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 firstname.lastname@example.org and they will be pleased to help.
The ability to change your mind within a set period after you have invested, subject to certain requirements.
The amount you invest is sometimes called your capital.
Upon the sale of a Unit Trust holding or a holding within an OEIC, an investor may have to pay tax on the increase in the capital value of the investment. Investments in an ISA are currently exempt from Capital Gains Tax (CGT).
This is the amount your original capital increases but without taking into account any income.
Shares in an investment trust/investment company which receive no income throughout the life of the trust/company but at winding-up the holders receive all the trust’s/company’s assets after the zero dividend preference share holders and the income share holders have been paid off. The success of the Capital Share is therefore dependent on an increase in the assets of the trust/company over and above what is needed to meet the entitlements of the other Shares.
A Cash Transfer takes place when you move your investments to a new intermediary or provider and some or all of your holdings are not available on the new platform. These assets will need to be sold first and the proceeds moved as cash which can then be used to purchase an alternative investment of your choice. Read more about transfers here
With effect from 6th April 2005, the Treasury has discontinued the ‘CAT Standard’ (Charges, Access and Terms) designation. The treatment of any Funds which meet the CAT standard will not be changing.
A Child Trust Fund (CTF) is a long-term tax-free savings account for children. Child Trust Funds can no longer be applied for and, instead, Junior ISAs are now available for children.
You can read about the key features of each and why you might consider transferring from a CTF into a JISA in our Insights Article here.
A Collective Investment Scheme is the generic term used when referring to Unit Trust schemes and OEICs (Open Ended Investment Companies), but not closed-ended corporate bodies such as Investment Trusts/investment companies.
A fee paid to a third party (a stockbroker or a financial adviser) for introducing business.
A tangible item which can be bought and sold (e.g. sugar, wheat, coffee, gold).
These are securities, usually Bonds or Preference Shares, which allow holders to convert their status as a creditor to that of an equity holder at a pre-agreed price.
Bonds issued by companies. 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.
The risk that the other party to a contract fails to complete its part of the contract (ie. it defaults).
The interest rate applied to the face value (‘nominal value’) of a bond.
This involves the use of either options or forward contracts to lock in the price at which a future transaction will be dealt. Fund managers may use the technique to try and make additional profits from their views on the expected movements of a particular currency.
The value of investments in currencies other than Sterling will change relative to Sterling due to changes in currency exchange rates, as well as movements in the prices of those investments.
This sector covers goods whose demand fluctuates with the economic cycle. The implication of this is that the companies in this sector will be successful when the economy is either in recovery or is buoyant. The two types of company are:
This sector covers services where demand fluctuates with the economic cycle. Company results will be most successful during economic recovery or buoyancy. This covers: