Financial Glossary

A company that manages mutual fund schemes. AMCs pool money from investors and invest it in various securities according to the fund's objective. Examples include HDFC Mutual Fund, SBI Mutual Fund, ICICI Prudential Mutual Fund, etc.

The industry body that represents all Asset Management Companies (AMCs) in India. AMFI works with SEBI to promote and develop the mutual fund industry, set standards, and ensure investor protection. HRP Wealth is an AMFI registered mutual fund distributor (ARN-342284).

A unique registration number issued by AMFI to mutual fund distributors. ARN certifies that the distributor is authorized to sell mutual funds. HRP Wealth's ARN is 342284.

The strategic distribution of investments across different asset classes (equity, debt, gold, real estate, etc.) based on your financial goals, time horizon, and risk tolerance. Proper asset allocation helps balance risk and returns.

Tax levied on the profit earned from selling investments like mutual funds, stocks, or property. Long-term capital gains (LTCG) and short-term capital gains (STCG) are taxed differently. Equity mutual funds held for more than 1 year qualify for LTCG benefits.

The movement of money in and out of your finances. Positive cash flow means your income exceeds expenses, allowing you to save and invest. Analyzing cash flow helps in budgeting, identifying savings opportunities, and planning investments.

The percentage of insurance claims settled by an insurance company out of total claims received. A higher claim settlement ratio (ideally above 90%) indicates better service and reliability. This is an important parameter when selecting insurance companies.

The process where your investment earnings generate additional earnings over time. When you reinvest returns, you earn returns on both the principal and accumulated returns, leading to exponential growth. The longer you stay invested, the more powerful compounding becomes.

The total amount of money accumulated or required to achieve a financial goal. For example, retirement corpus is the total amount needed to fund post-retirement expenses, while education corpus is the amount required for a child's education.

An insurance policy that provides a lump-sum payout upon diagnosis of specified critical illnesses (like cancer, heart attack, stroke, etc.). This cover helps meet treatment costs and maintain lifestyle during recovery, complementing health insurance.

Mutual funds that invest in fixed income instruments like bonds, government securities, and money market instruments. Debt funds offer more stability and regular income compared to equity funds, with lower volatility. Suitable for short to medium-term goals.

A mutual fund plan where you invest directly with the AMC without going through a distributor. Direct plans have lower expense ratios as they don't include distributor commissions, potentially leading to higher returns. However, you need to manage investments yourself.

A type of equity mutual fund that offers tax benefits under Section 80C of the Income Tax Act. ELSS has a lock-in period of 3 years and can help save tax while investing in equity markets for long-term wealth creation.

A reserve of liquid funds (typically 6-12 months of expenses) kept aside to handle unexpected financial emergencies like job loss, medical emergencies, or urgent repairs. Emergency funds should be in easily accessible instruments like savings accounts or liquid mutual funds.

A life insurance policy that provides both insurance coverage and savings. If the insured survives the policy term, they receive maturity benefits. However, returns are typically lower than pure investment products, and premiums are higher than term insurance.

Mutual funds that invest primarily in stocks/shares of companies. Equity funds offer higher return potential but come with higher volatility and risk. Suitable for long-term goals (5+ years) due to their ability to beat inflation over time.

The annual fee charged by a mutual fund to manage your investment, expressed as a percentage of the fund's average assets. This includes management fees, administrative costs, and distributor commissions. Lower expense ratios generally mean higher returns for investors.

The process of managing your finances to achieve life goals. It involves assessing your current financial situation, setting goals, creating investment plans, and regularly reviewing and adjusting your strategy. Financial planning helps build wealth systematically and achieve financial security.

An investment strategy where you invest with specific life goals in mind (like retirement, child's education, home purchase) rather than investing randomly. Each goal has its own portfolio, timeline, and investment strategy, providing clarity and discipline.

A mutual fund plan option where all returns are reinvested and reflected in the NAV. Growth plans are preferred for long-term wealth creation as they benefit from compounding. Capital appreciation is realized only when you redeem units.

An insurance policy that covers medical expenses arising from hospitalization, surgeries, and treatments. Health insurance helps protect your savings from unexpected medical costs and is essential for financial security. Premiums are eligible for tax deduction under Section 80D.

Mutual funds that invest in a mix of equity and debt instruments, aiming to balance growth with stability. Hybrid funds are suitable for moderate-risk investors and can be useful for near-goal transitions or those seeking balanced exposure.

Formerly known as dividend option in mutual funds. IDCW plans periodically distribute income to investors, which can be either income from investments (dividend) or capital gains. Investors can choose to receive this income or reinvest it.

A method to adjust the purchase price of an investment for inflation when calculating capital gains tax. Indexation helps reduce tax liability by accounting for inflation, especially useful for long-term debt fund investments held for more than 3 years.

The rate at which prices of goods and services increase over time, reducing purchasing power of money. Inflation erodes the real value of savings. Investments should generate returns that beat inflation to preserve and grow purchasing power over time.

The regulatory body that governs the insurance industry in India. IRDA licenses insurance companies and insurance intermediaries, sets regulations, and ensures consumer protection. HRP Wealth is an IRDA authorized insurance consultant.

