Finance & AI Glossary

SIP

A Systematic Investment Plan (SIP) is a way to invest a fixed amount in a mutual fund at regular intervals, usually monthly, instead of a lump sum.

Mutual Fund

A mutual fund pools money from many investors and a professional manager invests it across stocks, bonds or other assets on their behalf.

PPF

The Public Provident Fund (PPF) is a government-backed savings scheme with a 15-year lock-in, tax-free interest and Section 80C tax deductions.

NPS

The National Pension System (NPS) is a government retirement scheme where you invest during your career to build a pension, with extra tax benefits.

EPF

The Employees' Provident Fund (EPF) is a retirement scheme where you and your employer each contribute 12% of your basic salary every month.

ELSS

An ELSS is a tax-saving equity mutual fund that qualifies for Section 80C and has just a three-year lock-in, the shortest of any 80C option.

NAV

Net Asset Value (NAV) is the per-unit price of a mutual fund: its total assets minus liabilities, divided by the number of units outstanding.

ETF

An Exchange-Traded Fund (ETF) is a basket of securities, often tracking an index, that trades on a stock exchange like a single share at low cost.

Index Fund

An index fund is a mutual fund that passively tracks a market index like the Nifty 50, aiming to match the market's return at a very low cost.

Compound Interest

Compound interest is interest earned on both your original money and the interest it has already earned, making savings grow faster over time.

Inflation

Inflation is the gradual rise in prices over time, which reduces the purchasing power of money, so the same amount buys less in the future.

CAGR

CAGR (Compound Annual Growth Rate) is the smoothed average yearly return of an investment over a period, as if it grew at a steady rate each year.

XIRR

XIRR is the annualised return of an investment when money goes in and out on irregular dates, such as a SIP with many monthly instalments.

IPO

An IPO (Initial Public Offering) is the first time a private company sells shares to the public and lists on a stock exchange.

Dividend

A dividend is a share of a company's profits paid out to its shareholders, usually in cash, as a reward for owning the stock.

Expense Ratio

The expense ratio is the annual fee a mutual fund or ETF charges to manage your money, shown as a percentage of your investment.

Lumpsum

A lumpsum investment is a one-time deposit of a large amount, as opposed to spreading it out through regular instalments like a SIP.

SWP

A Systematic Withdrawal Plan (SWP) lets you withdraw a fixed amount from a mutual fund at regular intervals while the rest stays invested.

Rupee Cost Averaging

Rupee cost averaging is the effect of investing a fixed amount regularly, buying more units when prices are low and fewer when they are high.

Diversification

Diversification means spreading money across different investments so a loss in any one of them has only a limited impact on your portfolio.

Sovereign Gold Bond

A Sovereign Gold Bond is a government security denominated in grams of gold that pays 2.5% annual interest over an 8-year term.

Gold ETF

A gold ETF is an exchange-listed mutual fund unit tracking the domestic gold price, backed by physical gold held with a custodian.

Digital Gold

Digital gold lets you buy gold online from as little as Rs 1, stored in an insured vault. It is convenient but not directly regulated.

Asset Allocation

Asset allocation is how you split money across equity, debt, gold and cash. It drives risk and return far more than fund choice does.

4% Rule

The 4% rule says you withdraw 4% of your retirement corpus in year one, then raise it with inflation. In India it is seen as aggressive.

Liquid Fund

A liquid fund is a debt mutual fund that invests in money-market instruments maturing within 91 days, offering near-instant redemption and low risk.

Debt Fund

A debt mutual fund invests in fixed-income securities such as government bonds, corporate bonds and money-market instruments, offering steadier returns than equity.

Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana (SSY) is a government-backed savings scheme for the girl child offering tax-free returns, a 21-year tenure and Section 80C benefits.

Atal Pension Yojana

Atal Pension Yojana (APY) is a government pension scheme for unorganised sector workers guaranteeing a fixed monthly pension of Rs 1,000 to Rs 5,000 after age 60.

Senior Citizens Savings Scheme

The Senior Citizens Savings Scheme (SCSS) is a government-backed deposit for Indians aged 60 and above, offering quarterly interest payouts and Section 80C benefits.

ULIP

A Unit Linked Insurance Plan (ULIP) combines life insurance with market-linked investment, allocating part of the premium to insurance cover and the rest to equity or debt funds.

National Savings Certificate

A National Savings Certificate (NSC) is a fixed-income government savings instrument with a 5-year lock-in, guaranteed returns and Section 80C tax benefits.

STP (Systematic Transfer Plan)

A Systematic Transfer Plan (STP) transfers a fixed amount at regular intervals from one mutual fund scheme to another within the same fund house.

