This article is the continuation of its first part “Basic terms to know in Finance - Part-1”. This article also will share you some basics before you start your financial planning. This article will surely give clarity of each term like insurance, investment etc. OK with this brief intro I am moving into the second part.

Before starting the second part I would like to inform which are the topics covered in its first part. The first part of this article covered what is Money, Credit, Debit, Debt, Asset and Liability? Everyone must have some idea about all these topics, but now this article will give you a clear picture exactly what it is. While preparing this article I need to browse more things to put it in a right way and simple. I could not find a website showing all the financial related basic term in one page. So, that also makes my blog a different from other blogs. These two posts now contains very few basic terms, while we proceed forward, the new basic terms will surely be updated in these two post only.

The content of “Basic terms to know in Finance - Part-2”

    What is Investment?
    What is Insurance?
    What is Interest?
    What is Profit / Loss?
    What is Savings?

What is Investment?

Investment can be explained as a process or action of putting money in purchasing some property like plot, inventory, stocks, mutual fund etc., with the expectation of creating some profit after some time period. Investment king Warren Buffett will always say that Do not put all eggs in same basket, while he is asked about investment.

What is Insurance?

Insurance is a kind of investment (Actually not a kind), to serve us in an emergency situation. For example if we have met with an unexpected accident, the insurance company in which we have insured for accidental insurance will take care of our hospital expenses up to the maximum amount for which we have insured. Many of them considering insuring as an investment, actually it is not. Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment. www.wikipedia.org There are many kind of insurances with many insurance companies. There are many categories also, among that Term Policy is must for everyone in the family. Apart from this we can have life insurance, vehicle insurance, health insurance

What is Interest?

Interest in finance can be explained as the percentage of the total amount invested for a certain period of time. Interest will be calculated normally for the period of one complete year. But the credit card loan interest will be calculated for the period of one month. There are two basic types of interests, one is Simple Interest and other one is Compound Interest.


What is Profit / Loss?

This term must be come across in everyone’s life often. In very easy way to put this term is, if Income – (minus) Expenditure number comes in positive it is profit and if the same calculation gives negative number, then it is loss.
Income – Expenditure = Positive (PROFIT)
Income – Expenditure = Negative (LOSS)

What is Savings?

Savings can be explained as a part of the income kept aside for the future requirement. In olden days there was a saying “Save remaining money after the monthly spending”, but now-a-days it has been changed as “Spend the remaining after savings”. It is been observed that saving became mandatory for all level peoples. There are people plan for the future and start saving, and many people simply have a habit of savings and will use it for the emergency needs.