| Terminology | Description & Examples |
|---|---|
| Alpha | The extra return the (active) fund manager can generate over the (passive) index. |
| Asset class | 3 common asset classes are: 1. Debt: Umbrella term for all financial products that are based on borrowing. 2. Equity: Ownership of a business and the risk it brings, either directly (through stocks) or indirectly (through mutual funds). 3. Real assets: Can be physically seen. Gold and Real estates fall into this category. |
| Asset Management Company (AMC) | |
| Bombay Stock Exchange (BSE) | In context of India |
| Capital appreciation | |
| Central Provident Fund (CPF) | In context of Singpore |
| Consumer Price Index (CPI) | Designed to measure the average price changes of a fixed basket of consumption goods and services commonly purchased by resident households over time. It is widely used as a measure of consumer price inflation. Singpore CPI increased 2.4% in 2024. For more details, refer SINGAPORE CONSUMER PRICE INDEX by Department of Statistics. International CPI increased 5.7% in 2023. For more details, refer IMF report |
| Debt | |
| Debt financial products | Products that usually give us an assured return. Example include - FD - Corporate deposites - Bond - Provident Fund - Public Provident Fund (PPF) - The core of the product is loan. - Higher the return it promises, the higher is the risk of non-payment of both of our investment and the interest. |
| Debt mutual funds | |
| Equated monthly instalments (EMI) | |
| Equity | |
| Equity Linked Savings Scheme (ELSS) | In context of India. An equity fund that gets the tax benefit. |
| Exchange-traded fund (ETF) | Tracks an index like the Sensex, but also lists its units on a stock exchange, unlike a mutual fund. |
| Expense ratio | The fees that a mutual fund charges investors for its costs and the profit it makes. |
| Face value | The value written on a financial instrument, like a bond or a stock. Face value is the “official” value, not necessarily the “market” value. 👉 Example: A bond might have a face value of 1,000 at maturity. |
| Fast Moving Consumer Goods (FMCG) | |
| Financial Assets | Debt, and Equity |
| Fixed Deposit (FD) | |
| Fixed obligation-to-income ratio (FOIR) | |
| Index | |
| Index fund | |
| Inflation | |
| Investment horizon | Time for which we want to invest our money. Also known as “tenor” |
| Market Capitalization (Market Cap) | Market cap = No. of shares of company Price per share. SEBI defines - Large-cap company as one that features within first 100 companies by market cap on the stock market. - Mid-cap is a company that ranks between 101 to 250 by market cap, and - Small-caps are 251 and below. |
| Mutual Fund | |
| National Stock Exchange (NSE) | In context of India |
| Net Asset Value (NAV) | The price of one unit of a scheme (mutual fund). |
| Nifty50 | Stock market index, that’s made up of 50 stocks. |
| Provident Fund (PF) | |
| Public Provident Fund (PPF) | In context of India |
| Real Assets | Gold and Real estate |
| Recession | |
| Recurring Deposit (RD) | |
| Rule of 72 | Versatile rule to know the rate of return of every year of a double-your-money proposition. > Over what time, my money doubles? Then, divide the 72 by the time window in years. From the book Let’s Talk Money |
| Securities and Exchange Board (SEBI) | In context of India Sets up the rules of the game around the equity market. Stock exchanges have to abide by them. The firms that publicaly list must abide by SEBI and stock exchange rules. |
| Sensex | In context of India A stock market index. It’s made up of 30 most representative companies that are listed in BSE. The index has an initial value of 100, as on 1 Apr 1979. When we say Sensex went up, we mean that of the 30 companies in Sensex more prices rose than fell. Sensex is a barometer of the activity in stock market during the day, and over a long period of time. The Sensex and Nifty50 are broad market indices and are also called large-cap indices. |
| Stock Exchange | |
| Stock Market Index | |
| Systematic Investment Plan (SIP) | Think of this as a recurring deposit, but instead of putting money in a fixed deposit, we are making periodic investments into a mutual fund. |
| Systematic Transfer Plan (STP) | A facitity that allows us to space out a big investment over time. |
| Systematic Withdrawl Plan (SWP) | A facility to periodically redeem our units to generate an income. It works like a dividend plan, but in this case the control remains in our hand of how much money we want to take from our fund periodically. |
| Unit linked insurance plans (ULIP) |