Welcome to InvestEngine's Investment Glossary, your comprehensive guide to navigating the intricate world of finance. We understand that the journey of investing can be complex, and mastering the language is crucial. Our mission is to simplify these terms, providing you with the knowledge needed to make informed decisions on your investment journey.
A
Advisory Service:
Professional guidance provided by financial experts to help you make informed investment decisions tailored to your goals and risk tolerance.
Asset Allocation:
Strategic distribution of your investments across different asset classes, such as stocks, bonds, and cash, to optimise risk and return.
Asset Manager:
A professional or firm responsible for managing a client's investment portfolio, making decisions on asset allocation and investment strategy.
B
Bond:
A fixed-income investment where an investor loans money to an entity, typically a government or corporation, in exchange for periodic interest payments and the return of the principal at maturity.
C
Cash ISA:
A tax-efficient savings account where the interest earned is not subject to income tax, providing a safe haven for your cash.
Central Bank:
The primary financial institution in a country responsible for monetary policy, currency issuance, and regulating the money supply.
Commodities:
Physical goods like gold, oil, or agricultural products traded on financial markets. Learn how commodity trading works and its impact on investment portfolios.
Corporate Bonds:
Debt securities issued by corporations to raise capital. Investors earn interest on these bonds until maturity.
D
Debt:
Money borrowed by individuals, corporations, or governments, typically repaid with interest over time.
Discretionary:
A type of investment management where a professional makes decisions on behalf of the investor, taking into account their goals and risk tolerance.
Dividend:
A share of a company's profits distributed to its shareholders, usually in the form of cash payments.
DIY (Do-It-Yourself):
An approach to managing investments without professional advice, suitable for hands-on investors.
E
Equity:
Ownership in a company represented by shares of stock, providing investors with a claim on the company's assets and profits.
Exchange Traded Fund (ETF):
A type of investment fund traded on stock exchanges, combining features of both stocks and mutual funds.
F
FCA (Financial Conduct Authority):
The regulatory body in the UK overseeing financial markets and firms to ensure consumer protection and market integrity.
Financial Adviser:
A professional providing personalised financial advice based on your individual circumstances and goals.
Financial Assets:
Tangible or intangible assets with monetary value, such as stocks, bonds, or cash.
Financial Instrument:
Contracts that represent a monetary value, including stocks, bonds, derivatives, and more.
Financial Planning:
Strategic planning to achieve financial goals, considering income, expenses, and investments.
Fixed Allocation:
An investment strategy maintaining a predetermined mix of asset classes over time.
FSCS (Financial Services Compensation Scheme):
A UK government-backed scheme that protects customers if a financial institution fails, covering deposits and investments up to a certain limit.
Fixed Income:
Investments, such as bonds, that provide fixed periodic interest payments.
G
Government Bonds:
Debt securities issued by governments to raise funds, considered relatively low-risk.
H
Hedge Funds:
Alternative investment funds employing various strategies to generate returns, often catering to sophisticated investors.
I
Independent Financial Advisor (IFA):
A professional offering unbiased advice on a wide range of financial products from different providers.
Inflation:
The rate at which the general level of prices for goods and services rises, eroding purchasing power over time.
Investment Portfolio:
A collection of investments held by an individual or institution, designed to achieve specific financial objectives.
Investor Profile:
A personalised assessment of an investor's risk tolerance, financial goals, and investment preferences.
ISA (Individual Savings Account):
A tax-efficient savings or investment account in the UK.
J
Junior ISA:
A tax-efficient savings account for children in the UK, offering a head start in building financial assets.
L
Liquidity:
The ease with which an asset can be bought or sold in the market without affecting its price.
M
MiFID (Markets in Financial Instruments Directive):
EU legislation regulating financial markets to enhance investor protection and competition.
Mutual Fund:
An investment vehicle pooling money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities.
O
OCF (Ongoing Charges Figure)(Same as TER):
The total cost of owning an investment fund, including management fees and operational expenses.
P
Pension:
A long-term savings plan designed to provide income in retirement.
Portfolio:
A collection of financial assets, such as stocks and bonds, owned by an individual or institution.
Price/Earnings Ratio (P/E Ratio):
A valuation ratio comparing a company's current share price to its earnings per share.
R
Rebalancing:
Adjusting the composition of your investment portfolio to maintain desired asset allocation.
Retirement Planning:
Financial planning focused on securing a comfortable retirement through savings and investments.
Return:
The gain or loss on an investment, expressed as a percentage of the initial investment.
Risk:
The potential for loss or variability in investment returns.
Risk Profile:
An assessment of an investor's tolerance for risk, guiding the selection of suitable investments.
S
SIPP (Self-Invested Personal Pension):
A type of pension plan in the UK that allows individuals to make their own investment decisions.
T
Total Expense Ratio (TER):
The total cost of owning an investment, expressed as a percentage of assets under management.
U
UK Resident:
An individual living in the United Kingdom, subject to its tax and regulatory laws.
V
Volatility:
The degree of variation in the price of a financial instrument, reflecting market uncertainty.
W
Wealth Manager:
A financial professional or firm providing comprehensive financial services to high-net-worth individuals.
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