10 Investment Terms You Should Know Before Investing

By Abhi Loans

Diversification spreads investments across stocks, bonds, and real estate, minimizing risk by avoiding reliance on any single asset's impact on the portfolio.


Risk tolerance is crucial in investing it's your capacity and willingness to accept risk. Knowing it beforehand aids in selecting investments aligned with your goals and comfort level.

Risk Tolerance

Asset allocation is the distribution of your portfolio across various assets like stocks, bonds, and cash. Choosing the right mix depends on your goals, risk tolerance, and time horizon.

Asset Allocation

ROI (return on investment) gauges an investment's profit or loss over time. Calculate it by dividing the net profit by the investment's cost.


Mutual funds pool money from investors to buy diversified stocks, bonds, or securities. Managed by professionals, they provide a convenient route to diverse asset investment.

Mutual Funds

Index funds, a type of mutual fund, mirror specific stock market indices like the SIP 500. With low fees, they provide diversification across a broad spectrum of stocks.

Index Funds

ETFs, or exchange-traded funds, resemble index funds but trade like individual stocks. They provide diversification and low fees, offering flexibility and tradability compared to traditional mutual funds.


Dividends are payments from a company to its shareholders, representing a share of profits. They offer a consistent income source, typically from financially stable companies.


Capital gains are profits derived from selling an investment above its purchase price. Taxed based on duration held short-term or long-term.

Capital Gains

Volatility reflects the fluctuation in an investment's price over time. Assessing this before investing is crucial; high volatility implies high risk but also potential for significant returns.


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