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Glossary

a

Accumulation Unit

This is a type of unit in a unit trust where the income is reinvested automatically, thereby increasing the unit price. With income units, the income is given to the unitholders.

Active Management

An active fund manager tries to outperform stock market indices by skilfully selecting winning stocks, as opposed to the passive manager, who just purchases everything (or a representative portion) of an index, and then goes off for an early lunch. Active managers charge more for their supposed skills, even though in reality, more than two thirds of them actually underperform the index on a regular basis. Hence the popularity of passively-managed index funds.

ADR

An American Depository Receipt represents ownership in the shares of a non-US company that trades in the financial markets. ADRs grant US investors to buy shares in foreign companies with engaging in the risk and expense that come with cross border and cross currency transactions. In the case of companies incorporated in the United Kingdom, creation of ADRs attracts a 1.5% stamp duty reserve tax (SDRT) charge by the UK government. The first ADR was created by JP Morgan in 1927 for the retailer Selfridges.

Advisory Stockbroker

A broker who will give you personalised advice on what shares or other investments to buy. You do not have to follow the adVice, but bear in mind that you will be paying for it in the annual management charge (see below) whether or not you do. If you are a confident investor you shouldn’t need to pay extra for advice you do not need. Novice investors may appreciate a tiny bit of hand holding at first. Unfortunately, there is nothing to guarantee the advice you get will be any good….

AGM

Annual General Meeting
This is the annual opportunity for private investors to throw buns at the bosses while they trot out their lame excuses for poor performance. All companies – except the tiddlers – have to have an AGM. Although private shareholders have the right to vote in elections for new directors, say, they do not really have much influence. It’s the massive pension funds and other financial institutions that hold the power because they own most of the shares. But lots of people still turn up, if only to hurl abuse and partake of any freebies on offer.

AIC

Association of Investment Companies
The AIC is the main trade body for the closed-ended investment company industry representing over 300 investment trusts. The AIC’s revamped web site – www.theaic.co.uk – is a useful source of information on trusts for investors, including a comprehensive list of all the trusts available with links through to fund manager web sites. There are also links to some execution-only on-line stockbrokers.

AIM

Alternative Investment Market
AIM is like the London Stock Exchange’s nursery for small, fast-growing companies that want access to investment capital without the cost and regulatory burden 9f a full listing on the main market (The Official List). They often use it as a stepping stone. Although AIM is regulated, its stocks can be risky because the companies do not usually have long track records and there aren’t always buyers for your shares if you want to bail out (an effect known as illiquidity). But, then again, there are massive potential rewards investing in small companies if you are prepared to take the risk. After all, Microsoft started somewhere….

Amortisation

Annual management charge

This is a charge you pay to a company for managing your investments, whether it is a fund manager, stockbroker or financial adviser. Annual charges can vary from 0.5% to around 1.5%, according to the type of investment and the degree of advice you are getting.

Annual report and accounts

Every year, companies that trade on the main market and AIM have to provide shareholders and the London Stock Exchange with an annual report and accounts. This gives all the financial facts and figures for the previous year’s business, including profits and losses, and the directors’ salaries and pay increases – often the most interesting part of the report. There are an increasing number of world wide web services that will be provide investors with company reports and accounts for free.

Annuity

Usually when you retire you use your pension fund to buy an annuity – an annual amount paid to you for the rest of your life. You can delay buying the annuity until you are 75 and there are several options available. For example, you could select to have the annuity increase in line with inflation each year and to have it paid to your spouse on your death. And do not just accept the annuity quote given to you by your pension fund provider – shop around. There can be a difference of around 30% between the highest and lowest quotes on the open market.

Annuity Share

This is another term for an income share within a split capital investment trust. It’s not worth much at the end of the trust term because the capital value has be distributed as income to the investor.

Approved Investment Trust Company

This is an investment trust company (see under ’1′) that doesn’t have to pay capital gains tax on profits it makes from sales of investments within its portfolio.

APR

Annual Percentage Rate
One of the most misunderstood and misused terms in personal finance. It is supposedly and interest rate figure that indicates the total cost of borrowing, including any charges. It is mostly used for credit cards, personal loans and mortgages. The idea was that it would help us compare products on a like for like basis. In effect, headline APR rates are seldom the ones you end up paying, because the rates change according to the size and time-period of the loan. So it’s always important to look behind the advertised figures and find out the rate that you would pay for the type of loan you want. Also bear in mind that low early-year APRs on discount mortgages will revert to standard variable rates after the discount period has ended, making the overall APR much higher for the life of the loan.

Arbitrage

Basically this is the art of buying something cheap in one place and selling it at a profit somewhere else. The rise of global electronic trading has made this process much faster and easier, enabling arbitrageurs – as they are called – to switch massive sums of money across continents in seconds in an attempt to exploit small differences in the quoted prices of investments in different markets – foreign currency, for example. In share trading, so-called risk arbitrageurs attempt to make profits from the usual share price movements of companies that are in takeover situations. These investors will simultaneously buy stock in the target company, whose share price normally rises, while selling that of the bidder, whose share price normally falls. They will also invest in the target company if they think there is a chance the bidder will have to raise the offer price.

Ask price

The lowest price at which someone will sell an investment at a given moment.

AVC

Additional Voluntary Contributions
AVCs are top-up payments people make into their pension schemes to boost their eventual retirement income. If your employer does not contribute much into your company pension you may have to make AVCs to achieve anywhere near your hoped-for level of pension income. There are two types of AVC. You can either make extra payments into your company scheme or decide to contribute to another scheme managed by someone else. This latter AVC is called a Free-Standing AVC (FSAVC). There are pros and cons with both types of scheme. AVCs tend to be cheaper to make because administration costs are lower you are already in the pension scheme after all. But you put all your eggs in one basket and hope that the pension managers are good. An FSAVC may be slightly more costly but at least you give another company a go at making your money grow. Whichever type of AVC you choose, the total contributions must not exceed 15% of your earnings in any tax year. You get tax relief on AVCs at your basic rate, as with other pension contributions. For example, for every £60 a 40% taxpayer contributes, £100 will actually go into the scheme, making a very tax-efficient way to save for the future. The only drawback is that the money you commit to your pension scheme is tied up until you retire, so do not leave yourself short in your zeal to make the most of the tax breaks!

b

B Share

Instead of paying income in the form of a dividend, as with ordinary shares, B shares pay their holders in extra shares instead. This extra allocation is called a scrip issue. B shares were designed for higher-rate taxpayers as a way of avoiding income tax on dividends.

Balance Sheet

The balance sheet forms part of a company’s annual report and accounts. It lists everything the company owns and owes.

Bank base rate

The Bank of England’s Monetary Policy Committee sets a basic rate of interest that determines the cost of borrowing money. Commercial banks use this as a reference point when setting their own base rates. Basically, when the base rate increases, the cost of borrowing increases, so mortgages and personal loans become more expensive. But at the same time, savers usually benefit from higher interest rates on their savings. Unfortunately, lenders have a nasty habit of increasing their borrowing rates immediately after a base-rate rise, whilst showing less enthusiasm for increasing savings rates as quickly. Surely such institutions do not put profits before customers?

Bargain

Stockbroker jargon for a share transaction.

Basis point

A hundredth of one per cent (0.01%). City folk speak about basis points because even tiny increases or decreases in interest rates can make a huge difference to profits/losses when you are dealing in chunks of several million at a time. Otherwise known as a ’pip’.

Bear market

This is what they call it when share prices on the stock market are falling consistently over a long period of time, rather than just on the odd day here and there. Investors are often called ‘bearish’ if they think that prices are going to fall. They will usually sell shares to take profits before buying back at a later date when the share price is lower. ‘Bear’ investors can even sell shares they do not yet own – called selling short – in the hope that when they have to settle the contract i.e. pay up, the share price has fallen in the meantime. Such investors were called ‘bearskin jobbers’ in the 18th Century. The phrase may have come from the old saying: ‘Don’t sell your bearskins before you have caught the bears’, another version of ‘Don’t count your chickens until the eggs have hatched’. The opposite of ‘bear’ is ‘bull’.

beta (investing)

A measure of how volatile a share price is – that is, how much it tends to rise and fall over a period. The beta measures the distance between the high points and the low points, so the higher a share’s beta, the more volatile it is. If you are investing for the long term, volatility doesn’t matter much, but if you are a short-term speculator, a highly volatile share can offer massive rewards, but also massive potential losses if your timing is off. A beta of one means the share price moves parallel with the market as a whole, matching the benchmark index.

