Q: What is Blue Chip?

Large, financially stable, well-established companies with a long track record of reliable performance. They typically pay dividends and are market leaders.

Q: What is Bond?

A fixed-income debt instrument where an investor lends money to a borrower (government or corporation) for a defined period at a fixed or variable interest rate.

Q: What is Bull Market?

A sustained period of rising asset prices — typically defined as a 20%+ rise from recent lows. Bull markets are characterized by investor optimism and strong economic indicators.

Q: What is CAGR?

Compound Annual Growth Rate — the steady annual growth rate an investment would need to grow from its beginning value to its ending value over a given time period, assuming profits are reinvested.

Q: What is Call Option?

A financial contract giving the buyer the right (not obligation) to buy an asset at a specified price (strike price) before or on the expiry date.

Question 1

What is Alpha?

Accepted Answer

A measure of an investment's excess return compared to a benchmark index. Positive alpha means the investment outperformed; negative alpha means it underperformed.

Question 2

What is Asset Allocation?

Accepted Answer

The strategy of dividing investments among different asset classes — equities, bonds, real estate, gold, and cash — to balance risk and return based on goals and time horizon.

Question 3

What is Amortization?

Accepted Answer

The process of paying off a loan through scheduled, fixed payments over time. Each payment covers both interest and a portion of the principal, with the interest share decreasing over time.

Question 4

What is Bear Market?

Accepted Answer

A market condition where prices fall 20% or more from recent highs, accompanied by widespread pessimism. Bear markets can last months to years.

Question 5

What is Beta?

Accepted Answer

A measure of a stock's volatility relative to the overall market. Beta > 1 means more volatile than the market; Beta < 1 means less volatile.

Question 6

What is Blue Chip?

Accepted Answer

Large, financially stable, well-established companies with a long track record of reliable performance. They typically pay dividends and are market leaders.

Question 7

What is Bond?

Accepted Answer

A fixed-income debt instrument where an investor lends money to a borrower (government or corporation) for a defined period at a fixed or variable interest rate.

Question 8

What is Bull Market?

Accepted Answer

A sustained period of rising asset prices — typically defined as a 20%+ rise from recent lows. Bull markets are characterized by investor optimism and strong economic indicators.

Question 9

What is CAGR?

Accepted Answer

Compound Annual Growth Rate — the steady annual growth rate an investment would need to grow from its beginning value to its ending value over a given time period, assuming profits are reinvested.

Question 10

What is Call Option?

Accepted Answer

A financial contract giving the buyer the right (not obligation) to buy an asset at a specified price (strike price) before or on the expiry date.

Question 11

What is Capital Gains?

Accepted Answer

Profit earned from selling a capital asset (stocks, property, gold) for more than its purchase price. Taxed differently based on holding period and asset type.

Question 12

What is Compound Interest?

Accepted Answer

Interest calculated on both the initial principal and the accumulated interest from previous periods. Known as "the eighth wonder of the world" for wealth-building.

Question 13

What is Demat Account?

Accepted Answer

A Dematerialised Account holds financial securities (stocks, bonds, ETFs) in electronic form. Mandatory in India for trading on NSE/BSE, operated by NSDL or CDSL depositories.

Question 14

What is Diversification?

Accepted Answer

The risk management strategy of spreading investments across different assets, sectors, geographies, and instruments to reduce the impact of any single investment's poor performance.

Question 15

What is Dividend?

Accepted Answer

A portion of a company's profits paid to shareholders, usually quarterly or annually. Expressed as Dividend Per Share (DPS) or Dividend Yield (%).

Question 16

What is EBITDA?

Accepted Answer

Earnings Before Interest, Taxes, Depreciation, and Amortization. A proxy for operating cash flow, used to compare profitability across companies and industries.

Question 17

What is ELSS?

Accepted Answer

Equity Linked Savings Scheme — a tax-saving mutual fund investing primarily in equities. Qualifies for ₹1.5 lakh deduction under Section 80C with the shortest lock-in period of 3 years.

Question 18

What is EPS?

Accepted Answer

Earnings Per Share — a company's net profit divided by the number of outstanding shares. A key metric for comparing profitability between companies.

