Encyclopedia

Plain English for the words
the industry keeps to itself.

18 entries, each one written so a non-finance reader gets it in a single pass.

Foundations

The ideas everything else on this site is built on. Read these first if any word below feels unfamiliar.

Spending your corpus, sustainably

Decumulation

The phase after you stop earning a salary — when you're drawing income from a corpus rather than building one. It's the mirror image of accumulation, the wealth-building phase most Indian fintech serves (Zerodha, Groww, Kuvera, ET Money, INDmoney all optimise for opening accounts, running SIPs, growing AUM — that's how they earn). Decumulation asks the harder, under-served question: how do you draw from what you have, tax-efficiently, without running out? Every calculator on this site is built for that question. If you're 40+ and thinking about retirement — or already retired — this is the framing to read the rest of the encyclopedia through.

Think of it like: Building a swimming pool vs draining it responsibly. The tools you use — and the risks you face — are completely different problems.
Interest earning interest

Compounding

When your money earns interest, that interest starts earning its own interest the next year. It sounds boring, but it is the single reason a small savings habit today becomes a big number in 20 years. Time usually does more work than the exact interest rate.

Think of it like: A snowball rolling down a hill. Small at first, then huge — because the surface picks up more snow the longer it rolls.
Why ₹100 buys less every year

Inflation

Prices for things you buy — rent, food, petrol, movie tickets — rise a little every year. About 5–6% per year in India historically. So ₹1 lakh today has roughly half the buying power twelve to fourteen years from now. Any investment must beat this rate just to hold its ground.

Think of it like: Standing on a treadmill. If you don't move forward faster than the belt, you go backwards.
Brochure rate vs what reaches your bank

Yield vs In-hand

When a bank quotes "8% FD" or an app shows a "12% mutual fund," that is the gross yield — before tax, before charges. Your in-hand number is what actually shows up in your account, often 20–40% less. The useful question is not "what does it earn?" but "what do I keep?"

Think of it like: The CTC on your offer letter vs the salary in your bank account. Same idea.
Higher income tier → higher tax rate

Tax slab

Your income is taxed in tiers. The first ₹2.5–3L pays no tax. Then 5%, 10%, 15%, 20%, and 30% for income above ₹15L. Add cess (4%), plus surcharge if you earn very well. The top marginal rate lands around 31.2%–35.88%. This matters because FD interest, rent, and salary all get taxed at this top rate.

Think of it like: Water filling a set of buckets. Only when one bucket fills up does water start flowing into the next — and the higher buckets have a bigger tax drain.
Tax on money you make from selling investments

LTCG (and STCG)

Sell an equity mutual fund or stock at a profit and you pay tax on the gain, not the whole amount. Held over 12 months → LTCG at 12.5%, and only above a ₹1.25L annual exemption. Held under 12 months → STCG at 20%. This is much lighter than salary tax, which is why long-term equity is considered tax-efficient.

Think of it like: If salary tax is a full-price movie ticket, LTCG is the matinee-show discount.
The total money you have built up

Corpus

When people say "retirement corpus" or "college corpus," they mean the total pool of money set aside for that goal. It grows through your contributions AND through returns. Once you retire, this pool generates your monthly income.

Think of it like: The water tank on your roof. What flows out of your taps depends on how full the tank is.
The best tax label an investment can carry

EEE

EEE = Exempt-Exempt-Exempt. Three tax breaks in one: (1) your contribution is deductible from your income, (2) the interest earned is not taxed while it grows, and (3) the maturity amount is not taxed either. In India, PPF and EPF (within limits) are the two big EEE options. Nothing else in personal finance beats this on tax.

Think of it like: A duty-free shop, but for your money.

Safety-first instruments

Low risk, contractual returns, ideal for money you may need in the next few years or for the certainty portion of a retirement portfolio.

Renting your money to a bank at a fixed rate

Fixed Deposit (FD)

You give a bank a lump sum for a fixed period (1–10 years). They pay you a fixed rate — typically 7–8%. When the tenure ends, you get your principal back plus the interest. The first ₹5 lakh per bank is insured by DICGC. Interest is taxed at your slab rate, so an 8% FD lands closer to 5.5% after tax for someone in the 30% slab.

