Investment glossary
Every investing word you will meet on this site, explained in one simple sentence. No word is defined using another word you do not know yet.
Getting started
Annuity
A product that pays you a fixed income for life in exchange for a lump sum.
Broker
The company that lets you buy and sell investments.
Brokerage
The fee your broker charges for placing a trade.
Contract note
The bill your broker sends after a trade, listing every charge.
Demat account
The account that holds your shares electronically.
EPF
A retirement fund most salaried employees in India contribute to automatically.
KYC
The identity check required before you can open an investment account.
L₹
The RBI scheme that lets you send money abroad, up to a yearly limit.
Limit order
An instruction to buy or sell only at a price you specify, or better.
Market order
An instruction to buy or sell immediately at whatever price is available.
NPS
A government run retirement account you contribute to until you are 60.
PPF
A government savings account with a 15 year lock-in and tax free interest.
Retirement corpus
The total amount you need saved to stop working.
Stock exchange
The marketplace where shares are bought and sold.
TCS
Tax collected upfront when you send money abroad, which you can claim back.
Trading account
The account you use to place buy and sell orders.
Ways of investing
Gold as an investment
An asset that often holds up when shares fall.
Intraday trading
Buying and selling on the same day.
Long-term investing
Holding an investment for years so the business has time to grow.
SIP
Investing a fixed amount automatically every month.
Sovereign Gold Bond
A government bond whose value tracks the price of gold.
Swing trading
Holding an investment for a few days or weeks to catch one move.
US stocks from India
Owning shares of American companies as an Indian resident.
Funds
AMC
The company that runs a mutual fund.
AUM
The total amount of money a fund is managing.
Benchmark
The index a fund measures itself against.
Debt fund
A mutual fund that lends money rather than buying shares.
Direct plan
The version of a mutual fund you buy without a distributor, at a lower fee.
ELSS
An equity mutual fund that qualifies for a tax deduction and locks your money for three years.
ETF
A fund you buy and sell on the stock market like a share.
Exit load
A charge for selling a fund too soon after buying it.
Expense ratio
The yearly fee a fund charges, taken as a percentage of your money.
Folio
Your account number with a particular fund house.
Index fund
A fund that simply copies a market index instead of trying to beat it.
Liquid fund
A very short term debt fund used for money you may need soon.
Lock-in period
A period during which you are not allowed to withdraw your money.
Mutual fund
A pool of money from many investors, invested by a professional manager.
NAV
The price of one unit of a mutual fund.
Regular plan
The version of a mutual fund bought through a distributor, with commission included.
Rupee cost averaging
Investing a fixed amount regularly so you buy more when prices are low.
Tracking error
How far an index fund drifts from the index it is copying.
Company analysis
Annual report
The full yearly account a listed company must publish about itself.
Auditor report
An independent accountant opinion on whether the accounts are fair.
Balance sheet
A snapshot of what a company owns and what it owes on one date.
Book value
What the company would be worth on paper if it sold everything and paid its debts.
CAGR
The smoothed average yearly growth rate over a period.
Cash flow statement
A record of cash actually entering and leaving the business.
Contingent liability
A possible future cost that has not happened yet.
Debt
Money a company has borrowed and has to pay back.
Debt to equity
How much a company has borrowed compared with what its owners have put in.
EPS
The profit a company made for each share.
Free cash flow
Cash left over after a company pays to run and maintain itself.
Market capitalisation
The total value of a company in the stock market.
Operating margin
What share of each rupee of sales survives as operating profit.
PE ratio
Whether a share price looks expensive or cheap compared to the company’s profit.
Price to book
The share price compared with the company book value per share.
Profit
What a company keeps after paying all its costs.
Promoter
The founder or controlling owner group of an Indian company.
Promoter pledge
Promoter shares used as security for a loan.
Related party transaction
Business done between a company and people connected to it.
Revenue
The total money a company earns from selling its products or services.
ROCE
How much profit a company makes on all the capital it uses, borrowed and owned.
ROE
How much profit a company makes on the money its owners have put in.
Valuation
What price the market is asking for a business right now.
Working capital
The money tied up in running day to day operations.
Risk
Asset allocation
How you split your money between shares, funds, gold, deposits and cash.
Diversification
Spreading money across different investments so one bad result cannot ruin you.
Drawdown
How far an investment has fallen from its highest point.
Emergency fund
Three to six months of expenses kept in cash, not invested.
Hedging
Taking a position that reduces a risk you already carry.
Inflation
The rate at which money loses buying power over time.
Liquidity
How easily you can buy or sell without moving the price yourself.
Position sizing
Deciding how much to put into one investment.
Rebalancing
Returning your portfolio to its intended mix after prices have moved it.
Risk
The chance that an investment loses value, and how much it could lose.
Slippage
The gap between the price you expected and the price you actually got.
Stop loss
An instruction to sell automatically if the price falls to a level you chose.
Tax loss harvesting
Selling a losing investment on purpose to reduce the tax on your gains.
Trailing stop loss
A stop loss that moves up as the price rises, but never moves down.
Volatility
How sharply a price moves up and down.
Market
Bear market
A period when most share prices are going down.
Bull market
A period when most share prices are going up.
Circuit breaker
An automatic pause in trading when prices move too far, too fast.
Correction
A fall of about 10% or more from a recent high.
IPO
The first time a company sells its shares to the public.
Market crash
A sudden and steep fall in share prices across the whole market.
Moving average
The average price over a recent period, updated each day.
Target price
A price someone expects an investment to reach.
Volume
How many shares changed hands in a period.
Words are the easy part. Decisions are harder.
The learning hub puts these terms to work in real situations.