Glossaries: Investments

Asset allocation
The spread of investments across the asset classes.

Asset classes
The underlying investments - shares, bonds, property and cash deposits.

Bonds
A loan to a company or the Government.

Bond funds
Pooled investments investing in bonds.

Capital
The money you invest.

Capital growth
Any increase to your original investment after costs, charges and depreciation have been taken into account.

Collective investment scheme
A way of pooling contributions from lots of people into a single investment fund.

Contracts for Difference (CFD)
An agreement between two people to settle at the close of their contract the difference between the opening and closing price of a company's share price.

Corporate bonds
Loans issued by companies.

Corporate bond funds
Funds that invest in a selection of individual company bonds.

Coupon
A bond's fixed rate of interest as a percentage of its nominal value.

Covered warrants
Tradeable securities on the London Stock Exchange.

Debt securities
Another name for bonds.

Derivatives
A right or an obligation to buy or sell another type of asset - such as a share or a bond - to someone else at a specific date and time in the future.

Distribution bond
A type of investment bond that provides a regular income.

Diversification
Spreading your investments across different asset classes, or different types of investments within an asset class.

Equities
Another name for shares in a company.

Exchange Traded Funds (ETFs)
Index-tracking funds listed on the London Stock Exchange.

FCP
Fonds communs de placement - a type of open-ended investment fund.

Friendly Society
Similar to a mutual life assurance company but with different tax rules.

Gearing
The use of borrowing potentially to increase the amount you get back, but will also increase the risk.

Gilts
Bonds issued by the UK government.

Gross
Before tax has been deducted (as opposed to 'net', which is after tax has been deducted).

High-yield bond funds
The same as bond funds but investing in higher-risk bonds that offer higher interest rates.

ICVC
Investment Company with Variable Capital, also known as an OEIC. A type of open-ended investment fund.

Investment/insurance bonds
A pooled investment; a lump-sum life-assurance investment. They can also be called 'life-assurance bonds' and 'with-profits bonds'.

Investment trusts
A pooled investment. You are buying shares in a company that invests in other investments. It has shares and is quoted on the stock exchange. It is a 'closed-ended fund' as there are a set number of shares available.

ISA
Individual Savings Account - a tax-efficient way of saving or investing, with limits on how much you can pay in each tax year.

Life assurance investment
A pooled investment offered by a life assurance company.

Net asset value (NAV)
An expression used with investment trusts to mean the value of the fund's underlying assets.

Nominal value
Sometimes called the face value. This is the cost of the bond when it is issued and the amount you get back at the end of the term.

OEIC
Open-Ended Investment Company, also known as an ICVC. A type of open-ended investment fund.

PEP
Personal equity plan - a wrapper for investments. No longer available as all PEPs automatically became stocks and shares ISAs from 6 April 2008.

Pooled investments
A way of putting various levels of contributions from lots of people into a single investment fund. There are different types and they work in different ways.

Rate of return
The change in the value of your investment, taking into account both income and growth.

Rating
A formal opinion of a security's or organisation's investment quality and credit risk.

Redemption date
Usually associated with gilts or bonds, it is the date (set in advance) when the gilt or bond will be repaid by the issuing government or company and you will receive the nominal value of the bond.

Shares
A stake or share in a company.

SICAV
Société d'investissement à capital variable - a type of open-ended investment fund.

Stocks
Another word for shares.

Tax year
6th April one year until 5th April the following year.

Unit trusts
A pooled investment, which is an open-ended investment that gets bigger as more people invest and smaller when they take money out.

With-profits funds
A type of fund available within a life assurance investment. You share the return from these investments and the profits and losses of the company (if it's a mutual) or the with-profits business fund (if it's a plc).

Yield
What the bond pays to investors by way of interest as a percentage of the bond's price.

For independent financial advice, please call Burgess & Lee on 01202 312288 or email us


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