Investing Basics

Plain-language explainers of the concepts behind every portfolio — what they are and why they matter.

Risk & return

Risk is the chance that an investment's outcome differs from what was expected — including the possibility of loss.

Volatility measures how widely an investment's value swings around its average — in both directions.

Drawdown is the decline from an investment's highest point to a later low — a direct measure of historical downside.

Diversification spreads investments across assets that do not all move together, so one setback affects less of the whole.

Asset allocation is the split of a portfolio across asset classes — the mix that largely sets its risk-and-return character.

The total expense ratio is the annual percentage of a fund's assets deducted to run it — a cost that compounds over time.

A SIP invests a fixed amount at regular intervals; rupee-cost averaging is the arithmetic of what that does to average cost.

Compounding is earning returns on past returns — an effect whose power comes from time, and which works on costs too.

Deploying capital in stages during a market correction manages the risk of catching a falling knife — spreading purchases across a range of prices.

Pausing a SIP during a market fall means missing the lower prices that are the chief arithmetic benefit of investing in instalments.

Patience in investing is the willingness to stay invested through uncomfortable periods — the trait that lets compounding work its full effect.

Consistent, rule-bound investing through market cycles has historically outperformed attempts to time when to invest — even imperfect timing.

India VIX is the NSE's measure of how much uncertainty options markets are pricing into the next 30 days — a real-time gauge of collective fear.

Indian equity markets have seen repeated corrections throughout their history — each felt permanent in the moment, each followed by recovery.

Market breadth measures how many stocks are participating in a move — a narrow rally or decline tells a different story than a broad one.