33+ finance terms, in plain English.

Section 80C of the Income Tax Act — up to ₹1.5L in deductions.

Covers EPF, PPF, ELSS mutual funds, life insurance premiums, principal repayment of home loans, and several other instruments. Available only under the old regime.

The schedule that splits each EMI into principal and interest over time.

An amortization table shows how the loan balance shrinks month by month. It's the single most useful artifact when comparing prepayment strategies — and most lenders will only give it to you if you ask.

Annual Percentage Rate — the all-in yearly cost of credit.

APR includes the headline interest rate plus mandatory fees expressed as an annualized percentage. The number that matters when comparing two loan offers — not the marketing rate.

How your portfolio is split across equity, debt, gold and cash.

The single biggest driver of long-term returns. Aggressive (80/20 equity-debt) is appropriate for long horizons; defensive (30/70) makes sense closer to a goal. Rebalance once a year so winners don't quietly take over.

How much a stock moves relative to the broader market.

A beta of 1.2 means the stock tends to move 20% more than the market. Tech and small-caps are usually high-beta; FMCG and utilities are low-beta. Useful when sizing positions, less useful as a standalone signal.

A scarce, decentralized digital asset with a fixed supply of 21 million coins.

Bitcoin's design borrows from gold (scarcity, hard-to-produce), payments (transferable globally), and software (programmable). High volatility means it should be sized to a level you can sit through 70% drawdowns on.

Compound Annual Growth Rate — the constant annual return that maps start to end.

CAGR = (End / Start)^(1/years) − 1. It smooths out volatile year-to-year returns into a single comparable number, so a fund that did +30% / −15% / +25% can be compared against another with the same horizon.

Earning returns on your previous returns — the engine of long-term wealth.

Compounding means the gains you earn start earning their own gains. The effect is small in early years and explosive in late years — most of the corpus in a 30-year SIP is generated in the final third.

Dollar Cost Averaging — buy a fixed amount on a fixed schedule, regardless of price.

The same idea as a SIP, applied to crypto. Removes timing decisions from the equation. The most boring strategy and historically one of the most effective ones for volatile assets.

Spreading bets so no single failure is fatal.

True diversification spreads across asset classes (equity, debt, gold), geographies, and within equity across sectors and market caps. A portfolio of 'six largecap funds' is concentration in disguise.

The drop from a portfolio's peak to its subsequent trough.

Max drawdown is the largest peak-to-trough fall over a period. It's the metric that decides whether you'll panic-sell. Equity typically has 30–50% max drawdowns over long horizons.

3–6 months of expenses, parked in highly liquid, low-risk instruments.

Lives in a separate account from your investments. Liquid funds, sweep-in FDs, or high-yield savings work. Not for chasing returns — for buying you the freedom to walk away from a job or pay for the unexpected.

Equated Monthly Installment — a fixed monthly loan repayment.

EMI = P × r × (1+r)^n / ((1+r)^n − 1). Early in the tenure, most of the EMI pays interest. Later, more goes to principal. Tenure has a much bigger impact on total interest than people expect.

Exchange-Traded Fund — a fund you can buy and sell on the stock exchange.

ETFs have lower expense ratios than mutual funds and trade intraday. They suit investors who want index exposure with stock-like flexibility. Watch for low-volume ETFs where the bid-ask spread eats into returns.

Expected profit (or loss) per trade, assuming you keep playing the same game.

Expectancy = (win% × average win) − (loss% × average loss). A 40% win rate with a 3:1 reward-to-risk ratio still produces +0.6R per trade — patience matters more than win rate.

House Rent Allowance — a salary component with conditional tax exemption.

Exemption is the least of: actual HRA received, rent paid minus 10% of basic, or 50% (metro) / 40% (non-metro) of basic salary. Living with parents? You can pay them rent and they can declare it on their return.

A fund that mirrors an index (e.g. Nifty 50) instead of trying to beat it.

Index funds charge near-zero fees because there's no active manager picking stocks. The bet: most active funds underperform the index over 10+ years after fees. The data agrees, in most markets, most of the time.

