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A useful guide to the terminology surrounding investments.


A useful guide to the terminology surrounding investments.



Annual Report – The yearly audited report of a corporate or mutual fund’s condition and performance that is distributed to share holders.

Asset Allocation – The process of allocating a portfolio between different asset classes to optimise the balance between risk and reward based on investment needs.


Benchmark – A standard, usually an unmanaged index, used for comparative purposes in assessing performance of a portfolio or mutual fund.

Bond – A bond acts like a loan or an IOU that is issued by a corporation.

Bond fund – A mutual fund that invests exclusively in Bonds.



Corporate Bond – A long-term bond issued by a corporation to raise outside capital.



Discretionary investment – here the investment manager has the authority to make the investment decisions when they want to do so without seeking the investors approval first.

Diversification – The process of owning different investments that tend to perform well at different times in order to reduce the effects of volatility in a portfolio.



Equities - Shares issued by a company which represent ownership in it. Equity investors share in the profits of a business via dividend payments. They also have a proportional claim on the residual value of a business once all creditors have been repaid.



Fixed income fund – A fund that owns securities paying a fixed rate of income or interest – typically these are bonds or other debt instruments.

Fund – A pool of money from multiple investors in order to buy securities. Funds in the UK can be either open-ended, where investors can move money in or out of the fund as required. Or closed ended, where the capital in the fund is fixed but ownership interests are traded on an exchange in the secondary market.



Growth investing – investment strategy that focuses on stocks of companies where earnings are growing rapidly and are expected to continue growing.


Investment grade bonds  - A bond generally considered suitable for purchase by prudent investors due to its very low risk of default.

Investment objective  - The goal of a mutual fund and its shareholders e.g. growth, growth and income, income and tax-free income.



Long-term investment strategy – A strategy that looks past the day-to-day fluctuations of the stock and bond markets and responds to fundamental changes in the financial markets or the economy.


Mutual Fund – Fund operated by an investment company that raises money from shareholders and invests it in stocks, bonds, options, commodities or money market securities.


Net Asset Value per share (NAV) – The current sterling value of a single fund share/unit. The process of calculating the NAV is called pricing.



Portfolio – A collection of investments owned by one organisation or individual, and managed as a collective whole with specific investment goals in mind.



Risk tolerance – The degree to which you can tolerate volatility in your investment value.



Share – A long-term, growth orientated investment representing ownership in a company, also known as an ‘equity’.

Stock – A long-term, growth orientated investment representing ownership in a company, also known as an ‘equity’.



Total return – Accounts for all the dividends and interest earning before deductions for fees and expenses, in addition to any changes in the value of the principal, including share price, assuming the fund’s dividends and capital gains are re-invested.



Valuation – An estimate of the value worth of a company; the price investors assign to an individual stock.