Glossary of Terms

Absolute return investing aims to produce a profit over time regardless of what the market does. Even when markets are falling, an absolute return fund can still make money, although this is never guaranteed.

Funds are divided into portions called shares or units. In accumulation shares/units, the income earned by the fund is paid back periodically into the fund and reflected by an increase in the value of each share/unit. An investor will still have to account to tax authorities for any such income reinvested.

Where the fund manager uses their expertise to pick investments to achieve the fund’s objectives.

Countries with relatively high levels of personal income and established economies

An ongoing fee paid to the management company for managing the fund, usually charged as a percentage of the investment.

Dividing the money invested in the fund across different investments (‘assets’), e.g. in different types of investments, various geographic areas or by industry sectors such as oil and gas or financial companies.

A prolonged period of falling prices, usually measured as a fall in asset prices of greater than 20%.

An index of investments used for performance comparison purposes

A loan, usually to a company or government, that pays interest.

An investment approach that focuses on analysing individual shares rather than stock markets or sectors.

A prolonged period of rising prices, usually measured as a rise in asset prices of greater than 20%.

An increase in the value invested over time.

Markets that raise money from those who want to invest and make those funds available to businesses or governments.

Non-cash assets that can be quickly sold and easily converted to cash

Are investments in which investors pool money with that of other investors and are managed by fund managers who select the assets such as shares, bonds, property shares, cash instruments or physical property

Contracts for difference (CFDs) are a type of financial derivative that allow traders to take a view on the price movement of various markets and various securities without owning the underlying asset. Instead of buying and selling the actual asset, investors enter into an agreement to exchange the difference in price of the asset from when the position is opened to when it is closed.

The potential for a fund that invests overseas to lose or gain money purely because of changes in the currency exchange rate.

Difficult markets could refer to a number of different circumstances when the ACD has a high conviction that markets are expensive or when higher volatility is anticipated. This could include (but is not limited to) markets resulting from or anticipating, extreme events (for example, the 2008 global financial crisis).

An amount you pay to cover the dealing costs incurred by the fund when it buys or sells investments as a result of you buying or selling shares/units in the fund. It is normally only charged when the costs could materially impact the other investors and is used to protect investors and fund performance.

Investments whose value is linked to another investment, or to the performance of a stock, a group of stocks, a stock exchange or to some other variable factor, such as interest rates.

Holding a variety of investments that typically perform differently from one another.

A sector that represents an area of the economy in which businesses have the same or similar activities, products or services

Countries that are progressing toward becoming advanced, usually shown by some development in financial markets, the existence of some form of stock exchange and a regulatory body.

Company stock/shares.

An up-front fee paid to the management company when you buy shares/units.

An investment where the borrower/issuer (i.e. who the investment is paid to) is obliged to make payments of a fixed amount on a fixed schedule. Bonds are an example of this type of investment.

Countries that are more established than the least developed countries but still less established than emerging markets.

A future is a contract to buy or sell a stock at a pre-determined price on a specific date.

The increase in value of investments.

Stocks that experience growth in earnings and revenue, they usually pay little or no income.

Using investments as a way to counter or reduce risk. For example taking the opposite position in a related investment with the expectation that a fall in one will be offset by a rise in the other.

Money paid out by an investment, such as interest from a bond or a dividend from a share.

Funds are divided into portions called ‘shares’ or ‘units.’ In income shares/units, the income earned by the fund is paid out to investors.

An increase in the price of goods and services over time.   The government provides calculations that look at baskets of goods and services, and produces indices such as the UK’s Consumer Price Index (CPI) and Retail Price Index (RPI), which measure the aggregate changes in price of these baskets each month from which the annual rate of change can be derived.

The degree to which an asset can be quickly bought or sold on a market without affecting its price.  For example: A Fund that holds investment which can be turned to cash in less than a week may be said to be highly liquid. A Fund that holds a high cash balance may be said to have a good degree of liquidity.

The value of a company calculated by multiplying the number of shares by the latest share price.

Investments usually issued by banks or governments that are a short term loan to the issuer by the buyer. The buyer receives interest and the return of the original amount at the end of a certain period.

Non-cash assets that can be quickly sold and easily converted to cash

After all fees have been deducted.

A measure of what it costs to invest in a fund. It includes the fee paid to the management company and other operating costs.

An options contract gives the right but not the obligation to buy or sell the assets at a specific price on a specific date, known as the expiry date.

The fund manager aims to track the performance of a stock exchange index or another investment.

Groups of investments with similar styles or strategies. Used for performance comparison purposes.

An online service that allows you to buy and sell shares and funds and see your investments in one place.

The profit or loss on an investment compared to how other investments have performed.

The money made or lost on an investment.

A period of, say, three or five years, starting on any day three or five years ago.

An equal portion representing part ownership of a company which can also apply to a fund. Sometimes called a ‘stock’.

A type of share representing part ownership of the fund that is different to other share classes for some reason, such as it pays out income rather than paying it back into the fund for reinvestment purposes, or is denominated in a different currency

Process whereby a fund manager lends a portfolio of investments to other parties who pay a fee for borrowing the assets.

An investment approach that looks at the big picture first, e.g. the economy, then at the detail, like how individual shares are performing.

Investments that can be readily exchanged between two parties.

An equal portion representing part ownership of a unit trust fund (note: ‘Share’ has a similar meaning but for funds structured as corporate entities such as an open-ended investment company).

Stocks that are undervalued.

The amount and frequency that an investment fluctuates in value.

The income from an investment, usually stated as a percentage of the value of the investment.