Financial jargon explained

Here you’ll find a simple explanation of some of the most commonly used investment terms. If there is any other financial jargon you want translated, please call our Customer Service Team free on 0800 597 2525 or email us at enquiries@willisowen.co.uk and they will be pleased to help.

     


B

Basic Industries

This sector represents four company types:

  • Chemicals
  • Construction and Building Materials
  • Forestry & Paper
  • Steel & Other Metals

Bear Market

A market where investors are more likely to sell than buy, and thus Share prices are falling

Benchmark

A standard or target against which investment performance is measured. An example of a benchmark is the FTSE SmallCap Index which measures the performance of around 500 smaller companies in the UK

Beta

Beta is a statistical estimate of a Fund's volatility by comparison to that of its benchmark, i.e. how sensitive the Fund is to movements in the section of the market that comprises the benchmark. A Fund with a Beta close to 1 means that the Fund will move generally in line with the benchmark. Higher than 1, and the Fund is more volatile than the benchmark, so that with a Beta of 1.5, say, the Fund will be expected to rise or fall 1.5 points for every 1 point of benchmark movement.

If this Beta is an advantage in a rising market - a 15% gain for every 10% rise in the benchmark - obviously the converse is the case when falls are expected. This is when managers will look for Betas below 1, so that in a down market the Fund will not perform as badly as its benchmark.

Bid to Offer Spread

The difference between the bid price and the offer price, expressed as a percentage of the offer price.

Blue Chip

Originally an American expression, this is used to denote Shares of (usually large) companies which are well established.

Bond or Corporate Bond

Usually issued by governments, companies or official bodies (e.g. local authorities). They normally pay a fixed rate of interest and mature on a fixed date when the capital will be repaid. Bond prices fluctuate between issue and maturity.

Bull Market

A market where investors are more likely to buy than sell, and thus prices are rising.