Financial Terms Glossary
A **comprehensive guide** to financial terms across investments, banking, taxation, loans, insurance, personal finance, and retirement planning. Understand 500+ terms with practical examples, tips, and strategies to improve your financial literacy.
How to Use This Glossary
Browse categories based on your interest. Each term provides a plain-language definition, practical example, and tips for smart financial decisions. Use this glossary as a reference while planning your investments, loans, or savings.
Investment Terms
Asset Allocation
The process of distributing investments among various asset classes such as stocks, bonds, and cash to balance risk and reward. Example: Allocating 60% in stocks and 40% in bonds.
Blue-Chip Stocks
Shares of well-established companies with a history of reliable performance and dividends. Example: Infosys, TCS.
Capital Gain
Profit earned from selling an asset at a higher price than its purchase price. Example: Buying a stock at ₹100 and selling at ₹150 gives ₹50 capital gain.
Diversification
Investing in multiple asset types to reduce risk. Example: Investing in equities, mutual funds, gold, and bonds simultaneously.
Dividend
A portion of a company’s profit distributed to shareholders. Example: Receiving ₹5 per share annually from a stock holding.
Equity
Ownership interest in a company, usually in the form of stocks.
Index Fund
A mutual fund that tracks a stock market index like Nifty 50 or Sensex.
Mutual Fund
Pooled money from multiple investors invested in diversified portfolios managed by professionals.
Net Asset Value (NAV)
The per-unit value of a mutual fund calculated as Total Assets minus Liabilities divided by number of units.
Robo-Advisor
Automated platforms providing algorithm-based investment advice.
Systematic Investment Plan (SIP)
Regular investment in a mutual fund at fixed intervals, helping in rupee-cost averaging.
Volatility
Measure of the price fluctuations of an investment. High volatility indicates higher risk.
Banking & Savings
ATM
Automated Teller Machine; allows cash withdrawals, deposits, and balance checks.
Bank Statement
Record of all transactions in a bank account for a period.
Cheque
A written order instructing a bank to pay a specific amount from one account to another.
Current Account
Bank account mainly for business transactions with unlimited deposits and withdrawals.
Demat Account
Account to hold shares and securities in electronic format.
Fixed Deposit (FD)
Lump sum deposited for a fixed tenure with guaranteed interest.
Interest Rate
Percentage charged or paid on the principal amount by banks.
Mobile Banking
Banking services accessed through mobile apps.
Overdraft
Facility to withdraw more than your account balance up to a limit, with interest.
Recurring Deposit (RD)
Deposit of a fixed amount every month for a fixed tenure earning interest.
Savings Account
Basic bank account to deposit money and earn interest with withdrawal facility.
Taxation Terms
Annual Return
Income tax filing showing income, deductions, and taxes paid.
Capital Gains Tax
Tax on profits earned from selling capital assets like stocks or property.
Deductions
Expenses or investments eligible to reduce taxable income. Example: Section 80C deductions for PF, ELSS.
Exemption
Income not subject to tax. Example: Agricultural income in India.
GST
Goods and Services Tax; indirect tax on goods and services.
HRA Exemption
House Rent Allowance partially exempted from taxable income if conditions met.
Income Tax Slabs
Predefined brackets of income for determining tax liability.
TDS
Tax Deducted at Source; advance tax collected by deducting from payments.
Tax Audit
Verification of accounts of businesses to ensure compliance with tax laws.
Tax-Free Bonds
Government-backed bonds whose interest is exempt from income tax.
Financial Planning Terms
Emergency Fund
Money set aside for unexpected events like job loss or medical emergencies. Typically 6–12 months of expenses.
Financial Goal
Specific target for money over a defined period. Example: Buying a house in 5 years with ₹50 lakh.
Inflation
Rate at which general prices increase over time, reducing purchasing power.
Liquidity
Ease with which an asset can be converted to cash without loss of value.
Retirement Corpus
Total savings required to maintain desired lifestyle post-retirement.
Risk Appetite
Investor’s capacity and willingness to take investment risks.
Wealth Management
Comprehensive planning to grow and preserve wealth.
Portfolio
Collection of financial assets like stocks, bonds, and funds held by an investor.
Goal-Based Planning
Planning investments according to specific life goals and timelines.
Step-Up SIP
Investment plan where SIP amount increases periodically with income growth.
Personal Finance & Credit
Credit Card
Card allowing borrowing up to a limit with interest-free period for repayments.
Credit Score
Numeric representation of creditworthiness. Range: 300–900 in India.
Debt-to-Income Ratio
Percentage of monthly income used to repay debts. Helps evaluate loan eligibility.
Loan
Borrowed sum to be repaid with interest. Types include personal, home, auto, and education loans.
Mortgage
Loan to purchase property, using the property as collateral.
Personal Loan
Unsecured loan for personal needs. Interest rates usually higher than secured loans.
EMI
Equated Monthly Installment; fixed monthly repayment for loans.
Insurance Premium
Regular payment to maintain insurance coverage.
Net Worth
Assets minus liabilities; a measure of financial health.
Expense Ratio
Percentage of fund assets used for administrative costs in mutual funds.
Tips & Common Mistakes
Always Verify Sources
Double-check definitions, especially for taxation and compliance terms. Use official bank, government, or SEBI sources.
Practical Examples Help
Applying terms in real-life scenarios, like calculating EMI or SIP, improves retention and practical understanding.
Avoid Common Mistakes
Confusing similar terms (like SIP vs Mutual Fund) or ignoring tax implications can lead to costly mistakes.
Important Notes
- Definitions may evolve over time; always refer to latest RBI, SEBI, or government guidelines.
- Investment returns are subject to market risk. Past performance is not indicative of future results.
- Ensure compliance with income tax rules when applying terms like TDS, capital gains, or tax deductions.
- Financial planning terms are contextual; adapt them according to your personal goals, risk appetite, and timeline.
- Glossary is educational. Seek professional advice for personalized financial decisions.
Note: Content is subject to change as per government regulations and financial market updates.