Think of it like: Renting out a spare room. Guaranteed monthly rent — but you can't easily kick the tenant out early.
A 15-year government tax-free savings scheme

Public Provident Fund (PPF)

You can invest up to ₹1.5 lakh per year in PPF at a rate set every quarter by the government (~7–7.5% currently). Money is locked in for 15 years, extendable in 5-year blocks. Fully EEE — no tax on the contribution, the interest, or the maturity. The trade-off is the long lock-in.

Think of it like: A slow-cooker retirement dish. Set it and forget it — the tax-free flavour is worth the wait.
The mandatory retirement fund on your payslip

Employees' Provident Fund (EPF)

12% of your basic salary is deducted every month. Your employer matches with another 12% (a chunk goes to a pension pool called EPS). The total earns interest set by EPFO — currently around 8.25%. Tax-free at maturity if you meet the conditions. For most salaried Indians, this is the single biggest retirement corpus they end up with.

Think of it like: A forced savings account you didn't have to design — the payroll paperwork does the discipline for you.
Bonds where the interest never gets taxed

Tax-free bonds

Government-backed institutions like NHAI, PFC, and REC issued long-tenure bonds a decade ago whose interest is exempt from income tax. They trade on stock exchanges. A 5.5% tax-free coupon beats an 8% taxable one for someone in the 30% slab — a lower headline, more take-home. New issues are rare, but existing bonds can still be bought.

Think of it like: A quiet three-course meal that costs less than the loud five-course one — but leaves you fuller.

Growth instruments

Higher returns over long periods, with market ups and downs along the way. Best for goals that are 7+ years out.

Owning tiny pieces of companies

Equity (Stocks)

A stock is a share of ownership in a company. If the company grows and makes profits, the price of your share tends to go up. Some companies also share profits directly as dividends. Stocks are the highest-return asset over long periods, but they swing hard in the short run — 30% drops in a single year are normal.

Think of it like: Owning a slice of a business you'll never run. The slice's value depends on how the business does.
A basket of many stocks or bonds, professionally managed

Mutual Fund

Instead of buying individual stocks yourself, you give your money to a mutual fund. It pools everyone's money and buys 40–100 stocks or bonds according to its mandate. You own units of the fund. Instant diversification plus professional management, for a small annual fee (0.5–2%).

Think of it like: A restaurant thali. You don't have to know how to cook every dish — you just order the platter.
Auto-investing a fixed amount every month

SIP (Systematic Investment Plan)

You set up an auto-debit that puts, say, ₹10,000 into a mutual fund on the same day every month. When the market is down you get more units; when it is up you get fewer. Over years this averages your buying price and removes the need to guess the market's mood. This is how most Indian retail investors quietly build wealth.

Think of it like: Watering a plant every week without checking the weather. Regularity beats forecast.
A low-risk fund taxed like equity

Arbitrage Fund

These mutual funds profit from tiny price gaps between the cash market and the futures market for the same stock. They lock in both sides at the same instant, so they take no market-direction risk. Returns are modest (5–7%), but because SEBI classifies them as equity, they get the lighter equity tax treatment. Useful for short-term parking of money for high-slab investors.

Think of it like: A currency-exchange booth at an airport that only takes the small spread — no big bets, no big losses.
Small pieces of infrastructure and real estate

InvIT / REIT

InvITs and REITs pool investor money to own big income-generating assets — highways, power lines, office parks, malls. They pay out most of the rent or toll income every quarter to unit holders. It is like being a mini-landlord without dealing with tenants. The distribution mix (interest + dividend + return-of-capital) gives it a lower effective tax rate than pure interest income.

Think of it like: Owning a slice of a shopping mall or a highway. Every time someone shops or drives past, a tiny bit of that flows to you.

Actions

What you do with the corpus once you've built it.

The opposite of a SIP — taking money out on a schedule

SWP (Systematic Withdrawal Plan)

After you have built a corpus, you can set up an SWP to withdraw a fixed amount every month from your mutual fund. The rest keeps compounding. When done from an equity fund, only the gain portion of each withdrawal is taxable (and even that at the low LTCG rate), so it is very tax-efficient compared to plain interest income.

Think of it like: Drawing rent from a small orchard you own — you take some fruit each month, and the trees keep growing.

Every explainer above is educational, not a recommendation. Instruments vary by issuer, tenure, tax residency, and by year. If you are making a real decision, consult a SEBI-registered investment adviser and read the actual scheme document.

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