Bid/offer spread

If you want to buy an investment, you pay the offer price, and if you want to sell, you pay the bid price. The offer price is higher than the bid price and the difference between the two is known as the spread. The size of the spread depends on the sales, management and marketing costs of the investment, and the amount of profit margin built in by the fund manager or market maker. With mutual funds, the spread can be anything from 0.5% to 6%. With shares, the spread is typically 5% to 10%, but can be much higher. In fact, so-called ‘penny shares’ that are priced at just a few pence per share, may look cheap, but they can often have bid/offer spreads of 50% or more. So watch out.

Big Bang

When the London Stock Exchange went fully electronic in 1986 and consigned all those waving, shouting, blazer-wearing characters on the stock market floor to history. It introduced much-needed competition into the market and removed pernicious minimum commissions.

Blue chip

Big, boring, safe stock-market quoted company, usually in the FTSE 100. You will not make millions investing in them but at least you will be able to sleep at night.

Bollinger Bands (b%)

Unrelated to the well-known brand of champagne, Bollinger Bands were developed as an indicator by trader John Bollinger in the 1980s. A technical analysis tool, they can be used to measure the highness of lowness of the price relative to previous trades. They consist of a middle band being an N-period easy moving average, an upper band K times an N-period standard deviation above the middle band and a lower band at K times an N –period standard deviation below the middle band. Typical values for N and K are 20 and 2 respectively. Not one for beginners.

Bond

A bond is like an i.o.u. You effectively loan money to a company or government in return for a fixed level of income (coupon) and the guaranteed return of your investment at the end of bond’s life (known as ‘the maturity date’). There are lots of different types of bond, some maturing in a few years, some maturing after 25 years. One advantage of bonds over shares is that bond holders are ahead of shareholders in the pecking order if the underlying company goes bust.
Very few people actually hold bonds until maturity and there is a global multi-billion dollar market in bonds. Although the maturity price – redemption price – and income level is fixed, the market prices of bonds can rise and fall just like shares. Prices are greatly affected by interest rates and inflation forecasts. If inflation is likely to take off, your fixed income will be worth much less as time goes by, so you’d anticipate to pay less for your bonds in the open market to compensate for this.
Bear in mind that a bond advertising a higher-than-average interest rate may indicate that the issuing company is actually quite risky. Safer companies feel they do not have to offer such high rates. And overall, the long-term return on bonds is lower than that achieved by shares. But bonds are useful for boosting income in retirement. A bond fund purchases and sells a whole range of bonds in an attempt to achieve a fairly stable level of income for its investors. If the fund is within a Personal Equity Plan or Individual Savings Account, the income will be tax-free, too.
Bonds are also called Fixed-interest securities.

Bonus issue

Sometimes a company will give its shareholders a number of extra shares for each share they hold. This is often done when the share price has risen so high that smaller investors think of it as being too costly to buy. For example, if you owned 100 shares priced at £50 each and the company offered you a five-far-one bonus issue (also called a ‘scrip’ or ‘capitalisation’ issue), you’d end up with 500 shares priced at around £10 each. In America they call it a ‘stock split’.

Book value

This a theoretical figure representing how much a company is actually worth once all its debts and other liabilities have been subtracted from its assets. It doesn’t necessarily bear any relation to its stock market value.

BRIC

Acronym for Brazil, Russia, India and China. First postulated by Goldman Sachs in 2003 in a report which suggested that by 2050 these four economies would be wealthier than most of the current economic powers. Essentially a phrase meant to describe the four most potent emerging markets nations.

Bridging loan

A short term loan often taken out by homebuyers to finance a property buy before they have managed to sell their existing property. Although they fulfil a useful function, bridging loans are risky. What if you do not manage to sell your existing property for a long time? You’re landed with two hefty loans to payoff. And bridging loans also tend to be more costly that ordinary loans. So think carefully before you select this option. Is the new property really worth the risk and extra expense?

Broker

Usually short for stockbroker, but can refer to any intermediary selling financial products, from insurance to advice. Whatever they sell, you usually pay for their services somewhere along the line.

Bull market

Sustained period of rising share prices. A ‘bull’ investor is therefore someone happy to buy in the belief that shares will rise. See Bear market

Buy-back

When a company purchases back its own shares on the open market and then deletes them. This reduction in the overall number of shares on the market usually has the effect of increasing the share price. It is another way companies can reward their shareholders, especially if there is been criticism that the share price has being performing badly.

Buy-out

A company’s management team will often decide to buy all the company’s shares and thereby take complete control of the company. This is called a management buy-out, or MBO for short. If they have had to borrow money to buy the shares, it’s called a leveraged buy-out. A stock market quoted company may also buy back all its shares and return it to privately-owned status. It can also just mean the buy of the controlling stake in a company.

c

C Shares

A company’s management team will often decide to buy all the company’s shares and thereby take complete control of the company. This is called a management buy-out, or MBO for short. If they have had to borrow money to buy the shares, it’s called a leveraged buy-out. A stock market quoted company may also buy back all its shares and return it to privately-owned status. It can also just mean the buy of the controlling stake in a company.
This is a class of share issue by investment trusts. It grants them to increase the number of shares in issue and funds under management without reducing the value of the existing shares. ‘C’ shares are quoted separately from the ordinary shares until the money raised from their issue has been fully invested. After that, they are converted to ordinary shares at a value based on the trust’s net asset value.

Cable

Market slang among forex traders referring to the exchange rate between the U.S. dollar and Sterling. Because it is the norm in forex for most major currencies to be quoted against the U.S. dollar on a regular basis, “cable” is a commonly used term, often used simply to described Sterling.

CAC 40

An index of the largest 40 companies listed on the French CAC market. The CAC index is published by the Societe des Bourse Francaises.

Call option

This is the right, but not the obligation, to buy shares at a specified price at a specified date in the future. If the share price has risen above the specified price on the future date, you can buy the shares at the lower price and then sell at an immediate profit. This is called exercising the option. If the share price hasn’t risen, there is no point exercising the option and it expires. All you lose is the premium you paid to buy the option – usually a fraction of the underlying share price.

Candlestick charts

A charting method, originally from Japan, in which the high and low are plotted as a single line and are referred to as shadows. The price range between the open and the close is plotted as a narrow rectangle and is referred to as the body. If the close is above the open, the body is empty. If the close is below the open, the body is filled in.

Capital

The name for a company’s cash or physical assets, or the lump sum an investor has to invest. It also means the amount you have borrowed from a mortgage lender.

Capital expenditure

What a company spends on the stuff it needs to develop its business e.g. office space, biros and vending machines.

Capital growth

The increase in value of assets, shares, or piles of cash.

Capital share

A type of share within a split capital investment trust that receives the lion’s share of the fund’s increase in value.

CDO

Collateralised Debt Obligations are a type of structured asset-backed security whose value and payments are derived from a portfolio of fixed-income underlying assets. In the case of CDOs which have been blamed for catalysing the Credit Crunch these were enormous collections of mortgages which were split into tranches and tradable – right up to the point where the underlying assets – ie properties underwritten by the mortgages – could not be sustained. Then the CDO, and indeed the homes they covered, where no longer worth anything.

CDR

An annualised rate of default on a group of mortgages, typically within a collateralised product such as a mortgage-backed security (MBS). The constant default rate represents the percentage of outstanding principal balances in the pool that are in default, which typically equates to the home being past 60-day and 90-day notices and in the foreclosure process. Not a good sign if you are invested in a CDO.

CFD

Contracts for Difference.
A form of derivative designed for traders who want extra leverage in share trading, even though you can also trade commodities, indices and Forex through a CFD. Just like spread betting the investor places a deposit with their broker (typically 20% of the total buy value) and that margin requirement goes up and down in line with the rise and fall in value of their position. Again, like spread betting, the investor is able to speculate with much more money than he actually has by borrowing from his broker. The geared nature of the trade means if an investment performs well, the returns will be higher through trading on margin. If they perform badly, the broker will require more margin payments which have to be paid in cash.

CGT

Capital gains tax

Charting

The art of analysing share price graphs to spot investment opportunities by looking for patterns and users indicators to attempt to predict future trends. Although based on historical analysis they frequently, if interpreted correctly, are accurate in their predictions. Pattern examples include Head & Shoulders, Dead Cat Bounce and Moving Average, while the most common short-term indicators, of which there are many include momentum, relative strength, overbought oversold, convergence divergence and moving average. Its devotees claim it’s an excellent way of spotting the ideal times to invest. Its critics dismiss it as no more than financial tea-leaf reading.

Churning

The nefarious practice of buying and selling investments or other financial products unnecessarily on your behalf simply to earn the stockbroker or financial adwiser more commission. Always question your adviser/broker’s advice and actions and get a second opinion if you are not convinced that the proposed action is necessary. Churning goes on, but it is often difficult to prove.

