Personal Finance jargons to understand!

Every now and then, we come across many jargons in personal finance. Some we understand and others make us think, “Wait! What does this mean?” Therefore, in this article, we have explained some of the jargons.

Asset Allocation

Asset allocation is nothing but portfolio of various assets such as equity, debt, gold, real estate, etc. Here, investors can spread their investments across asset classes. This usually helps an investor to diversify risk and never depend on single asset.

Deductible

This jargon you might hear for insurance, specifically, for health insurance. Deductible is the amount that you need to pay from your pocket before your insurance coverage comes in to cover the rest of the expenses.

Defined contribution plan

These plans allow employees to contribute towards their retirement corpus that can be used during their retirement. Employee provident fund (EPF) is one of such example of defined contribution plan.

Re-balancing

Re-balancing is nothing but buying and selling assets periodically to maintain the original asset allocation strategy. This helps you to bring your investments to the appropriate level of risk which you can tolerate.

Step-up EMI

A step-up EMI is a method with which you gradually increase your EMI to pay off your debt before the actual loan tenure. This method helps to save interest and close your loan before the tenure by not giving pressure on paying the lump sum amount to close your loan.

Step-up SIP

This is something similar to step-up EMI. The only difference between the two is that step-up EMI helps to close your loan early and step-up SIP helps to achieve your financial objectives early. It is always wise to adopt step-up SIP with a rate at which your income increases.