Glossary
Big finance words, made simple.Mutual fund and insurance glossary, each term in a line or two.
Finance comes with a lot of jargon. Here are the words you’ll hear most often, each explained in a line or two. If something is still unclear, just ask our team.
- AMC (asset management company)
- The company that runs a mutual fund, also called the fund house. It manages the money and looks after the schemes.
- ARN (AMFI registration number)
- The registration number every mutual fund distributor must hold from AMFI. Ours is ARN-94806.
- CAGR (compound annual growth rate)
- The steady yearly growth rate that would take an investment from its starting value to its ending value. Useful for a single lump sum.
- Cashless claim
- A health claim where the insurer pays the network hospital directly, so you don’t pay the covered amount yourself.
- Co-pay
- The share of each health claim you pay yourself, such as 20%. The insurer pays the rest, as per the policy terms.
- Compounding
- Earning returns on your past returns, not just on the money you put in. The longer you stay invested, the bigger its effect.
- Debt fund
- A mutual fund that invests in bonds, government securities and similar instruments. It’s usually steadier than equity, but still carries some risk.
- Direct plan
- A version of a fund bought straight from the fund house, without a distributor. It has a lower expense ratio because no commission is paid.
- ELSS (equity linked savings scheme)
- An equity mutual fund with a three-year lock-in. It qualifies for the Section 80C deduction under the old tax regime.
- Equity fund
- A mutual fund that invests mainly in company shares. It has higher growth potential and bigger ups and downs, so it suits long goals.
- Exit load
- A fee some funds charge if you redeem within a set period after investing. The period and the fee are given in the scheme documents.
- Expense ratio
- The yearly fee a fund charges to manage your money, as a percentage of your investment. It comes out of the fund’s value, so the NAV you see is already after this cost.
- Family floater
- One health policy that covers the whole family under a shared sum insured. Anyone in the family can use the cover.
- Folio
- Your account number with a fund house. All your investments with that fund house can sit under one folio.
- Hybrid fund
- A mutual fund that invests in a mix of equity and debt, so its ups and downs usually fall somewhere between the two.
- Index fund
- A mutual fund that copies a market index, such as the Nifty 50 or Sensex, instead of a manager picking shares. It usually has a low expense ratio.
- Insurance Ombudsman
- A free, independent forum for insurance complaints. You can approach it if your insurer rejects your complaint or doesn’t resolve it in time.
- KYC (know your customer)
- A one-time check of your identity and address, using PAN, Aadhaar and other documents. You need it before you can invest in mutual funds.
- Lock-in
- A period during which you can’t withdraw your money, such as three years in ELSS or 15 years in PPF.
- Lump sum
- Investing a larger amount in one go, instead of in monthly instalments.
- NAV (net asset value)
- The price of one unit of a mutual fund on a given day. It is the value of everything the fund owns, minus its costs, divided by the number of units.
- NCB (no claim bonus)
- A reward for a claim-free year. In health insurance it often increases your cover.
- Nominee
- The person you name to receive your investments or insurance money if you die. Keeping nominees up to date saves your family trouble later.
- Premium
- The amount you pay the insurer, monthly or yearly, to keep a policy active.
- Regular plan
- A version of a fund bought through a distributor. Its expense ratio includes the distributor’s commission, so it is a little higher than the direct plan’s.
- Rider
- An add-on to an insurance policy, like accidental death or critical illness cover, bought for an extra premium.
- Riskometer
- A scale shown for every mutual fund scheme, from low to very high, that tells you the level of risk in the fund.
- Room rent limit
- The most a health policy pays per day for a hospital room. If you choose a costlier room, other charges may also be cut in proportion.
- Rupee cost averaging
- Investing a fixed amount every month, so you buy more units when prices are low and fewer when they are high. Over time it evens out your average cost.
- SIF (Specialized Investment Fund)
- A SEBI-regulated investment run by a mutual fund house, with a ₹10 lakh minimum and strategies a regular mutual fund can’t use. It generally carries higher risk.
- SIP (systematic investment plan)
- A way to invest a fixed amount in a mutual fund at regular intervals, usually every month. It builds the saving habit and spreads your buying over time.
- STP (systematic transfer plan)
- A way to move a fixed amount from one fund to another in the same fund house at regular intervals, for example from a debt fund into an equity fund.
- Sum assured
- The amount a life insurance policy promises to pay your family if you die during the policy term.
- Sum insured
- The most a health or general insurance policy will pay in a policy year, or for a claim, as per its terms.
- SWP (systematic withdrawal plan)
- A way to take a fixed amount out of a mutual fund at regular intervals, such as every month. Often used for a steady income in retirement.
- Term insurance
- Pure life cover for a fixed period. If you die during the term, your family gets the sum assured; if you survive it, nothing is paid.
- TPA (third party administrator)
- A company that handles health claims on behalf of an insurer, including cashless approvals.
- Waiting period
- A time after you buy a health policy when certain illnesses aren’t covered. Illnesses you already have usually have a longer waiting period.
- XIRR
- A way to measure your yearly return when you invest at different times, as in a SIP. It takes the date and amount of each instalment into account.
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