Closed-end fund

A name for a fund – usually an investment trust – that issues a fixed number of shares when its launches. The share price of a closed-end fund rises and falls according to the demand for those share in the market.

Commission

The charge made by a stockbroker for dealing on your behalf, or the fee a financial adviser gets from a product provider for selling you one of its products.

Commodities

The investment term usually applied to goods that have been mined, produced or harvested, like gold, coffee beans, or belly pork. These are then purchased and sold in dedicated commodities markets. Historically, these markets have always been closely linked to futures markets that allowed farmers and producers to accept a price on their goods before they were actually delivered. This removed a lot of the uncertainty associated with the day-to-day fluctuations in the commodity’s price known as the ‘spot price’. The producer pays a potential premium in exchange for security, because if the spot price rose come delivery/harvest time, he could have got more for his produce in the spot market. Then again, if the spot price had plummeted, he might have gone bankrupt.

Company share option scheme

A scheme usually reserved for company directors to encourage better performance apart from the fat-cat pay packets. Participants are given the right to buy shares in the company in the future, usually at a discount.

Compound interest

The interest rate that takes into account the effect of the interest that has already been earned and added to the capital amount. Compounding has a snowball-like effect over the long term and can count for the major proportion of investment growth over 20 years, say.

Contract note

Confirmation of your share purchase. With the rise of share trading over the internet, contract notes are increasingly being sent electronically.

Convergence Divergence

Moving Average Convergence Divergence (see MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of prices. It is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA of the MACD, called the “signal line”, is then plotted on top of the MACD, functioning as a trigger for buy and sell signals.

Convertible bonds or loan stock

Bonds that give the holder the right to convert them into the issuing company’s shares at a future date. The terms of the conversion are set at the time the bonds are issued. The aim is to give investors a higher income than they would normally receive from share dividends, whilst also giving them the chance to share in the capital growth of the company at a later date.

Coppock Curve

Also known as the Coppock Guide. A long-term price momentum indicator: a 10-month weighted moving average of the sum of the 14-month rate of change and the 11-month rate of change for the Dow Jones Industrial Average.

Corporate bond

The name for a bond issued by a public company.

Corporation tax

Correction

A sharp downturn in the value of shares – not quite as drastic as a crash. Though it can feel like it if it happens to your portfolio.

Coupon

Jargon meaning the income paid out on a bond or fixed-interest security.

CREST

The ‘paperless’ electronic system for settling share transactions, introduced in July 1996.

Critical illness cover

An insurance policy that pays out a lump sum if you are diagnosed as having a serious debilitating illness, such as cancer, heart attack, or stroke. Not to be confused with private medical insurance which covers the cost of private medical care. For more information go to the Association of British Insurers web site – www.abi.org.uk – which has a number of useful consumer guides.

Cum dividend

This means that if you buy this share you will also be entitled to receive the dividend. If the share is ex-dividend, it means the dividend has already been paid out. ‘Cum’ is just the Latin word for ‘with’.

d

DAX 30

The index of the biggest 30 companies listed on the Frankfurt Stock Exchange in Germany. The DAX is a ‘total return’ index in that it measures the returns from dividends as well as share price performance.

Day trading

Buying and selling shares during the day in the hope of making a quick profit from the daily fluctuations in share prices. Most day traders do not hold shares overnight. ‘Realtime’ world wide web sharedealing has driven growth in day-trading because it has made it much easier for private investors to react quickly to price movements. But,it is a highrisk activity. Most investors end up losing money because the dealing charges they pay per trade wipe out the profits they make. You really have to be dealing in very massive sums to make this kind of investing worthwhile. It’s also not very good for your mental well-being. Day trading is largely a US phenomenon. It is less likely to take off in the UK because of the 0.5% stamp duty we pay on all share purchases. Most day traders in the UK will use spread bets or CFDs.
To learn more about CFDs see our user guide (link)
To learn more about Spread betting see our Video Academy (link)
To trade CFDs or place spread bets visit our CFD and Spread betting centres. (link)

Dead Cat Bounce

A rebound in a market that sees prices recover and come back up somewhat.

Debenture stock

A type of bond that is secured on the company’s assets. This means that if the company goes bust, debenture holders are more likely to get their money back because the company’s assets will be sold and the proceeds distributed to them first before other stock and share holders. Bonds that aren’t secured in this way are known as loan stocks.

Deferred shares

A class of ordinary share that receives no dividend either for a set period or until the ordinary share dividend reaches a certain level.

Deflation

The feeling experienced by all Crystal Palace fans after their team’s performance, and also, the opposite of inflation. Intense competition in the high street and other economic forces can lead to lower prices in the shops and this can lead to deflation. It is the rare occurrence of the pound in your pocket actually increasing in buying power, rather than the more usual opposite.

Delta

The amount by which the price of an option changes for every dollar move in the underlying instrument.

Dematerialisation

The process of getting rid of paper in financial transactions. The rise of computers and the world wide web has meant that more processes can be carried out electronically without the need for costly and slow-moving bits of paper clogging up the system. For example, the introduction of CREST, the stock exchange’s electronic settlement system, means that share certificates are no longer issued as proof of ownership, unless you specifically ask for them. You have to pay more if you want this. Contract notes – confirmation of share transactions – can also be sent electronically these days. Dematerialisation speeds things up and makes them more efficient.

Demutualisation

Building societies and insurance companies have been demutualising like crazy over the last few years. It means that instead of being owned by their members and policyholders, a company decides to be listed publicly on the stock market. Anyone can then buy and sell its shares and benefit from the company’s profits without necessarily owning any of its products. Although demutualisation has usually meant windfall share allocations to members and policyholders – worth several thousands of pounds in some cases – defenders of mutuality claim that public companies offer less competitive products because their first loyalty is to their shareholders rather than to their customers. Long-term statistics bear this out. But defenders of demutualisation argue that the discipline of the stock market makes companies more efficient and unlocks more value for members. So far the Nationwide, the UK’s largest building society, has resisted the trend.

Depositary receipt

A certificate that shows you own shares that have been deposited with a financial institution, usually a major bank. This is the way US investors commonly buy and sell foreign, non-US shares. American Depository Receipts (ADRs) grant compqnies to gain access to US investors without going to the expense of listing on one of the US stock exchanges.

Depreciation

The fall in the value of a fixed asset over time. If you run a factory making widgets your machinery will eventually wear out and need to be replaced. The equipment loses its resale value the older it is. Depreciation is the measure of this effect in a company’s accounts.

Derivatives

Financial contracts, such as futures and options, whose value is derived from the value of some underlying asset, rate or index. This is where investment gets really scary because you are not actually buying anything tangible, just the right to buy or sell something at a set price in the future. Derivatives are primarily used by governments and companies as a way of reducing the risks associated with interest rate and foreign exchange rate volatility. But they can be extremely rewarding – if very risky – for sophisticated private investors, too. You can often buy them ‘at margin’, which means you pay only a fraction of the total value of the underlying asset. But your profits – and losses – are based on this total underlying value. So for a small investment you can make a massive profit. This kind of magnifying effect is known as gearing.

Discount rate

A rate applied to a future stream of income to work out how much it is actually worth now. The discount rate is closely linked to long-term interest rates.

Discount to net asset value

If the share price of an investment trust is less than the value per share of the assets it has invested in (net asset value or NA V), the trust is stated to be trading at a discount. The discount is expressed as a percentage of net asset value. A massive discount can mean that the shares are relatively cheap. If the share price is higher than the net asset value the trust is trading at a premium.

Discounted rate mortgage

A type of mortgage that offers an interest rate that is guaranteed to be lower than the lender’s standard variable rate for a set period of time. After the discount period has ended, the rate reverts to the standard rate. Such mortgages grant lenders to woo firsttime buyers with attractive-looking headline rates. Just make sure that when the rate reverts to the standard rate you can afford the repayments. Also, if you switch mortgage lenders within the discount period, you will pay an early redemption penalty that can be as high as six months interest.

Discretionary management

Where the stockbroker makes all the investment decisions, and, if you believe Woody Allen, invests all your money for you until it’s all gone. You can pay handsomely for such services and it is normally only very wealthy people who select this option.

Distribution

Another name for the paying out of share dividends and fund income to investors.

Dividend

The income from a share investment. Most companies pay dividends out of their profits twice a year, but they do not have to. The mid-year payment is known as the interim dividend, and the end-of-year payment is called the final dividend. Dividends may be quoted gross – before tax has been deducted – or net – after tax has been deducted, but they are paid out net.

Dividend cover

The number of times over a company can pay its dividend out of its earnings. It’s one measure of the financial strength of a company.

Dividend Yield

The dividend divided by the current share price, expressed as a percentage. It as a way of letting investors know the likely income they will receive on an investment.