Tax Loss Harvesting

Tax loss harvesting is the strategy of selling investments at a loss to offset capital gains and reduce your tax liability in India.

Balanced Advantage Fund

A Balanced Advantage Fund (BAF) is a hybrid mutual fund that dynamically shifts its allocation between equity and debt based on market valuations.

Direct Plan

A direct plan is a mutual fund scheme variant bought directly from the fund house without a distributor, carrying a lower expense ratio than the regular plan.

Gilt Fund

A gilt fund is a debt mutual fund that invests exclusively in government securities issued by the central or state governments, carrying zero credit risk.

SIP Full Form

SIP full form is Systematic Investment Plan - a method of investing a fixed amount in mutual funds at regular intervals, usually monthly.

Capital Gains

A capital gain is the profit you make when you sell an asset, such as shares or property, for more than you paid for it, and it is taxable.

TDS

TDS (Tax Deducted at Source) is income tax a payer deducts before paying you (on salary, interest or rent) and deposits with the government.

GST

GST (Goods and Services Tax) is a single indirect tax on most goods and services in India, collected along the supply chain but paid by the consumer.

HRA

HRA (House Rent Allowance) is a salary component for rent; part of it can be exempt from income tax under the old regime if you actually pay rent.

Section 80C

Section 80C lets you cut up to Rs 1.5 lakh from your taxable income by investing in options like PPF, ELSS and EPF, under the old tax regime.

Form 16

Form 16 is a TDS certificate issued by an employer to a salaried employee in India, summarising the salary paid and income tax deducted during a financial year.

Section 80D

Section 80D of the Income Tax Act allows a deduction for health insurance premiums paid for self, spouse, children and parents, up to defined limits.

Standard Deduction

Standard deduction is a flat Rs 75,000 deduction from salary income in India, available under both old and new tax regimes, requiring no proof of expenses.

Advance Tax

Advance tax is income tax paid in instalments during the financial year itself, required when your total tax liability exceeds Rs 10,000 in a year.

Income Tax Return (ITR)

An Income Tax Return (ITR) is the annual form filed with the Income Tax Department declaring total income, deductions claimed and tax paid during a financial year.

PAN Card

A PAN card is a laminated card bearing a unique ten-character Permanent Account Number issued by the Income Tax Department to identify taxpayers in India.

New Tax Regime

India's new tax regime offers lower income tax slab rates but removes most deductions and exemptions, and is the default regime from FY 2023-24 onwards.

Form 26AS

Form 26AS is a consolidated annual tax statement showing all TDS, TCS, advance tax and self-assessment tax credited against your PAN during a financial year.

CIBIL Score

A CIBIL score is a three-digit number from 300 to 900 that summarises your credit history; lenders use it to decide loan and card approvals.

Credit Score

A credit score is a number showing how reliably you repay borrowed money; a higher score means lower risk and better loan and card rates.

FOIR

FOIR, or Fixed Obligation to Income Ratio, is the share of your monthly income already going to EMIs. Lenders cap it when sizing a new loan.

Amortisation

Amortisation is repaying a loan in equal instalments where each payment covers interest first, so the principal falls slowly at the start.

Credit Utilisation

Credit utilisation is the share of your card limit you are using. Bureaus read it on your statement date, and under 30% protects your score.

Credit Report

A credit report is the full record a bureau holds on you: every loan and card, a month-by-month payment grid, and every enquiry.

Loan Default

A default is a lender formally recognising that you have stopped repaying. In India an account is usually classed as an NPA after 90 days.

Secured vs Unsecured Loan

A secured loan is backed by an asset the lender can seize, such as a house or gold. An unsecured loan is backed only by your income and credit record.

EMI

An EMI (Equated Monthly Instalment) is the fixed monthly amount you repay on a loan, covering both the principal and the interest, until it is cleared.

Fixed Deposit (FD)

A fixed deposit (FD) locks a lump sum with a bank for a fixed term at a guaranteed interest rate, earning more than a regular savings account.

Recurring Deposit (RD)

A recurring deposit (RD) lets you save a fixed amount every month for a set term at a guaranteed rate, like a fixed deposit built in instalments.

Gratuity

Gratuity is a lump-sum reward an employer pays for long service, usually after five or more years with the same company.

Term Insurance

Term insurance is a pure life-cover policy that pays your family a lump sum if you die during the term, at a low premium, with no maturity payout.

Emergency Fund

An emergency fund is easily accessible savings set aside for unexpected costs, like a job loss or medical bill, so you avoid going into debt.

Net Worth

Net worth is the total value of everything you own minus everything you owe, the clearest single measure of your overall financial health.

