deduction under Section 80C (old tax regime only) and the shortest lock-in among tax savers: 3 years.
Index fund — A fund that skips manager judgement and simply copies an index like the Nifty 50, at very low cost. Boring by design — which is its superpower.
ETF — An index fund that trades on the exchange like a share. Lowest costs of all, but needs a demat account and live buy orders.
Equity fund — Invests in shares of companies. The growth engine of a portfolio — highest long-term potential, bumpiest ride.
Debt fund — Invests in bonds and fixed-income instruments. Steadier than equity, usually ahead of savings accounts — the shock absorber of a portfolio.
Expense ratio — The fund's yearly fee, taken silently from returns. Small differences compound: 0.5% vs 2% is serious money over 20 years.
Exit load — A small charge for leaving a fund too early — a fence against impulsive exits.
Demat account — The electronic locker that holds shares and ETFs in your name. Needed for direct stocks and ETFs; not needed for regular mutual funds.
The big doors
PMS (Portfolio Management Services) — A professional runs a portfolio in your own name — you hold the shares directly. Personalised, minimum ₹50 lakh.
AIF (Alternative Investment Fund) — The ₹1 crore+ club: venture capital, private equity, long-short and other alternative strategies, in three SEBI categories.
SIF (Specialized Investment Fund) — SEBI's newer middle rung between mutual funds and PMS — advanced strategies at a ₹10 lakh minimum.
Tax
Section 80C — The classic deduction bucket — up to ₹1.5 lakh a year across ELSS, PPF, insurance premiums and more. Applies under the old tax regime only.
Capital gains (STCG/LTCG) — Tax on investment profits. Short-term and long-term rates differ by holding period and asset — and the rules change with Budgets, so always check current rates.
Old vs new tax regime — India's two parallel income-tax systems: old (more deductions like 80C, higher slab rates) vs new (fewer deductions, lower slabs). Which wins depends entirely on your deductions — worth computing both.
General financial education, not investment advice. Definitions simplified for clarity; product rules, minimums and tax provisions change — confirm current details before acting. Mutual Fund investments are subject to market risks; read all scheme related documents carefully. Insurance is the subject matter of solicitation.