Glossary · 15 terms
Personal Finance
All personal finance terms in the EquitiesIndia.com glossary — plain-English definitions written for Indian retail investors.
Asset Allocation
Asset allocation is the strategy of distributing an investment portfolio across different asset classes such as equity, debt, gold, and real estate to balance risk and return in line with an investor's goals, time horizon, and risk tolerance.
Compounding(Compound Interest)
Compounding is the process by which an investment earns returns not only on the original principal but also on previously accumulated interest or gains, causing wealth to grow at an accelerating rate over time.
Diversification
Diversification is the practice of spreading investments across multiple securities, sectors, asset classes, or geographies to reduce the impact of any single poor-performing investment on the overall portfolio.
Emergency Fund
An emergency fund is a dedicated pool of liquid savings set aside to cover unexpected expenses or loss of income, typically equivalent to three to six months of living expenses.
EPF(Employees' Provident Fund)
The Employees' Provident Fund (EPF) is a mandatory retirement savings scheme administered by the EPFO for salaried employees in India, where both employee and employer contribute 12 percent of basic salary and dearness allowance each month.
Financial Goals
Financial goals are specific, time-bound monetary objectives — such as building a retirement corpus, funding a child's education, or purchasing a home — that guide investment planning and savings decisions.
Gratuity
Gratuity is a lump-sum payment made by an employer to an employee as a token of appreciation for continuous service, governed by the Payment of Gratuity Act, 1972, and payable upon retirement, resignation after five years, or death.
Net Worth
Net worth is the total value of an individual's assets minus total liabilities at a given point in time, serving as a comprehensive snapshot of financial health.
NPS(National Pension System)
The National Pension System (NPS) is a voluntary, market-linked retirement savings scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA), offering subscribers the choice of investing across equity, corporate bonds, government securities, and alternative assets.
PPF(Public Provident Fund)
The Public Provident Fund (PPF) is a long-term government-backed savings scheme in India offering tax-free returns under the EEE (Exempt-Exempt-Exempt) framework, with a 15-year lock-in period and interest rates set quarterly by the Ministry of Finance.
Rebalancing
Rebalancing is the process of realigning the weightings of a portfolio's assets by periodically buying or selling holdings to restore the original or target asset allocation.
Rule of 72(Doubling Time Rule)
The Rule of 72 is a simple mental shortcut to estimate the number of years required for an investment to double in value by dividing 72 by the annual rate of return.
Rupee Cost Averaging(RCA)
Rupee cost averaging is the practice of investing a fixed rupee amount at regular intervals regardless of market price, resulting in more units being purchased when prices are low and fewer units when prices are high, thereby lowering the average cost per unit over time.
Senior Citizen Savings Scheme(SCSS)
The Senior Citizen Savings Scheme (SCSS) is a government-backed deposit scheme exclusively for individuals aged 60 and above (or 55 and above for those who have taken voluntary retirement), offering quarterly interest payouts and one of the highest guaranteed returns among post-office savings instruments.
Sukanya Samriddhi Yojana(SSY)
Sukanya Samriddhi Yojana (SSY) is a government-backed small savings scheme for the girl child launched under the Beti Bachao Beti Padhao initiative, offering one of the highest interest rates among small savings instruments with complete EEE tax exemption.