Dow Jones Industrial Average

‘The Dow’ is the oldest stock market index in the US, measuring the performance of a representative selection of 30 blue-chip companies. The 30 companies are selected by Dow Jones & Co and the Wall Street Journal.

Dual capital trust

See split-capital investment trust.

e

Early-redemption penalty

Financial penalty levied by a mortgage lender for switching to another lender before the discount or fixed-rate period on your current mortgage has elapsed. It can be as much as six months interest, so check out the small print before you switch.

EGM

Extraordinary General Meeting
A meeting of shareholders usually called by a company’s board of directors to discuss special business, such as a proposed takeover or merger, or a substantial change in the way the business is to be run. Shareholders holding at least 10% of the voting rights can also call and EGM. Not to be confused with the more run-of-the-mill Annual General Meeting (AGM).

EIS

Enterprise Investment Scheme

EMA

Exponential Moving Average Similar to a easy moving average other than more weight is given to the latest available data. The exponential moving average is also known, in the US especially, as “exponentially weighted moving average”.

Emerging markets

Markets based in developing economies, such as those of Latin America and many of the Far East that have not had a long history of equity investment. The potential for rapid growth makes such markets attractive for speculative investors prepared to accept a higher level of risk. See BRIC

Endowment policy

A financial product that combines investment with life assurance. It is usually sold with interest-only mortgages with the aim of paying off the loan at the end of the loan period. If you die before then, the insurance pays off the loan. Endowments have attracted a lot of criticism for being inflexible and expensive. If you cash in the endowment early you get virtually nothing back. Up to a third of the total investment amount can be added on the last day of the endowment period in the form of a terminal bonus, so you should never cash in early if you can help it. They also achieved notoriety because of the way they were oversold by commission-hungry advisers and salesmen, even when they were patently unsuitable for certain types of borrower. There is also concern that in some cases, the monthly premiums may not be enough to pay-off the loan. The underlying investments have not been growing as fast as some companies predicted. Having stated all this negative stuff, there have not yet been any instances where an endowment hasn’t paid off a loan. So if you have one, do not panic and hold on until the bitter end. You could even end up with more than the loan amount.

Enhanced Scrip Dividend

A dividend paid to investors in the form of shares, rather than cash, to a value greater than the cash dividend to encourage shareholders to take the scrip rather than the cash. The companies paying the enhanced scrip dividend also arrange for shareholders who want cash to be able to sell their shares immediately in the market.

EPS

Earnings per share
The amount of profit a company manages to make per ordinary share, expressed in pence. The figure is reached by dividing pre-tax profits by the number of shares in issue. It is one of the most obvious and important measures of how well a company is doing for its shareholders. A company may be growing its profits fast by acquiring other companies, but if it is issuing lots of new shares in the process, these increased profits are being spread over a much bigger number of shares. The earnings per share may actually be falling. This is why it is such an important indicator of true value for investors.

Equities

The posh name for ordinary company shares.

Equity capital

The capital provided by the ordinary shareholders, who collectively own the company, and benefit from capital growth if the share price rises, as well as dividends. The equity shareholders have least security, coming last in order of preference if the company is wound up.

ETF

Exchange Traded Fund. This fund owns a basket of stocks that mirrors the composition of a market index. An investor purchases ETF shares the same way shares of stock are bought, not from a fund company, but on a stock exchange, with the help of a broker who charges a commission.
To learn more about ETFs see our guide here (link please)

Ethical investments

An attempt to give rabid capitalism a caring face. They are usually mutual funds (unit trusts, open-ended investment companies or investment trusts) that invest in companies that are kind to the environment, or that do not have anything to do with tobacco, alcohol, or the arms trade. We all have differing views on what is and is not ethical, so it is important to look at the fund’s objectives before you invest. A fund migbt invest in solar energy companies but also biotech companies that carry out fiendish experiments on fluffy bunnies. Bear in mind also that there is usually a price to pay for a clear conscience – ‘ethical’ companies are not always the most profitable. See SRI

Euro

European unit of currency the UK has not signed up to, which given the continuing aftershocks of 2009, most people are grateful for.

Eurodollar

Dollars deposited in foreign banks, with the futures contract reflecting the rates offered between London branches of top US banks and foreign banks.

Euronext Liffe

Pan-European stock exchange based in Amsterdam and with subsidiaries in Belgium, France the Netherlands, Portgual and the UK. IN December 2010 Euronext had a market cap of US$2.93trillion making it the 5th largest exchange in the world. In December 2001 it acquired the shares of the London International Financial Futures Exchange (LIFFE) which still operates under its own governance.

Eurosterling bond

A corporate bond issued in pounds sterling by a company that wants to raise money in the international markets rather than just in the UK.

Ex-dividend

A share sold without the right to receive the next dividend payment that has already been allocated to the existing shareholders. In the financial pages this is abbreviated to ‘ex div’ or ‘xd’.

Exceptional items

Transactions listed in a company’s profit and loss account that aren’t expected to occur again.

Exchange Traded Funds

see ETF

Execution only

A type of sharedealing service where the stockbroker does not give any advice to the investor but simply carries out the transaction. In theory, dealing costs should be lower to account for the lack of adVice, but this is not always the case. The rise of on-line investment research and ‘real-time’ dealing facilities has made execution-only dealing a lot more popular in recent years.

Exercise price

The price at which a holder of warrants can buy the shares associated with those warrants.

Exit charge

Charge imposed on investors selling an investment, like a unit trust of selling an Investment.

Exposure

Jargon word to describe how much of your portfolio is invested in a particular sector or geographical area. For example, if your portfolio is largely in technology stocks it could be described as having a high exposure to technology. Currency exposure is the amount of your portfolio that is vulnerable to exchange rate fluctuations.

f

Face value

The value of a bond when it matures. This is also called the ‘nominal’ or ‘par’ value.

Fee-based adviser

An increasingly common type of independent financial adviser that earns a living by charging a fee for advice rather than earning commission from financial companies for selling their products. With commission-based advisers there is always the worry that the advice you are getting may be motivated more by the size of the commission than the product’s suitability – even though this is against the law. Then again, when people see how much advice actually costs per-hour, they often walk away in horror. So there are arguments to support both types of charging method. And just because a commissionbased adviser has sold you a product that pays a higher level of commission than another product, it doesn’t necessarily make the product unsuitable. Sometimes you just have to pay more for better performance. And these days, at least the commission level does have to be disclosed to the client. You pays your money, you makes your choice, as they say.

Fill

An executed order; sometimes the term refers to the price at which an order is executed.

Final dividend

The dividend paid by a company to its shareholders at the end of the financial year.

Final salary scheme

The Rolls Royce of company pension schemes. The size of pension on retirement is calculated according to a formula that incorporates the number of years you have worked for the company and the level of your ‘pensionable earnings’. The maximum pension is two-thirds of your final salary. They usually come with a widow’s pension and annual increases in line with inflation. But in these days when jobs for life are increasingly rare, costly final salary schemes are being replaced by riskier Money Purchase Schemes.

Financial gearing

The ratio between a company’s borrowings and its capitalisation. That is, a ratio between what it owes and what it owns.

Financial Services Act 1986

Pivotal Act that introduced some sort of regulation – albeit self-regulation – into the chaotic world of personal finance. It has now been overtaken by the Financial Services and Markets Bill that, amongst other things, has centralised regulatory power in the hands of the Financial Services Authority.

Financial Times Stock Exchange SmallCap Index

The All-Share index minus the top 350 companies.

Fixed interest security

An investment, such as a gilt (Government bond), debenture or corporate bond, that provides a fixed level of income called a coupon. It also has a redemption value – the amount repaid at the redemption, or maturity, date. The market price of the security may range above or below the redemption (or par) value.

Fixed-rate mortgage

A mortgage that has a fixed rate of interest for a set period of time, typically three to five years. Even if interest rates rise and lenders increase their mortgage rates in line, your monthly payments will stay the same. Similarly if interest rates fall. You’ll usually pay a slight premium on the lender’s standard variable rate for such certainty, but many borrowers think it’s worth it for the peace of mind it brings. They can also prove to be good value if interest rates rise more sharply than expected. Bear in mind that if you switch lender before the fixed-rate period is up, you will have to pay a redemption charge often known as an ‘overhang’.

Flexible Mortgage

A new type of mortgage that is becoming more popular, especially among the selfemployed and other people who may experience uneven cash flow. It grants you to vary your monthly payments without penalty, and even to take a payment holiday for a while. You can also borrow, or ‘draw down’, from the loan when you need to. The capability to overpay can save you a lot of interest over the term of the loan. Flexible mortgages often incorporate a current account, too, encouraging the idea that borrowings and savings can be run more efficiently in one pot.

