Index fund
Market basicsA fund that mechanically holds every constituent of an index in its weightings.
In plain terms
You will never beat the index. You will also never underperform it by much, and you pay almost nothing.
1492 terms
Glossary
Every term is defined twice: once the way a filing would put it, and once the way somebody would explain it to you across a table. The second one is usually the one that sticks.
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Core and satellite
Market basicsAlso called: Core-satellite
Holding most of a portfolio in broad index funds with a smaller actively chosen portion.
In plain terms
Lets you find out whether you can pick stocks without your outcome depending on it.
ETF
Market basicsExchange-Traded Fund — an index fund that trades on the exchange like a share.
In plain terms
Needs a demat account and buys at a live price rather than end-of-day NAV.
Index rebalancing
Technical analysisPeriodic revision of index constituents and weights, forcing index funds to trade.
In plain terms
Mechanical buying and selling on a known date by participants who have no choice.
PMS
Market basicsPortfolio Management Service — discretionary management of a portfolio held in your own name.
In plain terms
A full fee structure needs roughly three to four points of annual outperformance just to match an index fund.
Reversibility
Risk & psychologyAlso called: Reversible decision, Irreversible decision, One-way door, Two-way door, Cost of reversing
How much it costs, in money and in time, to undo a commitment — transaction costs, price impact, any load or penalty, the tax event crystallised, and whatever a lock-in prevents you doing.
In plain terms
Deliberation should be proportionate to this, not to the amount involved. A ₹15 lakh index fund purchase can be undone on Tuesday; ₹3 lakh of booking money on an under-construction flat cannot be undone at any price you would accept.