Glossary

Units that benefit from capital growth but don't pay any income or dividend. See income units.

An actively managed fund is one where a fund manager constantly monitors the companies, markets or other assets and commodities the fund invests in. The manager then makes decisions about the assets to be included in the fund.

An insurance policy that you buy with a lump sum, such as a maturing pension fund, that provides you with a regular income.

A person who receives an annuity payment.

In investment terms, an asset could be shares, fixed interest securities, bonds, property or cash instruments that a fund invests in.

The process of deciding what type of investment assets (such as shares, bonds and property) should be invested in a particular fund and in what proportion. Asset allocation may also include the geographical spread of the assets.

A market, such as a stock market, where prices have or are expected to fall.

A person who is due to receive a benefit under an insurance policy, trust or will.

The difference between the buying (offer) and selling (bid) price of units in a fund.

The price you will be offered for your units or shares in a fund when you want to cash them in.

Also called fixed interest securities, this type of investment can be issued by a government or a company and pays a fixed rate of interest for a fixed term.

A market, such as a stock market, where prices have or are expected to rise.

Usually refers to the amount of an original investment.

The difference between the price you pay to purchase an asset and the price you receive when you sell it. If the sale price is lower than the purchase price, you will make a capital loss.

A tax which could be charged on certain capital gains.

A tax free savings account that pays you a fixed or variable rate of interest. There are financial limits on how much money you can save in an ISA.

Sometimes known as an occupational pension, this is a pension scheme set up by an employer to provide retirement benefits for employees. Normally, the employer and the employee will both make regular contributions to the scheme.

Sometimes called fixed interest securities, this type of investment is issued by a company and pays a fixed rate of interest for a fixed term.

A financial instrument whose value depends on the value of some other asset or group of assets. Derivatives don't actually have ownership of the assets that their value is linked to. They are used to manage risk such as the effect of possible market falls or changes in exchange rates.

Also known as income units. These units pay an income or dividend which is either paid directly to the owner of the units or reinvested in the fund.

A payment made to a company shareholder based on the profits made by the company.

A geographic market such as a developing country which is at an early stage of economic development and is believed to hold greater potential for rapid growth.

A share in a company that entitles the owner to some of the profits on the company, and carries voting rights. Shares are issued by companies listed on a stock exchange.

An investment in companies who operate in a socially acceptable way, such as employing a sound environmental policy and treating workers properly.

Also known as a withdrawal charge, this is a fee you may have to pay if you cash in some types of investment plan before the agreed maturity date.

Also known as bonds, this type of investment can be issued by a government or a company and pays a fixed rate of interest for a fixed term.

Is the Financial Times Stock Exchange, an independent company jointly owned by the Financial Times and the London Stock Exchange.

Also known as the Footsie, this is a stock market index that monitors the average share prices of the largest 100 companies whose shares are traded on the London Stock Exchange.

This daily stock market index represents the average share prices of all of the companies whose shares are traded on the London Stock Exchange

An arrangement where money from different individuals or organisations is pooled together. It allows an investor to benefit from professional fund management and is less risky than investing in individual shares.

A person who manages an investment fund. A fund manager will decide what the fund invests in.

A fund that invests in a number of different funds to provide a broad exposure to a wide range of assets and fund managers.

Sometimes called gilt edged bonds are fixed income or index-linked bonds issued by the UK Government.

The income you receive from employment and investments before any deductions, such as tax and national insurance, have been made.

Interest before Income Tax has been deducted.

A particular type of investment fund that uses derivatives to increase the probability of greater investment returns.

Her Majesty's Revenue & Customs. The organisation responsible for collecting UK taxes.

A pension option that lets you leave your pension fund invested while you take part of it to provide you with an income.

Also known as distribution units. These units pay an income or dividend which is either paid directly to the owner of the units or reinvested in the fund.

A bond issued by the UK Government where the repayment on maturity and the interest you receive rises each year in line with changes in the Retail Prices Index.

Sometimes called passive or tracker funds, these funds aim to produce returns which match the performance of an index (such as the FTSE 100) or market sector (such as technology).

A rise in the level of prices of goods and services over a period of time.

A fund that is constituted as public limited company. It buys the shares of other companies and investors buy the shares of the investment trust company.

An Individual Savings Account - a tax efficient way of saving money. You can invest in a cash ISA and/or a stocks and shares ISA.

A bond that pays a higher rate of interest but carries a higher risk of default.

London Inter-Bank Offered Rate is the rate of interest at which banks borrow money from other banks in the London wholesale money market.

This type of fund invests in a broad range of assets that could include equities, bonds, property and cash.

Is a company whose business is looking after the ownership of investments, property or assets on behalf of someone else.

Also called a company pension, this is a pension scheme set up by an employer to provide retirement benefits for employees. Normally, the employer and the employee will both make regular contributions to the scheme.

The price charged for each unit or share when you are investing in a fund.

A type of investment fund used widely in the UK. Sometimes referred to as an ICVC (Investment Company with Variable Capital).

Sometimes called a tracker or index tracker fund, these funds aim to produce returns which match the performance of an index (such as the FTSE 100) or market sector (such as technology).

A collection of assets that represent the holdings of a fund or the investments of an individual.

An investment risk is the possibility that you will not get some or all of your money back when you decide to cash the investment in. Generally speaking, the higher the risk, the higher the growth potential of the investment and the higher the possibility of loss.

Sometimes called stocks or equities. Shares are sold by companies to raise capital with each share representing part of the ownership of the company. If the company is a Plc (Public Limited Company) their shares will be available to purchase on the stock exchange.

The price at which you can purchase shares in a company on the stock market. Share prices can fluctuate throughout the trading day.

A pension plan for individuals that has low management charges and a low minimum contribution level.

Government funded retirement benefit that you may be entitled to at normal retirement age depending on your National Insurance contributions.

A tax efficient savings plan that lets you invest in stocks and shares. There are financial limits on how much money you can save in an ISA.

A place where shares in companies can be bought and sold.

Sometimes called structured bonds or structured deposits, these are lump sum investments where the returns are usually linked to the performance of a stock market index or a collection of shares. They normally provide a minimum return of your original investment if you remain invested in the plan for the agreed term.

Sometimes called a passive or index tracker fund, these funds aim to produce returns which match the performance of an index (such as the FTSE100) or market sector (such as technology).

A trust is a legal arrangement where assets, such as property or other investments, are held and managed for the benefit of a particular person. Trusts are widely used to help minimise the impact of Inheritance Tax.

A person or organisation appointed under a trust who administers the affairs of the trust. This could mean taking decisions about the investment of the trust's assets to managing its tax affairs.

A type of investment fund. In the UK, unit trusts have largely been replaced by or converted to OEICS.

The time on each business day that the unit trust or other fund is valued and a price calculated.

The degree to which the value of an investment asset is likely to change over time, normally the short term.

Also known as an exit charge, this is a fee you may have to pay if you cash in some types of investment plan before the agreed maturity date.

A wrapper is a product designed to go around an investment to make it more tax efficient. For example, an ISA wrapper allows you to invest in a unit trust without having to pay personal income or capital gains tax.

The yield is an indication of the level of annual return on an investment asset and is usually expressed as an interest rate.