Flotation or floatation

Term for when a company offers its shares on the stock market for the first time. It can also be called a new issue or initial public offering. By offering its shares to investors in this way a company can raise finance to fund further growth.

Front-end loading

An American term to describe the initial sales charges you pay when you invest in a mutual fund, such as a unit trust, or any other type of investment. A massive part of the front-end, or initial charge, is the cost of the adviser or salesmen.

FSA

Financial Services Authority

Here are the FSA’s other contact details:-
Address:
The Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS
Telephone:
Switchboard: 020 7676 1000
Public Enquiries (including Central Register authorisation queries): 0845 606 1234 (local call rates)
Fax: 020 7676 1099 ,

FSAVCs

Free-standing Additional Voluntary Contributions
see Additional Voluntary Contributions.

FSCS

Financial Services Compensation Scheme. A savings industry-funded institution ensuring bank depositors and insurance customers are compensated if their firm goes bust. Following the Icelandic Banks crisis of 2009, rules were changed and as a May 2011 the limits stand at: For deposits £85,000 per person per firm for investments 100% pof the first £50,000 per person per firm.
Contact:
Financial Services Compensation Scheme
7th floor, Lloyds Chambers
Portsoken Street
London E1 8BN
Tel: 020 7892 7300

Web: www.fscs.org.uk

FTSE 100

Financial Times Stock Exchange 100 Index
The main UK stock market index measuring the performance of the UK’s 100 largest companies (by market capitalisation – the number of shares time the share value). It is often just called ‘The Footsie’.

FTSE 250

Financial Times Stock Exchange 250 Index
The UK index that measure the performance of the 250 companies below (by market capitalisation) the FTSE 100 companies.

FTSE-A-All-Share

Financial Times Stock Exchange Actuaries All-Share Index
Known simply as the ‘All Share’, this is the broadest based of the UK stock market indices, measuring the performance of over 900 publicly quoted companies.

FTSE4 Good

A series of indices introduced in July 2001 to provide benchmarks for the performance of funds, products and firms in the SRI (Socially Responsible Investing) arena. The FTSE4Good selection criteria cover three areas.
- Working towards environmental sustainability
- Developing positive relationships with stakeholders
- Upholding and supporting universal human rights.

Fully invested

When an investment trust has invested all its capital in shares or other investments, rather than holding some of it as cash, it is ‘fully invested’.

Fundamental Analysis

The analytical method by which only the sales, earnings and the value of a given tradable’s assets may be considered.

Fundamentals

The theory that holds that stock market activity may be predicted by looking at the relative data and statistics of a stock as well as the management of the company in question and its earnings.

Future

A type of derivative that is a contract to buy or sell shares or commodities in the future at a pre-agreed price. These contracts are purchased and sold in futures markets. Futures are generally considered too risky for ordinary investors.
See CFD To learn more, see our CFD user guide (link).
To open an account and go to our CFD centre (link)

g

Gamma

The degree by which the delta changes with respect to the changes in the underlying instrument’s price.

Gearing

Gearing is the ratio of a company’s borrowing to its assets. A highly-geared company is one that has a lot of debt as a proportion of its total assets. Gearing can help companies expand more quickly, but it also increases the risk that it will not be able to repay the debt if things go badly. Investment trusts are allowed to ‘gear up’ (borrow money), unit trusts are not.

General / generalist trust

A unit or investment trust that has a wide spread of investments and look to provide income as well as capital growth for investors. They are generally less risky than more specialised trusts.

Gilt

Very secure type of bond issued by the UK government. Normal gilts payout a fixed income or coupon, but index-linked gilts rise each year in line with inflation.

Golden Cross

The point at which a security’s short-term moving average (such as 15-day moving average) breaks above its long-term moving average (such as 50-day MA) or resistance level. Said to be an indicator of a forthcoming bull market.

Goodwill

The difference between what a company pays for another company and the book value of that company.

Gross

Without tax deducted.

Gross redemption yield

Return on a fixed interest security expressed as an annual percentage. Redemption yield measures the capital as well as income return on the investment.

Gross yield

The annual gross dividends as a percentage of the current share price. It is a way of indicating the likely income an investor will receive.

Grossing up

The process of working out the before-tax amount of an interest or dividend payment.

GTC

Good till Canceled
An order to buy or sell a stock at a specific price that remains in effect until it is executed or the investor cancels the order. Also called an Open Order

Guaranteed income bond

A single premium investment offered by insurance companies that pays a fixed amount of income annually and returns the original sum invested at the end of a specified period. Despite their name, not all guaranteed income bonds guarantee to return your capital, but sometimes make this conditional on a specified rise in the stock market ofer the period. Be sure to read the smallprint before investing. Insurance companies have a habit of giving with one hand and taking away with the other.

h

Head & Shoulders

When the middle price peak of a given tradable is higher than those around it.

Hedging

A way of reducing the risk of losses that may occur if interest rates, share prices or foreign exchange rates move in the wrong direction. This usually involves the use of futures contracts.

House broker

House brokers are employed by large, diversified broker-dealers. Broker-dealers were once called “investment houses” or “banking houses,” from which the term “house” broker is derived. The house broker executes orders on behalf of his or her firm’s customers or occasionally on behalf of his or her firm’s own account.

i

IHT

Inheritance Tax

Illiquidity

The difficulty of changing your assets in cash because of a lack of demand for whatever it is you are trying to sell. See Liquidity.

Income share

Class of share within a split capital investment trust that receives all or most of the trust’s income.

Income unit

A type of unit within a unit trust that automatically pays out an income to holders. You can select to have your income reinvested if you want.

Indemnity insurance

Insurance designed to protect a mortgage lender against the risk of the borrower not being able to repay the loan. The injustice is that it’s the borrower that pays the premium. This type of insurance is only imposed by the lender if you borrow above a certain percentage of the value of the property – typically 75% or above. The greater your proportional borrowing, the bigger the insurance premium you have to pay. This kind of policy is also known as a mortgage indemnity guarantee (MIG).

Index tracker

Type of fund that tries to replicate the performance of a particular stock market index by buying all or a representative proportion of the stocks within that index. They have grown in popularity because of disillusionment with actively-managed funds, more than half of which regularly underperform the main stock market index. Index trackers are also much cheaper. You can anticipate to pay an annual management charge of around 0.5% compared with the more usual 1% to 1.5% on an actively-managed fund. The only drawback is that you cant do better than the average.

Index-linked investment

One that increases in value each year by the rate of inflation or by a fixed percentage above inflation. Index-linking is mostly associated with income-producing investments, such as gilts, to protect the income from the ravages of inflation over the long-term.

Inflation

The general increase in prices over time. It has the effect of reducing the buying power of money. The most common measure of inflation is the Retail Prices Index (RPI).

Initial charge

A charge made by a fund manager to cover administration and sales costs. It is typically 5%.

Insider dealing

The illegal use of privileged information that, if it were made public, would significantly affect the share price. For example, if someone knows that a company is about to make a price sensitive announcement and purchases or sells shares in advance of that for profit, that is insider dealing. In practice, few people have been successfully prosecuted though.

Institutions

Short-hand for massive institutional investors, such as pension funds, unit trusts and insurance companies that buy and sell massive volumes of shares.

Intangible asset

A non-physical asset, such as brand name, patent or copyright, that can be given a notional value on a company’s balance sheet.

Interest cover

The number of times a company’s profits can cover the interest payments on its debts.

Interest-only mortgage

A type of mortgage that requires the borrower to repay only the interest on the loan each month whilst making other arrangements to pay-off the loan itself at the end of its term. Common investments people take out with interest-only mortgages are endowment policies and Individual Savings Accounts.

Intestacy

Dying without making a will so that you have no control over the distribution of your assets. Not an advisable say to end up in.

Investment club

Investment Grade

A bond with a Standard & Poor’s rating of BBB- or above, or a Moody’s rating of Baa3 or above.

Investment trust

A public limited company listed on the UK stock exchange that invests in the shares of other companies. There are many different types of investment trust: some specialising in UK companies, others investing internationally. The share price of an investment trust is subject to normal market forces and as such can move independently of the value of the trust’s underlying assets.

IPO

Initial Public Offering
American term for what we generally call a new issue in the UK. It is the share offering from a company coming to the stock market for the first time.

ISA

Individual Savings Account
The Individual Savings Account was introduced on the 6th April 1999 to replace the Personal Equity Plan (PEP) and Tax-Exempt Special Savings Account (TESSA) with one plan that covered both stock market and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). Think of ISAs this way: if you purchased a pair of shoes and the shop assistant put them in a free carrier bag, the shoes are the investment and the carrier bag is the ISA. The limit, as of 2011/12, is £10,680 in any tax year of which the maximum in cash is £5,340 and the balance in shares, or the whole lot in a stocks and shares ISA.
For more information and to help with your investment go to our ISA centre here (link please)

j

January Effect

The tendency for securities prices to recover in January after tax-related selling is finished before the year-end.