The rate at which prices rise — your money buys less every year.

India long-term average ≈ 6%. At 6%, prices double roughly every 12 years. The biggest reason 'safe' instruments like savings accounts are a slow loss in real terms.

How easily you can buy or sell without moving the price.

High-liquidity markets (large-cap stocks, blue-chip ETFs) have tight bid-ask spreads. Illiquid assets (small-caps, real estate, alternatives) can take days or months to exit at a fair price.

A one-time investment, as opposed to recurring contributions.

Lumpsum investing puts the full amount to work immediately. It outperforms SIPs in steadily rising markets but exposes you to single-shot timing risk. Hybrid approach (split into 3–6 tranches) is common for large amounts.

Running thousands of randomized simulations to map the range of outcomes.

Instead of one optimistic projection, Monte Carlo gives you a distribution: median outcome, worst 5%, best 5%, probability of hitting the goal. The right way to plan around uncertainty.

Everything you own minus everything you owe.

Track it quarterly, not daily. Trend over years matters far more than any single snapshot. Exclude depreciating assets (cars, electronics) from the 'wealth' bucket — they're consumption.

Two parallel tax regimes — old has deductions, new has lower slabs.

Old regime: higher slabs but lets you claim 80C, HRA, home loan interest, etc. New regime: lower slabs but most deductions disappear. The breakeven depends on your deductions — high deductions usually favor old.

Paying back loan principal ahead of schedule.

On floating-rate home loans in India, there are no prepayment charges for individuals. Prepaying early in the tenure has the largest impact on total interest because you cut off years of compounding interest.

Return after subtracting inflation — what your money actually buys more of.

The Fisher equation: (1 + r_real) = (1 + r_nominal) / (1 + i). A 12% nominal return at 6% inflation is roughly 5.66% real — the shortcut (12 − 6 = 6) only works for small numbers.

The probability your account hits zero given your strategy and bet size.

Pros risk 0.5–2% per trade for exactly this reason — they want to survive long losing streaks that are statistically inevitable. Risking 5–10% per trade quickly drives risk of ruin above 50% even with positive expectancy.

Excess return per unit of risk — higher is better.

Sharpe = (Return − RiskFreeRate) / Volatility. Above 1.0 is generally attractive; 0.5–1.0 is decent; below 0.5 means you're not being paid much extra for the risk. Compare across portfolios with similar tenure.

Systematic Investment Plan — invest a fixed amount every month into a mutual fund.

A SIP automates a fixed monthly contribution into a mutual fund. Because you buy more units when prices are low and fewer when they're high, your average cost smooths out over time (rupee cost averaging). The discipline matters more than the timing.

A crypto token pegged to a fiat currency (usually USD).

USDT, USDC, DAI are the major ones. Useful for parking crypto without converting to fiat. Each has different backing — fiat reserves (USDC), mixed assets (USDT), or on-chain collateral (DAI). Read the disclosures before holding size.

A SIP whose monthly contribution increases by a fixed % each year.

Most investors get raises every year. A step-up SIP grows alongside your salary — typical step-ups are 5–15% per year. Over 20+ years, a 10% step-up roughly doubles the corpus vs a flat SIP, for the same starting commitment.

Tax Deducted at Source — tax withheld by the payer and deposited on your behalf.

Banks withhold 10% TDS on FD interest above ₹40K (₹50K for seniors). Employers deduct TDS monthly based on declared investments. You reconcile via Form 26AS at filing time.

How much an asset's price wobbles around its average — usually annualized.

Measured as standard deviation of returns. Equity ≈ 18–22%, debt ≈ 4–6%, gold ≈ 14–18%. High volatility isn't the same as high risk — for a long-horizon investor, short-term volatility is just noise.

CAGR-style return for irregular cash flows like SIPs and partial withdrawals.

XIRR finds the discount rate that makes the present value of all cash flows equal to zero. Use it whenever your contributions or redemptions happen at different times — which is true for almost any real portfolio.