Glossary

Active investor

Highly involved, picking individual stocks and typically looking at their stocks many times a day

Actively managed fund

A fund in which professionals make decisions about how to invest the fund’s money.

Asset classes

Different types of investments, like stocks, shares, bonds and commodities.

Asset management

Managing investments on behalf of others.

Bear market

A decline in price of a financial asset or a group of assets, or the market as a whole by 20% from a recent high amid widespread investor pessimism, usually for a few months. It is the opposite of a bull market.

Bond funds

A collection of investment primarily in bonds that generate regular income.

Bonds

Bond are IOUs issued by companies and governments. when you buy one you’re making a loan to an organisation. They promise to pay you back, and in the meantime, they’ll give you regular interest payments.

Bourse

Go to Stock Exchange

Broker

An individual or company that acts as the middle person between an investor and a stock exchange.

Bull market

Refers to a growth in price of a financial asset or a group of assets, or the market as a whole by 20% from a recent trough amid widespread investor optimist, usually for a few months. It is the opposite of a bear market.

Capacity for loss

How much you can’t afford to lose. It depends on your age, health, dependants, income, expenses, current savings, desired standard of living, among other variables.

Capital

Capital includes the cash and other financial assets held by an individual or business.

Cash and Cash Equivalents

Cash and other assets that can be easily converted into cash.

Cash ISA

A type of ISA (sometimes called NISAs) are savings accounts that pay interest that is free of income tax.

Central Banks

A financial institution given privileged control over the production and distribution of money and credit for a nation or a group of nations.

Collective investment schemes

Go to Investment Fund

Collective investment vehicles

Go to Investment Fund

Commodities

Physical goods used in commerce. Such as gold, copper, wheat, beef.

Common Stock

There are two main types of stock: common stock and preferred stock.

Common stock is the most common type of stock. When you own common stock, you own a share in the company’s profits as well as the right to vote. You may also earn dividends — a payment made to stock owners on a regular basis — but those dividends are variable and not guaranteed.

In the UK, common stocks are known as ‘equity shares’ or ‘ordinary shares’, because they’re just that – ordinary.

Compounding

Compound interest is the interest calculated taking into account the money you invested and the returns from previous periods.

Coupon

The annual interest rate paid on a bond.

Credit Rating

An estimate of the ability of a person or organisation to fulfil their financial commitments, based on previous dealings.

Crowd lending

Go to Peer-to-Peer Lending

Cryptocurrency

A type of digital or virtual money which is secure, decentralised and transparent – making it nearly impossible to counterfeit or double-spend.

Debt

An amount of money money that is owed.

Diversification

Diversification is a risk management strategy that mixes a wide variety of investments in an attempt to limit the impact any single asset type has on the overall portfolio if it’s value or performance falls.

Dividend

A sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves).

Dow Jones

A stock market index that measures the stock performance of 30 large companies listed on stock exchanges in the United States.

Due diligence

Due diligence is the exercise of care that a reasonable business or person is normally expected to take before entering into any agreement or contract with another person. It’s an investigation or audit into the other party’s operations, ownership, finances and other relevant information.

Easy Access Savings Accounts

A type of savings account that lets you to add and withdraw cash whenever you want, without having to pay any fees or charges.

Easy-access cash ISAs

Cash ISAs where you can take out your money when you want, without penalty.

Employer pension

A pension scheme set up by your employer with contributions made by you and your employer.

Engaged investor

Makes regular commitments and monthly payments towards their saving and investing, does want to find out what’s behind their portfolio and what impacts on their life and money goals

Equity

Equity is the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company’s debt was paid off.

Equity funds

A collection of investments primarily in stocks.

ESG

An acronym that refers to the environmental, social, and governance practices of an investment.

ESG Integration

An ethical investment strategy where you combine your ethical and social concerns into your investment portfolio, but the primary objective is still financial performance.

Ethical Investing

Investing in financial products, companies or other types of assets based on your principles.

Exchange rate

The value of one nation’s currency compared to the currency of another nation or economic zone.

Exchange Traded Funds

A fund made up of different assets like stocks and bonds. Investors can then buy shares in the ETF on the stock exchange.

Face value

Face value is a financial term used to describe the nominal or dollar value of a security as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. It’s also known as ‘par value’.

FANG stock

The stocks of four the technology companies: Facebook, Amazon, Netflix, and Alphabet (Google’s parent company).

Financial advisor

A qualified person whose job is to provide financial advice to people.