Jobbers

Old name for market makers

Joint life annuity

Annual pensions payment that continues after the death of the first partner and ends after the death of the second partner.

Junior market

Another name for the Alternative Investment Market.

Junk bond

A type of bond issued by a company that is considered very risky by risk assessors like Standard & Poor’s and Moody’s. Sometimes called High Yield Bond

k

Kill

Letting a share order lapse because the price the investor wanted to buy or sell at could not be achieved at the time of the order. Part of the phrase ‘Fill or kill’, which means to carry out the transaction at the investor’s chosen price, or not at all. See limit order.

Krugerrand

A highly tradeable coin minted in South Africa containing one ounce of pure gold and originally intended as an investment item.

l

Leverage

American term for gearing – the ratio of a company’s debts to its assets.

Leveraged buyout

Purchase of a company by an institution using a massive amount of borrowed money. A great way to grow fast and then crash spectacularly in a fiery ball when the underlying businesses fail and the debt becomes crippling.

Liabilities

Accountancy jargon for everything that a company owes.

LIBOR

London Interbank Offer Rate
Rate of interest banks offer to lend money to each other in the London money markets. in the City of London. Money can be borrowed for any length of time, but the most commonly-quoted yardstick is the ‘three-month LIBOR’.

Limit order

An order to buy or sell a share at a specific price. The order will only be carried out by the broker at that price, or a better one. If the broker can’t fulfil the limit order, it lapses.

Limit order processing

The limit order system electronically files orders which are to be executed when and if the specific limit price is reached. The system accepts limit orders up to 99,999 shares and electronically updates the Specialist’s Display Book. Good ’til Cancelled orders not executed on the day of submission are automatically stored until executed or cancelled

Limited-life trust

A trust which has a fixed date by which it must be wound up.

Liquidation

When a company is wound up and its assets distributed to its creditors.

Liquidity

The ease with which an asset can be converted into cash. A liquid market is one where there is lots of demand for what you want to sell and an abundant supply of what you want to buy. The opposite of this is illiquidity. Although most shares you buy are very liquid in that you can sell them very easily, some are less so, particularly those listed on the smaller markets such as the Alternative Investment Market and Ofex.

Listed company

A public limited company (plc) listed on a stock exchange.

Load

An American term meaning the additional charge added to mutual funds to cover administration charges. It is usually a percentage of the money initially invested in the fund (front-end loading) but can also be taken when you exit the fund.

Loan stock

Bonds issued by companies that are not secured on its assets, unlike debentures.

Long-dated bond

Bond or gilt with 15 years or more to go to redemption, when the nominal capital is repaid to the holder.

Low-start mortgage

Type of mortgage that offers a low initial interest rate which then rises to the lender’s standard variable rate. This increase may take several years – a stepped rate mortgage – or it may happen as soon as the ‘low start’ period is over. Such mortgages are supposed to lure first-time buyers into the property market. Just make sure that you know exactly what the monthly mortgage payments would be once the rate has reverted to the standard variable rate, or you could end up in trouble.

LSE

London Stock Exchange
The UK’s main exchange for buying and selling shares in public limited companies.

LTV

Loan to value
Ratio of the amount borrowed to the value of the property. If you are borrowing £70,000 to buy a £120,000 property, the LTV ratio is 70%. The higher the LTV the more likely it is that you will have to pay a mortgage indemnity premium that insures the lender against you defaulting on the loan. Borrowers with low LTVs can also usually achieve better deals on their mortgages because they are less risky customers for lenders.

m

MACD

See Convergence Divergence

Margin

Short-term borrowing within a brokerage account to buy investments.

Market capitalisation

The value of a company reached by multiplying the number of shares in issue by the current price of the shares.

Market maker

City dealers who buy and sell stocks and shares on their own behalf to sell on at a profit. They used to be called jobbers.

Maturity

Another word for redemption – when an investment period ends and, in the case of bonds, the nominal capital is repaid to the holder.

Mid-market price

The price between the offer and bid price at which shares are purchased and sold. The midmarket price is used to compute investment trust performance statistics. It is also the price used in most newspapers’ share tables.

Mifid

MIG

Mortgage indemnity guarantee
Insurance designed to protect a mortgage lender against the risk of the borrower not being able to repay the loan. The injustice is that it’s the borrower that pays the premium! This type of insurance is only imposed by the lender if you borrow above a certain percentage of the value of the property – typically 75% or above. The greater your proportional borrowing, the bigger the insurance premium you have to pay.

Momentum

An investment strategy that aims to capitalise on existing trends in the market carrying through. The momentum investor believes massive increases in the price of a security will be followed by additional gains and vice versa for declining values. In essence, capturing the value of ‘hot’ stocks.

Money buy scheme

Type of pension scheme that builds up a pot of cash used to buy an annuity on retirement. Personal pensions work on this basis as, increasingly, do company pension schemes (sometimes called defined contribution schemes). Riskier than final salary pension schemes because there is no guaranteed level of pension on retirement.

Mortgage protection policy

An insurance policy designed to pay-off what is left of your loan if you die before it is fully paid off.

Moving Average

A mathematical procedure to smooth or eliminate the fluctuations in data and to assist in determining when to buy and sell. Moving averages accentuate the direction of a trend, confirm trend reversals and smooth out price and volume fluctuations or “noise” that can confuse interpretation of the market; the sum of a value plus a selected number of previous values divided by the total number of values.

Moving average cross-overs

The point where the various moving average lines intersect each other or the price line on a moving average price bar chart. Technicians use cross-overs to signal price-based buy and sell opportunities.

MPC

Monetary Policy Committee
The suits at the Bank of England who gather each month to decide whether or not to raise interest rates. The Labour Chancellor, Gordon Brown, gave the Bank of England independence in 1997 to remove interest rate decisions from the political process. The MPC, a committee of economic experts, examines all the available data to see whether inflation is likely to rise above the target rate. If it is, it generally increases rates slightly to try to cool the economy down again by increasing the cost of borrowing. Exporters complain that this increases the value of the pound and so makes their exports more costly for foreign buyers. In economics, someone is always unhappy.

Mutual Funds

Collective investments, such unit trusts, that pool investors’ money which the fund manager uses to buy shares in other companies. Unlike investment trusts, they are not quoted on the stock exchange and they are not allowed to borrow money for further investment. Investors buy units in the fund – the unit value being calculated on a daily basis.

Mutuality

The increasingly old-fashioned concept of members owning a company for their own benefit. Building societies are classic examples of mutual societies, but they are fast disappearing in the rush to demutualise and become banks. It may be old fashioned, but if you are a mortgagee or a cash saver, evidence shows that mutual tends to be best.

n

Naked put

The writer of a put option contract who is not short the underlying security.

Names (Lloyds)

Wealthy individuals with at least £250,000 of assets to spare who traditionally underwritten risks on the Lloyds of London insurance market. They are grouped into syndicates each led by an underwriter who writes policies on their behalf, traditionally in the marine insurance market. Names concur to put their entire wealth on the line should it be necessary to meet claims, in return for substantial commissions. Well, that was the theory, but we all know what happened in practice – they were still going bust in 2009. Another not so great chapter in the history of the City of London.

NASDAQ

National Association of Securities Dealers Automated Quotations system
The second largest stock exchange in the US, specialising in high-tech and world wide web related companies, such as Microsoft. The movements of the NASDAQ can have a significant effect on the UK markets, particularly the recently-launched techMARK index of technology, media and telephony companies. Its website is www.nasdaq.com

NAV

Net Asset Value
The market value of an investment trust’s underlying assets Le. the investments it has made in other companies. This is usually different from the share price which can trade at a discount or premium to NAV, according to the level of investor demand for those shares.

Negative equity

When the value of your property falls below the size of the loan you have taken out to buy.

Net yield

Return on an investment after tax has been deducted.

New Issue

A company that is floated on the stock market for the first time. Offering shares to the investment public is a way of raising capital for further expansion.

Nominal value

Bonds are given a nominal value when they are issued, which is the value they will have when they mature/are redeemed at the end of their lives. This value is also called the par value or redemption value.

Nominee account

An account that a stockbroker sets up to hold shares on your behalf. Although your name doesn’t go on the share register when you buy shares in a nominee account, you still remain the beneficial owner of the shares, eligible for all income, capital gains, perks and other shareholder rights as normal. Most execution-only world wide web stockbrokers insist that customers hold their shares in a nominee account. This speeds up the settlement process and does away with the need for paper share certificates and contract notes. Just make sure that your broker is fully responsible for the nominee account and will safeguard all your normal shareholder rights.

