Dictionary
Financial & Investing Dictionary.
Every term explained in plain English, with the formula, a worked example and why it matters.
44 terms
A
Absolute Return
The total percentage gain or loss on an investment, ignoring how long it took.
Read definition →Alpha
The return a portfolio earned beyond what its risk level and benchmark explain.
Read definition →Asset Allocation
How your money is split between equity, debt, gold, cash and other asset classes.
Read definition →AUM
Assets Under Management
The total market value of all the money a fund or manager currently manages.
Read definition →B
Balance Sheet
A snapshot of what a company owns, what it owes, and what is left for owners.
Read definition →Benchmark
The index a portfolio is compared against to judge whether it performed well.
Read definition →Beta
How much a stock or fund tends to move when the market moves.
Read definition →Bid-Ask Spread
The gap between the highest price buyers offer and the lowest price sellers accept.
Read definition →Bond Yield
The return a bond gives at its current market price, not its face value.
Read definition →C
CAGR
Compound Annual Growth Rate
The steady yearly rate that would take an investment from its start value to its end value.
Read definition →Candlestick
A chart bar showing the open, high, low and close for one time period.
Read definition →Capital Gains Tax
Tax on the profit made when you sell an asset for more than you paid.
Read definition →Compound Interest
Interest earned on your original money and on the interest it has already earned.
Read definition →Credit Score
A three-digit number summarising how reliably you have repaid borrowings.
Read definition →D
Demat Account
An electronic account that holds your shares and securities in digital form.
Read definition →Diversification
Spreading money across different assets so no single failure can sink the portfolio.
Read definition →Dividend Yield
The annual dividend expressed as a percentage of the current share price.
Read definition →Drawdown
The fall from a portfolio's peak value to its lowest point before a new peak.
Read definition →DRHP
Draft Red Herring Prospectus
The draft offer document a company files with SEBI before an IPO.
Read definition →E
Emergency Fund
Cash set aside to cover several months of essential expenses if income stops.
Read definition →EMI
Equated Monthly Instalment
The fixed monthly payment that repays a loan's interest and principal over its tenure.
Read definition →EPS
Earnings Per Share
The company's net profit divided across each outstanding share.
Read definition →ETF
Exchange-Traded Fund
A basket of securities that trades on the stock exchange like a single share.
Read definition →Expense Ratio
The annual percentage of your investment that a fund charges to run the scheme.
Read definition →G
I
Index Fund
A fund that simply copies an index such as the NIFTY 50 instead of picking stocks.
Read definition →Inflation
The general rise in prices that reduces what each rupee can buy.
Read definition →IPO
Initial Public Offering
The first time a private company sells its shares to the public and lists on an exchange.
Read definition →M
N
P
R
S
SIP
Systematic Investment Plan
Investing a fixed amount in a mutual fund at fixed intervals, usually monthly.
Read definition →Stop-Loss
A pre-set order that exits a position once the price hits your maximum acceptable loss.
Read definition →Support and Resistance
Price zones where buying or selling has repeatedly turned the trend before.
Read definition →Quick glossary
Shorter definitions for other common finance terms.
- Asset
- Anything of economic value that can produce income or grow in value.
- Amortization
- Gradual repayment of a loan through scheduled installments.
- Annuity
- A series of equal payments made at regular intervals.
- APR
- Annual Percentage Rate the yearly interest cost of a loan including fees.
- Arbitrage
- Simultaneous buying and selling to profit from a price difference between markets.
- Bear Market
- A market that has fallen 20% or more from its recent high.
- Blue Chip
- Large, established, financially sound companies with a history of reliable performance.
- Bond
- A debt instrument where the issuer pays interest and returns principal at maturity.
- Book Value
- Net asset value of a company (assets minus liabilities).
- Bull Market
- A market marked by sustained rising prices.
- Capital Gain
- Profit from selling an asset for more than its purchase price.
- Cash Flow
- Net amount of cash moving in and out of a business.
- Circuit Breaker
- Automatic trading halt triggered by extreme market moves.
- Commodity
- A raw material (gold, oil, wheat) traded on exchanges.
- Convertible Bond
- Bond that can be converted into a fixed number of company shares.
- Correction
- A short-term decline of 10%+ in a market from recent highs.
- Coupon
- The periodic interest payment made by a bond.
- Currency Risk
- The risk that foreign exchange rate movements reduce returns.
- Debt-to-Equity
- Ratio comparing a company's total debt to shareholders' equity.
- Deflation
- A general decline in prices, opposite of inflation.
- Depreciation
- Accounting method to allocate the cost of an asset over its useful life.