Financial Analysis

Evaluating a company’s finances to determine their performance and suitability.

Financial asset

A non-physical asset whose value is derived from a contractual claim, such as bank deposits, bonds, and stocks.

Financial instruments

Go to Asset classes

Fixed Income Security

Go to Bonds

Fixed rate cash ISAs

Cash ISAs with a fixed rate of interest for a set period of time. Usually, if you withdraw your money ahead of time you may lose some or all of the interest.

Fixed-income funds

Go to Bond Funds

Fixed-income securities

Go to Bonds

Fixed-Rate Bonds

A type of savings account that lets you put your money away for a set period of time in return for a fixed amount of interest on your cash. You won’t be able to access your money for the duration of the bond term.

Flexible cash ISAs

Cash ISAs where you can take money out and return it in the same tax year (by 5th April), without losing your current year’s ISA allowance.

Foreign exchange market

Go to Forex

Forex

Forex is a money market where currencies are traded against each other, taking advantage of the currency value fluctuations.

FTSE 100

A stock market index that that measures the stock performance of 100 large companies listed on the London Stock Exchange.

Fund management fee

Charges related to making investment decisions, usually a percentage of your investment.

Fund manager

People who decide how to invest the money contributed to a fund.

Fungibility

The state of being interchangeable. For example, money has fungibility because there is no difference between one pound and another pound. Similarly, stocks of the same type in the same company are considered fungible.

Futures

A financial contract obligating the buyer to purchase an asset or the seller to sell an asset at a predetermined future date and price.

FX

Go to Forex

Hedge

A risk management strategy used to limit or offset probability of loss from fluctuations in the prices of different types of assets.

Hedge fund

A hedge fund is an investment fund that trades use more complex trading techniques to maximise the return for their investors. Hedge funds are generally available to sophisticated investors only given their complexity and high risk.

Impact Investing

An ethical investment strategy that investments in companies that are working to solve social or environmental problems.

Index Fund

Go to Passively Managed Fund

Index-stocked ETF

An exchange traded fund made up of a collection of stocks that match the index it is tracking such as the FTSE 100 or the S&P 500.

Inflation

The rate at which the general prices of goods and services in an economy increases over a period of time.

Innovative Finance ISAs

The innovative finance ISA (IFISA) lets you use your ISA allowance to invest in peer-to-peer lending or crowding, or lend directly to a business or consumer.

Investment Fund

An investment fund is a collection of different investments managed by a fund manager to make money for the people who invest in it.

Investment pools

Go to Investment Fund

Investment Trusts

A type of investment fund described as ‘closed-ended’ because they have a fixed number of shares that investors can buy into. Investment trusts are public limited companies (PLCs) that you can buy and sell on a stock exchange.

Investment Vehicle

Go to Investment Fund

Investor

A person or institution that puts money into financial schemes with the expectation of making a profit.

Involvement level

How much time and attention you can commit to managing and monitoring your savings and investments.

ISAs

Individual Savings Accounts (ISAs) are financial products available to UK residents (and non-UK residents in specific circumstances) that help you save or invest your money. You don’t have to pay income tax and capital gains tax on returns or withdrawals under your tax-free allowance (set at £20,000 for the tax period 2020/2021).

Junior ISA

A type of ISA you can set up for any child under 18 living in the UK. The account is in their name, but they cannot touch the cash until they are 18.

Lifetime ISA

A type of ISA available to under 40s where you can contribute up to £4,000 of your total ISA allowance per year and get a government bonus of 25% each financial year until you are 50. The ISA allowance for 2020/21 is currently set at £20,000 per year.

You can use the funds to buy your first home, or save towards your retirement.

Liquidity

The ease with which an asset, or security, can be converted into ready cash without affecting its market price.

Managed funds

Go to Investment Fund

Market Capitalisation

The total pound or dollar market value of a company’s stock that is available to buy on the stock market.

Market index

A market index is a hypothetical portfolio of investment which represents a segment of the financial market. For example, the FTSE 100, S&P 500, or a collection of themed assets such as Green energy or automotive stocks.

Money market funds

A money market fund is a type of fund that invests in highly liquid assets such as cash, cash equivalent securities, and other assets that can be turned to cash easily.

Mutual Funds

Go to Investment Fund

Nasdaq

An American stock exchange located in New York City.

NISA

Go to Cash ISA

Nominal value

Go to Face value

Non-flexible cash ISAs

Cash ISAs with different rules apply to the level of flexibility and penalty fees associated, if you want to access your money early.