Question 19

What is ETF?

Accepted Answer

Exchange-Traded Fund — an investment fund traded on a stock exchange like a regular stock. Tracks an index, commodity, sector, or other assets. Combines diversification of mutual funds with intraday trading flexibility.

Question 20

What is Expense Ratio?

Accepted Answer

The annual fee charged by a mutual fund or ETF as a percentage of assets under management (AUM). It covers management, operational, and distribution costs.

Question 21

What is Futures?

Accepted Answer

A futures contract is an obligation (not just a right) to buy or sell an asset at a predetermined price on a specified future date. Used for hedging or speculation.

Question 22

What is Free Cash Flow?

Accepted Answer

The cash a company generates after accounting for capital expenditures (capex). Represents money available for dividends, debt repayment, buybacks, or reinvestment.

Question 23

What is Gold ETF?

Accepted Answer

An exchange-traded fund that tracks the domestic price of gold. Each unit typically represents 1 gram of 99.5% pure gold, stored in vaults by the fund house.

Question 24

What is Hedge?

Accepted Answer

An investment strategy used to reduce the risk of adverse price movements by taking an offsetting position in a related asset.

Question 25

What is Index Fund?

Accepted Answer

A passively managed mutual fund or ETF that replicates the composition and performance of a market index like Nifty 50 or S&P 500, with minimal fund manager intervention.

Question 26

What is Inflation?

Accepted Answer

The rate at which the general price level of goods and services rises over time, eroding the purchasing power of money. Measured by CPI (Consumer Price Index) in India and the US.

Question 27

What is IPO?

Accepted Answer

Initial Public Offering — when a private company offers its shares to the public for the first time on a stock exchange. Investors can apply for shares before listing.

Question 28

What is Liquidity?

Accepted Answer

The ease with which an asset can be converted to cash without significantly affecting its market price. Cash is the most liquid asset; real estate is the least.

Question 29

What is LTCG?

Accepted Answer

Long-Term Capital Gains — profits from selling a capital asset held beyond the prescribed holding period. For equity in India: >1 year attracts 12.5% tax above ₹1.25 lakh.

Question 30

What is Market Cap?

Accepted Answer

The total market value of a company's outstanding shares. Used to classify stocks into Large Cap, Mid Cap, and Small Cap.

Question 31

What is Mutual Fund?

Accepted Answer

A professionally managed investment vehicle that pools money from many investors to invest in a diversified portfolio of stocks, bonds, or other securities.

Question 32

What is NAV?

Accepted Answer

Net Asset Value — the per-unit market value of a mutual fund. Calculated daily as (Total Assets − Liabilities) / Number of Units.

Question 33

What is Nifty 50?

Accepted Answer

India's premier large-cap stock market index, comprising 50 of the largest and most liquid stocks listed on the NSE (National Stock Exchange), representing ~65% of NSE's free-float market cap.

Question 34

What is NPS?

Accepted Answer

National Pension System — a government-backed retirement scheme in India with equity (E), corporate bonds (C), and government bonds (G) allocation choices. Offers tax deduction under 80C + additional ₹50,000 under 80CCD(1B).

Question 35

What is Options Greeks?

Accepted Answer

Mathematical measures that describe how an option's price changes relative to various factors: Delta (price change), Gamma (delta change), Theta (time decay), Vega (volatility), Rho (interest rates).

Question 36

What is P/B Ratio?

Accepted Answer

Price-to-Book Ratio — compares a company's market price to its book value (net assets). P/B < 1 may indicate undervaluation. Popular in banking sector analysis.

Question 37

What is P/E Ratio?

Accepted Answer

Price-to-Earnings Ratio — the current share price divided by earnings per share (EPS). Used to assess if a stock is overvalued or undervalued relative to its earnings.

Question 38

What is PPF?

Accepted Answer

Public Provident Fund — a government-backed long-term savings scheme in India with a 15-year lock-in. Offers tax-free returns (~7.1% p.a.), qualifies for 80C deduction up to ₹1.5 lakh/year. EEE status (Exempt-Exempt-Exempt).

Question 39

What is Put Option?