- Derivative
- A contract whose value depends on an underlying asset (futures, options).
- Dividend
- Portion of profit paid to shareholders.
- DMA
- Direct Market Access placing trades directly on an exchange.
- EBITDA
- Earnings before interest, tax, depreciation, and amortization.
- Equity
- Ownership interest in a company, represented by shares.
- FD
- Fixed Deposit a savings product with a fixed interest rate and tenure.
- Federal Reserve
- The central bank of the United States.
- Fiat Currency
- Government-issued currency not backed by a physical commodity.
- Financial Statement
- A formal record of financial activities (income, balance sheet, cash flow).
- Fiscal Deficit
- The gap between government expenditure and revenue in a year.
- Forex
- The foreign exchange market where currencies are traded.
- Fundamental Analysis
- Evaluating an investment based on financial and economic factors.
- Futures
- Contract obligating parties to buy/sell an asset at a set price and date.
- Growth Investing
- Focus on companies expected to grow earnings faster than the market.
- Hedge
- An investment made to reduce the risk of adverse price moves in another asset.
- Hedge Fund
- Pooled investment vehicle using diverse strategies, usually for accredited investors.
- Holding Period
- Length of time an investment is held.
- Index
- A statistical measure of a group of stocks (e.g., NIFTY 50, S&P 500).
- Interest Rate
- The percentage charged on borrowed money or paid on deposits.
- Intrinsic Value
- Perceived true value of an asset based on fundamentals.
- Junk Bond
- High-yield bond with a low credit rating and higher default risk.
- Large Cap
- Companies with a large market capitalization (typically top 100 by size).
- Leverage
- Using borrowed money to increase investment exposure.
- Liability
- A financial obligation or debt owed to others.
- Long Position
- Owning an asset expecting its price to rise.
- Market Cap
- Total value of a company's outstanding shares.
- Margin
- Borrowed funds from a broker used to buy securities.
- Maturity
- The date when a bond's principal is repaid.
- Mid Cap
- Companies with medium market cap, typically ranked 101–250.
- Mutual Fund
- Investment vehicle pooling money from many investors into a managed portfolio.
- Net Worth
- Total assets minus total liabilities.
- Nominal Return
- Return before adjusting for inflation.
- NPS
- National Pension System India's voluntary retirement savings scheme.
- Option
- Contract giving the right, not obligation, to buy/sell an asset at a set price.
- Options Chain
- List of all available option contracts for an underlying asset.
- Passive Investing
- Investing to match a market index rather than beat it.
- PPF
- Public Provident Fund long-term tax-saving savings scheme in India.
- Preferred Stock
- Shares with priority over common stock for dividends and asset claims.
- Principal
- The original amount borrowed or invested.
- Prospectus
- Legal document describing an investment offering.
- Quantitative Easing
- Central bank policy of buying assets to inject money into the economy.
- Rebalancing
- Adjusting portfolio weights back to target allocation.
- Real Return
- Return after subtracting inflation.
- Recession
- Two consecutive quarters of negative GDP growth.
- REIT
- Real Estate Investment Trust pools capital to own income-producing real estate.
- Risk Tolerance
- An investor's ability and willingness to withstand losses.
- SEBI
- Securities and Exchange Board of India India's markets regulator.
- Short Selling
- Selling borrowed assets hoping to buy back at a lower price.
- Small Cap
- Smaller companies ranked below 250 by market cap.
- Spread
- Difference between bid and ask price of an asset.
- Stagflation
- High inflation combined with stagnant economic growth.
- Stock Split
- Company increases share count by splitting existing shares.
- STP
- Systematic Transfer Plan periodic transfer between mutual funds.
- SWP
- Systematic Withdrawal Plan periodic withdrawals from a mutual fund.
- Technical Analysis
- Studying charts and price patterns to forecast future movement.
- Tenor
- The length of time until a bond or loan matures.
- Term Insurance
- Pure life insurance paying only on death within the policy term.
- Treasury Bill
- Short-term government debt with maturity up to one year.
- Underwriting
- Process of evaluating and pricing risk for insurance or securities.
- Unit Trust
- Pooled investment vehicle similar to a mutual fund.
- Valuation
- Estimating the worth of an asset or company.
- Value Investing
- Buying assets trading below their intrinsic value.
- Volume
- Number of shares/contracts traded in a period.
- Yield
- Income return on an investment, expressed as a percentage.
- Yield Curve
- Graph of bond yields across different maturities.
- Zero-Coupon Bond
- Bond that pays no periodic interest but is issued at a discount.