Notice Savings Accounts

A type of Saving account where you have to give advance notice if you want to make a withdrawal.

OEICs

Go to Open Ended Investment Companies

Open-Ended Investment Companies

A type of ‘open-ended’ investment funds. This means they can grow or shrink depending on the number of investors who wish to buy into them.

Par value

Go to Face value

Passive investor

Makes saving and investing decisions once or twice a year, does not want or can not currently spend much time thinking about their portfolio.

Passively Managed Fund

Funds with a portfolio made up of assets that matches or tracks a market index.

Peer-to-Peer lending

Peer-to-peer lending is where individuals or business obtain loans directly from other individuals and companies, cutting out the financial institution as the middleman.

Pensions

Go to Employer Pension

Pensions Funds

Pension funds, or pension schemes, are investments that aim to provide retirement income.

Personal pensions

A pension scheme you set up by yourself and make direct contributions to the fund yourself.

Platform fee

Charges related to an online service to review and administer your investment portfolio.

Portfolio

A collection of financial assets such as stocks, bonds, commodities, currencies and cash equivalents. different types of funds can also be considered as part of a portfolio.

Potential returns

How much money you can potentially make. They can come from interest, from selling the investment for a higher price than you bought it or, in the case of stocks and shares, from the company’s profits.

Pound cost averaging

A technique that reduces exposure to market volatility over the long run by investing small amounts regularly – allowing more units to be bought cheaply on average because you can buy more shares when prices are low.

Profit

The financial gain when the cost of buying, operating, or producing something is taken away from the amount earned.

Regular Savings Accounts

A type of savings account where you deposit a minimum amount each month.

Return

How much money you make from your savings or investments products. Typically expressed as the change in pound value of an investment over time.

Risk

The degree of uncertainty and/or potential financial loss inherent in an investment.

Risk appetite

How much risk you are willing to take with your investments.

Robo-advisers

Robo-Advisors are computer algorithms that automate some or all the decision-making process in some passively managed funds.

S&P 500

A stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States.

Savings Bonds

Go to Fixed Rate Bonds

Securities

Go to Financial Assets

Securities exchange

Go to Stock Exchange

Self Invested Personal Pensions

A type of pension scheme where you have the most flexibility to pick and choose your investments.

Shares

Go to Stocks

Sin stocks

Sin stocks include companies that are directly or indirectly associated with activities such as gambling, alcohol, or the production of weapons.

Social lending

go to Peer-to-Peer Lending

Socially Responsible Investing

An ethical investment strategy that deliberately avoids ‘sin stocks’ or funds that invest in such stocks. Sin stocks include companies that are directly or indirectly associated with activities such as gambling, alcohol, or arms production.

SRI

go to Socially Responsible Investing

State pension

The income you get from the government when you hit retirement age.

Stock exchange

Go to Stock Market

Stock fund

Go to Equity Funds

Stock Market

A place where stockbrokers and traders can buy and sell securities, such as shares of stock and bonds and other assets.

Stock mutual fund

Go to Equity Funds

Stocks

Stocks part ownership of a company, also known as shares and equity.

Stocks and Shares ISA

A type of ISA which invest your money in funds, stocks and bonds.

Tangible assets

A physical asset such as commodities or real estate that can be traded on financial markets.

Tax Wrapper

Tax breaks that an investor can benefit from for their savings and investments. The most common tax wrappers are ISAs and pensions.

Technical Analysis

Examining and predicting price movements in the financial markets by using historical price charts and statistics.

Thematic Investing

An ethical investment strategy which aims to identify long-term trends and invest in companies or sectors that stand to benefit from those trends.

Tracker fund

Go to Passively Managed Fund

Trading fee

Charges related to buying and selling assets to maintain your portfolio.

Turnover

The total money taken by a business in a certain period.

Unicorn

A privately held startup company valued at over $1 billion.

Unit Trusts

A type of ‘open-ended’ investment fund. This means they can grow or shrink depending on the number of investors who wish to buy into them.

Valuation

The analytical process of working out the current (or projected) worth of an asset or a company.

Values-aligned investing

Invest your money according to your personal values.

Wall Street

A street in New York City that represents the financial centre of the US.

Workplace pensions

Go to Employer Pension

Yield

Yield is the income returned on an investment usually expressed as an annual percentage rate based on the investment’s cost, current market value, or face value.