Simple Interest

Simple interest is calculated only on the original principal, never on interest already earned. It is principal times rate times time.

Hallmark

A hallmark is the BIS purity mark on Indian gold jewellery, carrying the BIS logo, the purity in carats and fineness, and a unique six-digit HUID code.

Annuity

An annuity is a contract where you pay an insurer a lump sum and receive a guaranteed income for life. NPS requires buying one at exit.

Artificial Intelligence

Artificial Intelligence (AI) is the field of building computer systems that can perform tasks that normally require human intelligence.

Machine Learning

Machine learning is a branch of AI where computers learn to make predictions from data and examples, rather than following fixed programmed rules.

Large Language Model (LLM)

A Large Language Model (LLM) is an AI trained on massive amounts of text to understand and generate human-like language, like ChatGPT and Claude.

Generative AI

Generative AI is artificial intelligence that creates new content (text, images, audio, video or code) rather than just analysing existing data.

Prompt

A prompt is the instruction or question you give an AI tool; its clarity and detail strongly shape the quality of the response you get back.

Token

A token is a small chunk of text, a word or part of a word, that an AI language model reads and generates. Models measure their work in tokens.

Hallucination

In AI, a hallucination is when a language model produces information that sounds confident and plausible but is actually false or made up.

Prompt Engineering

Prompt engineering is the skill of writing clear, well-structured instructions for AI tools so they return more accurate and useful results.

Neural Network

A neural network is a computing system loosely inspired by the brain, using layers of connected nodes to learn patterns in data, the basis of modern AI.

AI Agent

An AI agent is an AI that takes actions to complete a goal on its own, planning steps and using tools, rather than just answering one question.

Cryptocurrency

A cryptocurrency is a digital currency that uses cryptography and a decentralised blockchain network to verify transactions without a central authority like a bank.

Bitcoin

Bitcoin is the first and largest cryptocurrency, created in 2009, that operates on a decentralised blockchain using proof-of-work mining to process transactions.

Ethereum

Ethereum is a decentralised blockchain platform that enables smart contracts and decentralised applications, with Ether (ETH) as its native cryptocurrency.

Blockchain

A blockchain is a distributed digital ledger that records transactions across many computers in a tamper-resistant chain of cryptographically linked blocks.

Altcoin

An altcoin is any cryptocurrency other than Bitcoin, including tokens like Ethereum, Solana and Cardano that offer different features or use cases.

Stablecoin

A stablecoin is a cryptocurrency designed to maintain a stable value by pegging its price to a reserve asset like the US dollar or gold.

DeFi (Decentralised Finance)

DeFi, or Decentralised Finance, refers to financial services like lending, borrowing and trading built on blockchain smart contracts without traditional intermediaries.

NFT (Non-Fungible Token)

An NFT is a unique digital token on a blockchain that represents ownership of a specific item like art, music, or a collectible, and cannot be replicated.

Crypto Wallet

A crypto wallet is a software application or hardware device that stores the private keys needed to send, receive and manage your cryptocurrency holdings.

Crypto Mining

Crypto mining is the process of using computational power to validate blockchain transactions and earn newly minted cryptocurrency as a reward.

Staking

Staking is the process of locking up cryptocurrency in a proof-of-stake blockchain to help validate transactions and earn rewards in return.

Smart Contract

A smart contract is a self-executing program stored on a blockchain that automatically enforces the terms of an agreement when predefined conditions are met.

Gas Fees

Gas fees are the transaction charges paid in cryptocurrency to compensate validators for processing and recording transactions on a blockchain network.

Decentralised Exchange (DEX)

A decentralised exchange (DEX) is a peer-to-peer crypto trading platform that uses smart contracts instead of a central authority to match and settle trades.

Market Cap (Crypto)

Market cap, or market capitalisation, is the total value of a cryptocurrency calculated by multiplying its current price by the total number of coins in circulation.

Crypto Token

A crypto token is a digital asset created on an existing blockchain, unlike a coin which has its own native blockchain, and can represent anything from utility to ownership.

Web3

Web3 is the vision of a decentralised internet built on blockchain technology, where users own their data, identity and digital assets instead of relying on centralised platforms.

Yield Farming

Yield farming is a DeFi strategy where users provide liquidity or lend cryptocurrency to protocols in exchange for interest, fees and token rewards.

Liquidity Pool

A liquidity pool is a collection of cryptocurrency tokens locked in a smart contract that enables decentralised trading, lending and other DeFi activities.

HODL

HODL is crypto slang for holding cryptocurrency long-term instead of selling during price drops, originating from a misspelling of 'hold' in a 2013 Bitcoin forum post.