NYSE

New York Stock Exchange
The largest and oldest US stock exchange.

o

Occupational pension scheme

Type of company pension scheme where the employee and/or the employer make contributions and the level of pension is calculated according the number of years participation in the scheme and your final salary come retirement age. The maximum pension under this kind of scheme is two-thirds of final salary.

OEIC

Open Ended Investment Company
A new type of investment fund set to replace unit trusts. The main differences are that they quote a single price rather than a bid/offer spread, but have a company structure like investment trusts.

Offer price

Price at which you buy shares or units.

Open ended

Term referring to investment funds, such as unit trusts, that have a variable number of units in issue each day. An investment trust on the other hand is closed ended, meaning that it has a fixed number of shares in issue at anyone time.

Operating profit

Profit before interest and tax have been deducted.

Option

The contractual right, but not obligation, to buy or sell an investment for a specified price within a set period of time in the future. The right to buy is called a ‘call option’ and the right to sell is called a ‘put’ option. Options are derivatives that can be purchased and sold in a futures market. If you do not exercise the right within the concurred period, the option lapses. This is different to a future, which has to be honoured come what may (unless you sell it before the contract comes into force).

Order

An order is an intent to buy or sell a security.

Ordinary shares

The main type of shares, or equity capital, purchased by private investors.

Orphan assets

If a life insurance company can meet all its liabilities to policyholders and shareholders, but still has surplus funds, these are called orphan assets. Who owns these assets is still a hot topic. Some policyholders argue that they should be redistributed to them, with companies claiming that they should be allowed to keep them.

Overbought oversold

An indicator that attempts to define when prices have moved too far and too fast in either direction and thus are vulnerable to a reaction.

p

Paid-up value

Once you stop contributing to a personal pension, the fund you have built up so far is given a paid-up value. This amount is left to grow. The problem is that in the early years, most of your contributions actually go to paying the costs of the adviser or salesman who sold you the policy as well as other sales and administration costs. So if you stop paying in after a year or so, there is very tiny actually in the pot. You’ll end up with a tiny pension fund of tiny use to man nor beast.

Par value

see nominal value.

Passive management

see index tracker

PE

Price-earnings ratio
The share price divided by the earnings per share. It is a measurement of how highly a share is valued. A high PE suggests that investors believe a company has good prospects of achieving above-average growth in the future, even if earnings are not that high at the moment. Strong demand for the company’s shares pushes the price up.

Penny shares

Shares in companies that have a low market capitalisation, whose price is usually just a few pence. Investors are often misled by the price into thinking they are cheap, when in fact the bid/offer spreads can be very high. Penny shares can also suffer from illiquidity and extreme volatility. They should be considered as high risk by most investors.

Perceptron

A pattern-recognition machine, based on an analogy to the human nervous system, capable of learning by means of a feedback system which reinforces correct answers and discourages wrong ones.

Pip

See Basis point

Placing

A new issue of shares sold only to institutions rather than private investors.

Pooled funds

Another name for collective or mutual funds.

Portfolio

The posh name for your collection of investments. To run your portfolio free of charge, register with www.iii.co.uk

Positive divergence

A positive divergence occurs when a price index is making a lower bottom at the same time a technical indicator is making a higher bottom.

PPP

Personal Pension Plan
A private pension scheme, mostly offered by insurance companies, that enjoys tax relief on contributions into it. The amount of tax relief increases the older you are. When you have reached the minimum retirement age – 55 for personal pensions – you can use the pension fund to buy an annuity and take up to 25% of the fund as a tax-free lump sum.
Personal pensions became notorious after they were mis-sold by unscrupulous salesmen and financial advisers who persuaded people in perfectly decent company pension schemes to transfer to PPPs, many of which were not in any way suitable for people’s needs. High front-end charges also meant that contributions were eaten up in the early years, so that investors wanting to transfer to another provider were quoted miniscule transfer values. The Financial Services Authority, the chief regulator, is still dealing with the compensatory implications of this mis-selling scandal. Having stated all this, providing you know what the costs are, they can be useful products.

Pre-tax profits

A company’s profits before tax, interest and depreciation have been taken into account.

Preference share

A type of share that acts like a bond, paying a fixed rate of interest. They are the first in the pecking order if a company or trust is wound up and its assets distributed to shareholders.

Preliminary results

A report to the Stock Exchange on the company’s annual results in advance of the publication of the report and accounts.

Premium

If the share price of an investment trust is higher than the net asset value, the trust is stated to trade at a premium. The premium is shown as a percentage of the share price. Most investment trusts actually trade at a discount.

Profit and loss account

Important part of a company’s annual report and accounts along with the balance sheet. It gives details of the company’s income over the previous 12 months as well as its operating expenses, including salaries and running costs.

Profit taking

Selling tradables that have appreciated since initial buy in order to take advantage of the appreciation.

Prospectus

A document issued by a company wanting to issue shares to the public. It tells potential investors all about the company, its activities, business plans, and financial state. Obviously it can’t lie or it will get into trouble.

Public Limited Company (plc)

A company that offers a proportion of its share capital to the public. Only plcs can be listed on stock exchanges.

Purchased life annuity

A guaranteed income for the rest of your life provided by insurance companies in return for a lump sum investment.

Puts and Calls

See Options

q

Qrops

Qualifying recognised overseas pensions schemes (Qrops) are popular among wealthy earners who retire abroad. Their advantages include potentially lower tax bills (as income tax and inheritance tax will be subject to the overseas country’s rates that the Qrops-holder is now resident in, rather than the UK) and increased investment flexibility.

Quotes

Shorthand for share prices. A quoted company is one that is listed on a stock exchange.

r

Rally

Swift rise in the value of the stock market or of particular share.

reaction (investing)

A fall in prices following a rally as everyone quickly takes profits.

Redemption

Date at which a bond become repayable. Also called the maturity date.

Redemption yield

An dividend or interestAate figiye of a bond that takes into account its capital value if held to maturity.

Refinancing

As it sounds really and the same as refunding. A company sells new securities and the money is used to retire existing securities. The objective is usually to save interest costs, extend the maturity of the loan or both.

Registrar

Firm responsible for communicating with a company’s shareholders and maintaining its share register. Several of the major banks, such as Equinity and Computershare are well-known registrars.

Reinvestment of dividends

If you save regularly into investment trust savings scheme you can ask for any dividends earned to be reinvested to buy more shares. When you see ‘total return’ fund performance figures, they assume that dividends have been reinvested.

Relative strength

A comparison of an individual stock’s performance to that of a market index such as FTSE100 index. Most times the FTSE100 or the Dow Jones Industrial indices are used for comparison purposes. It is calculated by dividing the stock price by the index price. A rising line indicates that the stock is doing better than the market a declining line indicates that the stock is not doing as well as the market.

REMA

Reverse Exponential Moving Average
An exponential moving average computed working backwards through the time series, rather than forward, as is the case with a standard EMA. A REMA is used so the target would reflect only future price behaviour, not past action that would induce spurious correlation. Got that? Good.

Repayment mortgage

Type of property loan where you pay-off both the capital and interest each month until you have completely repaid the loan at the end of the pre-agreed term. In effect, you do not really begin paying off much capital for about five years, because the loan interest payments are at their highest then.

Retained Profits

The profits left over after all charges have been paid and dividends declared. This number is added, or subtracted jf it is a loss, to shareholders’ funds at the end of the year.

return (investing)

The amount by which your investment increases in value after interest/dividend income and capital growth have been taken into account.

Rights issue

When a company issues more shares to existing shareholders – usually at a discount as a way of raising more funds.

Risk Reward ratio

Monthly excess return to risk comparison, calculated by dividing alpha by standard deviation. (A ratio better than 0.4 is excellent. Apparently.

RPI

Retail Prices Index
The most common monthly indicator of inflation. It measures the prices of a representative sample of household goods and services. In general it is an indicator of a rise or fall in the cost of living and is used as a yardstick for increases in wages, say benefits, tax allowances and so on. This monthly quoted figure is called the headline rate, whereas the underlying rate excludes mortgage interest costs.

Running yield

Current level of income/dividend payments made by a fund or bond.

s

S&P500

Essentially the US equivalent of the FTSE100 – though obviously much bigger, it is market cap weighted index of 500 stocks. Standard and Poor’s 500 index represents the price trend movements of the major common stock of US public companies. It is used to measure the performance of the entire US domestic stock market.

Samurai bond

Issued by a foreign borrower in Japan. Denominated in Yen it can be purchased by a non-Japanese investor.