Accepted Answer

A financial contract giving the buyer the right (not obligation) to sell an asset at a specified price (strike price) before or on the expiry date. Used as insurance against price fall.

Question 40

What is REIT?

Accepted Answer

Real Estate Investment Trust — a company that owns income-producing real estate (malls, offices, warehouses). Traded on stock exchanges, allowing retail investors to access commercial real estate with small capital.

Question 41

What is Repo Rate?

Accepted Answer

The rate at which the RBI lends money to commercial banks. A key monetary policy tool — raising repo rate curbs inflation; lowering it stimulates growth. Directly impacts home loan and FD rates.

Question 42

What is Roth IRA?

Accepted Answer

A US retirement account where contributions are made with after-tax dollars, but all growth and qualified withdrawals are completely tax-free. 2024 contribution limit: $7,000 ($8,000 if 50+).

Question 43

What is Rule of 72?

Accepted Answer

A simple formula to estimate how long it takes an investment to double. Divide 72 by the annual interest rate to get approximate years to double.

Question 44

What is Sensex?

Accepted Answer

The S&P BSE Sensex is the benchmark index of the Bombay Stock Exchange (BSE), comprising 30 of the largest and most actively traded stocks. India's oldest stock index, created in 1986.

Question 45

What is Sharpe Ratio?

Accepted Answer

A measure of risk-adjusted return. It tells how much excess return you receive for each unit of risk taken. Higher is better; >1 is good, >2 is excellent.

Question 46

What is Short Selling?

Accepted Answer

Borrowing shares and selling them hoping the price will fall, then buying back at a lower price to return the shares and profit from the difference.

Question 47

What is SIP?

Accepted Answer

Systematic Investment Plan — a method of investing a fixed amount in a mutual fund at regular intervals (monthly, weekly, etc.), leveraging rupee-cost averaging to reduce market timing risk.

Question 48

What is STCG?

Accepted Answer

Short-Term Capital Gains — profits from selling a capital asset before the long-term holding period. For equity in India: <1 year attracts 20% tax (raised from 15% in Budget 2024).

Question 49

What is Stock Split?

Accepted Answer

When a company divides existing shares into multiple shares, reducing the price per share proportionally without changing total market cap. Improves liquidity and retail participation.

Question 50

What is Technical Analysis?

Accepted Answer

A method of evaluating securities by analyzing statistical trends from historical trading activity — primarily price movements and trading volumes — using charts and indicators.

Question 51

What is Volatility?

Accepted Answer

A statistical measure of the dispersion of returns for a given security or market index. High volatility = large price swings (higher risk and potential reward). Measured by Standard Deviation or VIX.

Question 52

What is VWAP?

Accepted Answer

Volume Weighted Average Price — the average price of a stock weighted by volume traded throughout the day. Used by traders as a benchmark; price above VWAP = bullish intraday trend.

Question 53

What is 401(k)?

Accepted Answer

A US employer-sponsored retirement savings plan where contributions are pre-tax (reducing current taxable income), grow tax-deferred, and are taxed on withdrawal. 2024 limit: $23,000/year + employer match.

Question 54

What is Yield?

Accepted Answer

The income returned on an investment, expressed as a percentage of the investment's cost or current value. Applicable to bonds, dividend stocks, FDs, and REITs.

Financial Dictionary

4

401(k)

A

Alpha

Amortization

Asset Allocation

B

Bear Market

Beta

Blue Chip

Bond

Bull Market

C

CAGR

Call Option

Capital Gains

Compound Interest

D

Demat Account

Diversification

Dividend

E

EBITDA

ELSS

EPS

ETF

Expense Ratio

F

Free Cash Flow

Futures

G

Gold ETF

H

Hedge

I

Index Fund

Inflation

IPO

L

Liquidity

LTCG

M

Market Cap

Mutual Fund

N

NAV

Nifty 50

NPS

O

Options Greeks

P

P/B Ratio

P/E Ratio

PPF

Put Option

R

REIT

Repo Rate

Roth IRA

Rule of 72

S

Sensex

Sharpe Ratio

Short Selling

SIP

STCG

Stock Split

T

Technical Analysis

V

Volatility

VWAP

Y

Yield