A mandatory process to verify the identity and address of investors before they can invest in financial products like mutual funds. KYC helps prevent fraud and money laundering. KYC can be done online or offline with documents like PAN, Aadhaar, and address proof.

Gains from selling investments held for more than the specified holding period (1 year for equity funds, 3 years for debt funds). LTCG on equity funds is taxed at 10% (with exemption up to ₹1 lakh), while LTCG on debt funds is taxed at 20% with indexation benefits.

A type of endowment policy that provides periodic payouts during the policy term along with insurance coverage. A portion of the sum assured is paid at regular intervals, with the balance paid at maturity. Premiums are higher than term insurance for similar coverage.

A pool of money collected from multiple investors and managed by a professional fund manager. The fund invests in a diversified portfolio of securities (stocks, bonds, etc.) according to the fund's investment objective. Investors own units of the fund, not the underlying securities directly.

The price per unit of a mutual fund. NAV is calculated by dividing the total market value of all investments in the fund by the number of units outstanding. NAV changes daily based on the performance of the underlying securities.

The total value of your assets (investments, property, savings, etc.) minus your liabilities (loans, debts, etc.). Net worth represents your true financial position and is an important metric to track financial progress over time.

A government-backed retirement savings scheme regulated by PFRDA. NPS offers tax benefits under Section 80C and Section 80CCD, and allows you to build a retirement corpus through systematic investments in equity, debt, and government securities.

The periodic payment (monthly, quarterly, or annually) made to an insurance company to keep the policy active. Premium amount depends on factors like age, sum assured, policy term, health condition, and type of policy.

The process of realigning the weightings of different asset classes (equity, debt, etc.) in your portfolio to maintain the desired asset allocation. Rebalancing helps manage risk and ensures your portfolio stays aligned with your goals and risk profile.

A mutual fund plan where you invest through a distributor (like HRP Wealth). Regular plans have slightly higher expense ratios as they include distributor commissions, but provide professional guidance, behavioral support, and periodic portfolio reviews.

An investment adviser registered with SEBI who provides investment advice for a fee. RIAs have strict compliance requirements and must act in clients' best interests. HRP Wealth is NOT a SEBI-registered RIA; we work as an AMFI-registered mutual fund distributor.

Your ability and willingness to take investment risks based on factors like age, income stability, financial goals, time horizon, and personal risk tolerance. Risk profile helps determine appropriate asset allocation between equity and debt investments.

An investment strategy where you invest a fixed amount regularly (as in SIP), which automatically buys more units when prices are low and fewer units when prices are high. This averages out the purchase cost over time and reduces the impact of market volatility.

The regulator for securities markets in India, including mutual funds, stocks, and other investment products. SEBI protects investor interests, regulates mutual funds, and ensures transparency and fair practices in the market.

A section of the Income Tax Act that allows tax deduction up to ₹1.5 lakh per year for investments in specified instruments like ELSS mutual funds, PPF, NPS, life insurance premiums, and repayment of home loan principal. This is one of the most popular tax-saving provisions.

A section of the Income Tax Act that allows tax deduction for health insurance premiums paid for self, family, and parents. Deduction limits vary based on age and coverage type. This encourages health insurance coverage and provides tax benefits.

A systematic way to invest in mutual funds where you invest a fixed amount regularly (usually monthly) regardless of market conditions. SIPs help in rupee cost averaging and build investment discipline. You can start with as little as ₹500 per month.

Gains from selling investments held for less than the specified holding period. STCG on equity funds is taxed at 15%, while STCG on debt funds is added to income and taxed as per your income tax slab.

A strategy to transfer a fixed amount from one mutual fund scheme to another at regular intervals. STP is useful when you want to gradually move money from debt to equity funds or when you have a lump sum to invest but want to deploy it gradually.

The guaranteed amount that will be paid to beneficiaries in case of death of the insured, or the amount payable at maturity (in case of endowment/moneyback policies). It's the basic coverage amount of a life insurance policy.

A health insurance policy that covers expenses above a deductible (base amount). Super top-up plans are cost-effective ways to enhance health coverage, especially useful for covering high medical costs beyond the base health insurance policy.

A facility that allows you to withdraw a fixed amount from your mutual fund investment at regular intervals (monthly, quarterly, etc.). SWP is useful for creating regular income from accumulated corpus, especially during retirement.

A reduction in taxable income allowed by the Income Tax Act for certain investments or expenses. Tax deductions (like Section 80C, 80D) reduce your taxable income, while tax exemptions reduce the tax payable. Both help in tax planning and savings.

Tax deducted by the payer before making payment to the payee. In mutual funds, TDS may be deducted on certain payouts like dividends above specified limits. TDS is credited against your final tax liability when filing income tax returns.

A pure life insurance policy that provides death benefit to beneficiaries if the insured dies during the policy term. Term insurance offers high coverage at affordable premiums with no maturity benefit if the insured survives the term. Ideal for pure protection needs.

The duration available to achieve a financial goal, from now until when you need the money. Time horizon is crucial in investment planning as it determines asset allocation - longer horizons allow for higher equity exposure, while shorter horizons require more stable debt investments.

An insurance product that combines insurance coverage with investment in market-linked funds. Premiums are allocated between insurance coverage and investment in equity/debt funds. ULIPs have lock-in periods and charges, making them less efficient than separate term insurance and mutual fund investments.