Reference
Finance glossary
40 essential money terms in one sentence each.
- Amortisation
- Paying off a loan through scheduled payments that cover interest and gradually reduce principal.
- APR
- Annual percentage rate — the yearly cost of borrowing, including certain fees.
- APY
- Annual percentage yield — the yearly return on savings including compounding.
- Asset allocation
- How your investments are divided among stocks, bonds, cash and other assets.
- Avalanche method
- Paying off the highest-interest debt first.
- Balance transfer
- Moving debt from one credit card to another, often for a lower promotional rate.
- Bond
- A loan you make to a government or company in exchange for interest payments.
- Budget
- A plan that assigns your income to spending, saving and debt repayment.
- Capital gain
- Profit from selling an asset for more than you paid.
- CIBIL score
- A widely used Indian credit score from 300 to 900.
- Compound interest
- Interest earned on both the original amount and previously earned interest.
- Credit utilisation
- The share of available revolving credit you're using.
- Debt-to-income ratio (DTI)
- Monthly debt payments divided by gross monthly income.
- Diversification
- Spreading money across many investments to reduce risk.
- Dividend
- A share of company profits paid to shareholders.
- Down payment
- The upfront portion of a purchase price you pay in cash.
- Emergency fund
- Cash set aside for unexpected essential expenses.
- EMI
- Equated monthly instalment — a fixed monthly loan payment.
- ETF
- Exchange-traded fund — a basket of investments that trades like a stock.
- Expense ratio
- The annual fee a fund charges, as a percentage of assets.
- FICO score
- A widely used US credit score from 300 to 850.
- Fixed rate
- An interest rate that doesn't change over the agreed term.
- Index fund
- A fund that tracks a market index such as the S&P 500 or Nifty 50.
- Inflation
- The general rise in prices that reduces purchasing power.
- 401(k)
- A US employer-sponsored retirement plan.
- Liquidity
- How quickly an asset can be turned into cash without loss.
- LTV
- Loan-to-value — loan amount divided by property value.
- Mutual fund
- A pooled investment managed by a fund company.
- Net worth
- Everything you own minus everything you owe.
- Principal
- The original amount borrowed or invested.
- Rebalancing
- Adjusting a portfolio back to its target allocation.
- Refinancing
- Replacing an existing loan with a new one, usually for better terms.
- Roth IRA
- A US retirement account funded with after-tax money that can grow tax-free.
- RRSP
- Canada's Registered Retirement Savings Plan.
- Rule of 72
- 72 divided by the annual rate ≈ years for money to double.
- Sinking fund
- Money saved in advance for a known future expense.
- SIP
- Systematic investment plan — fixed regular investing into a fund.
- Snowball method
- Paying off the smallest debt balance first.
- TFSA
- Canada's Tax-Free Savings Account.
- Variable rate
- An interest rate that moves with a benchmark.