Finance & AI Glossary

SIP

A Systematic Investment Plan (SIP) is a way to invest a fixed amount in a mutual fund at regular intervals, usually monthly, instead of a lump sum.

Mutual Fund

A mutual fund pools money from many investors and a professional manager invests it across stocks, bonds or other assets on their behalf.

PPF

The Public Provident Fund (PPF) is a government-backed savings scheme with a 15-year lock-in, tax-free interest and Section 80C tax deductions.

NPS

The National Pension System (NPS) is a government retirement scheme where you invest during your career to build a pension, with extra tax benefits.

EPF

The Employees' Provident Fund (EPF) is a retirement scheme where you and your employer each contribute 12% of your basic salary every month.

ELSS

An ELSS is a tax-saving equity mutual fund that qualifies for Section 80C and has just a three-year lock-in, the shortest of any 80C option.

NAV

Net Asset Value (NAV) is the per-unit price of a mutual fund: its total assets minus liabilities, divided by the number of units outstanding.

ETF

An Exchange-Traded Fund (ETF) is a basket of securities, often tracking an index, that trades on a stock exchange like a single share at low cost.

Index Fund

An index fund is a mutual fund that passively tracks a market index like the Nifty 50, aiming to match the market's return at a very low cost.

Compound Interest

Compound interest is interest earned on both your original money and the interest it has already earned, making savings grow faster over time.

Inflation

Inflation is the gradual rise in prices over time, which reduces the purchasing power of money, so the same amount buys less in the future.

CAGR

CAGR (Compound Annual Growth Rate) is the smoothed average yearly return of an investment over a period, as if it grew at a steady rate each year.

XIRR

XIRR is the annualised return of an investment when money goes in and out on irregular dates, such as a SIP with many monthly instalments.

IPO

An IPO (Initial Public Offering) is the first time a private company sells shares to the public and lists on a stock exchange.

Dividend

A dividend is a share of a company's profits paid out to its shareholders, usually in cash, as a reward for owning the stock.

Expense Ratio

The expense ratio is the annual fee a mutual fund or ETF charges to manage your money, shown as a percentage of your investment.

Lumpsum

A lumpsum investment is a one-time deposit of a large amount, as opposed to spreading it out through regular instalments like a SIP.

SWP

A Systematic Withdrawal Plan (SWP) lets you withdraw a fixed amount from a mutual fund at regular intervals while the rest stays invested.

Rupee Cost Averaging

Rupee cost averaging is the effect of investing a fixed amount regularly, buying more units when prices are low and fewer when they are high.

Diversification

Diversification means spreading money across different investments so a loss in any one of them has only a limited impact on your portfolio.

Capital Gains

A capital gain is the profit you make when you sell an asset, such as shares or property, for more than you paid for it — and it is taxable.

TDS

TDS (Tax Deducted at Source) is income tax a payer deducts before paying you — on salary, interest or rent — and deposits with the government.

GST

GST (Goods and Services Tax) is a single indirect tax on most goods and services in India, collected along the supply chain but paid by the consumer.

HRA

HRA (House Rent Allowance) is a salary component for rent; part of it can be exempt from income tax under the old regime if you actually pay rent.

Section 80C

Section 80C lets you cut up to ₹1.5 lakh from your taxable income by investing in options like PPF, ELSS and EPF, under the old tax regime.

CIBIL Score

A CIBIL score is a three-digit number from 300 to 900 that summarises your credit history; lenders use it to decide loan and card approvals.

Credit Score

A credit score is a number showing how reliably you repay borrowed money; a higher score means lower risk and better loan and card rates.

EMI

An EMI (Equated Monthly Instalment) is the fixed monthly amount you repay on a loan, covering both the principal and the interest, until it is cleared.

Fixed Deposit (FD)

A fixed deposit (FD) locks a lump sum with a bank for a fixed term at a guaranteed interest rate, earning more than a regular savings account.

Recurring Deposit (RD)

A recurring deposit (RD) lets you save a fixed amount every month for a set term at a guaranteed rate, like a fixed deposit built in instalments.

Gratuity

Gratuity is a lump-sum reward an employer pays for long service, usually after five or more years with the same company.

Term Insurance

Term insurance is a pure life-cover policy that pays your family a lump sum if you die during the term, at a low premium, with no maturity payout.

Emergency Fund

An emergency fund is easily accessible savings set aside for unexpected costs — like a job loss or medical bill — so you avoid going into debt.

Net Worth

Net worth is the total value of everything you own minus everything you owe — the clearest single measure of your overall financial health.

Artificial Intelligence

Artificial Intelligence (AI) is the field of building computer systems that can perform tasks that normally require human intelligence.

Machine Learning

Machine learning is a branch of AI where computers learn to make predictions from data and examples, rather than following fixed programmed rules.

Large Language Model (LLM)

A Large Language Model (LLM) is an AI trained on massive amounts of text to understand and generate human-like language, like ChatGPT and Claude.

Generative AI

Generative AI is artificial intelligence that creates new content — text, images, audio, video or code — rather than just analysing existing data.

Prompt

A prompt is the instruction or question you give an AI tool; its clarity and detail strongly shape the quality of the response you get back.

Token

A token is a small chunk of text — a word or part of a word — that an AI language model reads and generates. Models measure their work in tokens.

Hallucination

In AI, a hallucination is when a language model produces information that sounds confident and plausible but is actually false or made up.

Prompt Engineering

Prompt engineering is the skill of writing clear, well-structured instructions for AI tools so they return more accurate and useful results.

Neural Network

A neural network is a computing system loosely inspired by the brain, using layers of connected nodes to learn patterns in data — the basis of modern AI.

AI Agent

An AI agent is an AI that takes actions to complete a goal on its own — planning steps and using tools — rather than just answering one question.