Savings scheme

A way of investing regular small amounts in a collective fund, such as an investment trust or unit trust, without incurring the usual stockbroker dealing charges. They cheap and easy ways to get into investing on the stock market and can begin at £20 a month. You can usually also make occasional lump sum contributions.

Scrip dividend

Dividends paid in the form of shares.

Scrip issue

New shares issued by a company to increase the number of available shares in the market place. This reduces the share price and helps liquidity, whilst keeping the overall market capitalisation the same. Existing shareholders do not have to pay for scrip shares and receive a number proportional to their current shareholding.

SEAQ

Stock Exchange Automated Quotations
An electronic price display system for securities. SEAQ requires all competing market makers to quote buying and selling prices along with the number of shares they are prepared to deal at that price. These quotes are displayed on screens in brokers’ offices.

SEC

Securities & Exchange Commission
The US regulator for all companies quoted on the country’s stock exchanges.

Secondary market

When a company floats on the stock market the initial scrabble for its shares is known as the primary market. After all the shares have been allocated to the investors who applied for shares, they can then be traded on the secondary market – the usual market for shares provided by the London Stock Exchange.

Securities

Term used for cover all stocks and shares. Stocks are generally fixed-interest investments, like bonds and gilts, and shares are…well. ..shares.

Self-select Individual Savings Account

A type of ISA that gives you freedom to select the investments that go in it. You’re not restricted to the funds of one particular ISA manager. This helps spread risk and puts you more in control.

Selling short

This is practice of selling shares that you do not own in the hope that the share price falls before you have to settle the contract. If the price does fall you can then buy the shares at the lower price and pocket the difference. It’s a risky practice and one ideal avoided by most private investors.

SERPS

State Earnings-Related Pension Scheme
An optional top-up pension designed to boost the basic say pension that is provided by the government to everyone who has made enough National Insurance Contributions. The rules for opting in and out of SERPS are very complicated.

SETS

Stock Exchange Electronic Trading Service
SETS is an electronic trading system that matches buy and sell orders from the 100 biggest listed companies. It was introduced by the Stock Exchange in October 1997.

Settlement

The process of transferring ownership of assets and paying for them.

SFA

Securities and Futures Authority
The self-regulatory organization (SRO) for stockbrokers and other dealers that has now been rolled into the Financial Services Authority.

Share

A security that represents part-ownership of a company.

Share certificate

Legal proof that you own shares in a company. With the rise of electronic trading and settlement systems (see CREST), share certificates are being gradually phased out, and investors who insist on having them will have to pay more for their share deals.

Share exchange

Scheme offer by a fund manager to take your shares and convert them into shares or cash invested in its own fund.

Share price total return

A share price performance figure that assumes dividends have been reinvested to buy more shares.

Shareholder

Someone who owns shares in a company and has the right to attend the Annual General Meeting and vote on company business, such as the appointment of directors.

Sharpe Ratio method

The Sharpe Ratio Method is the classic return/risk measure. Both the Sharpe and the Sterling Ratio methods compare returns with variability of returns, as opposed to risk of loss of original investment.

Short Sale

A transaction by an investor who believes a security will decline and sells it, even though he does not own it. For example, you instruct your broker, or though a CFD do it yourself, sell 100 shares of XYZ. Your broker borrows the stock so delivery of the 100 shares can be made to the buyer. Your broker deposits the money value of the shares borrowed with the lender. Sooner or later you must cover your short sale by buying the same amount of stock you borrowed for return to the lender. If you are able to buy XYZ at a lower price than you sold it for, your profit is the difference between the two prices – not counting commission and taxes. But if you have to pay more for the stock than the price you received, that is the amount of your loss. Stock exchange and regulators govern and limit the conditions under which a short sale may be made on a national securities exchange. Sometimes people will sell short a stock they already own in order to protect a paper profit. This is known as selling short against the box.

Sinewave

A wave whose amplitude varies as the sine of a linear function of time. Indeed.

SIPP

Self-Invested Pension Plan
A type of personal pension that gives the holder freedom to select the underlying investments.

SiPP

Self-invested personal pension
A personal pension scheme gives the policyholder ultimate choice about the investments held within the scheme. With a normal pension, choice is limited to funds run by the provider but a SiPP holder can invest in the shares of any company listed on a stock exchange and certain other assets – some of them very exotic like property, art or classic vehicles – bringing them all within the SiPP tax wrapper. SiPPs tend to incur higher charges than normal personal pensions making them more suitable for those with bigger sums to invest.

Split-capital trust

An investment trust that offers different types of share – high income shares that provide no capital growth, for example, or pure capital growth shares that provide no income.

Spot market

A market in the underlying instrument on which a futures or options contract is based. This market is for immediate delivery – typically two days.

Spot price

The price of a currency, index or commodity share for immediate settlement or delivery as traded on a spot market.

Spread

Every tradable financial instrument has what we call a ‘spread’. The spread is the difference between the buy price (offer) and the sell price (bid) ie. Say Vodafone is trading at 150 to 151. You could buy this instrument at 151 and sell the instrument at 150. The Spread is 1.
Go to spread betting centre

Spread betting

Basically, betting on the above, long or short of a price. In the UK, this has the premium advantage of being tax-free since it is essentially a bet even though there are complex trading strategies and common sense rules which make it a better proposition than a roulette table.For more information and our Spread Betting Academy go to:
Go to spread betting centre

SRI

Socially Responsible Investing, also known as Social Business investing and Ethical Investing, or they might as well be.

Stagging

Selling shares immediately after you have received them – usually from a company flotation – with a view to making a quick profit.

Stamp duty

The scourge of the private investor, stamp duty is a tax levied on all share purchases (not sales) at a current rate of 0.5%. It is also levied on house purchases, with a tiered rate system according to the value of the property being bought.

Stepped preference shares

Type of share in a split-capital investment trust that provides dividends that rise at a pre-set rate and a fixed capital value when the trust is wound up.

Stochastic

Literally means random. Which is a help.

Stock exchange

A place where stocks and shares are purchased and sold

Stockbroker

A member of the London Stock Exchange who purchases and sells shares on your behalf in return for a dealing commission. Some provide advice and investment management services, others don’t.

Stop Loss

The risk management technique in which the trade is liquidated to halt any further decline in value.

Strike price

The price per unit at which the holder of an option may receive or deliver the underlying unit, also known as the exercise price.

Subsidiary company

Company more than 50% owned by another company, usually called the parent company.

Support

The price a share trades at, but does not go lower than, over a period of time. (The opposite of resistance.) It is where buying is sufficient enough to halt a price decline. A price level at which declining prices stop falling and move sideways or upward – where there is sufficient demand to stop the price from falling.

Surrender value

Amount you would receive if you cash in an endowment-policy early – normally not very much in the early years because all your premiums are going towards sales and administration costs.

Swaps

Selling one security and buying a similar one at nearly the same time to take a loss, usually for tax purposes.

t

Tax avoidance

Attempting to pay as tiny tax as possible by all legitimate means.

Tax evasion

Attempting to pay as tiny tax as possible by illegitimate means i.e. lying about your true level of income.

Tax year

The 12-month period beginning April 6 and ending April 5 the following year applied to annual tax and investment allowances.

Tax-efficient investments

Collective name for investments that offer some form of tax relief on contributions, income, and/or capital gains.

TechMARK

A frequently mistrusted FTSE index, launched in 1999, with a base figure of 2,300 points by the London Stock Exchange to reflect the growth at that time in world wide web and technology stocks. To be included, a company must be committed to technological innovation and listed on the exchange. It includes biotechnology companies as well as world wide web stocks and software companies. The TechMARK 100 is a subset of the TechMARK all-share and both have an upper market cap limit so as to exclude the largest companies.

Tender offer

A way for a company to raise money from stockmarket investors by inviting them to make bids for the price they are willing to pay for the shares.

Term insurance

A easy life insurance policy that pays out a lump sum on your death. If you survive the term of the policy, it lapses. It is the cheapest form of life insurance. There is no investment element, unlike a with-profits life policy.

Theta

The rate of change of an option or warrant premium for a given change in the number of days to expiry. Usually expressed in pence per day or per week, and sometimes called time decay, the theta measures the loss of time value as the option or warrant nears its expiry date.

Tick

A minimum upward or downward movement in the price of a security. The tick is the upward or downward movement of a stock’s price. The TICK, usually given as one of a number of market indicators, refers to the net tick on their last trade of all stocks being traded on a given day. This information is useful in determining the current direction of the market and strength of the market in a given direction. For example, the market could be up 50 points, but, if the TICK were -400, it would indicate that the market had changed directions and was heading down. Or the market could be up 50 points with a tick of +750. This would indicate that the market may go much higher since the momentum is clearly up.

Tied agent

Financial salesman who only sells products from one or more companies rather than looking at the whole market for a product that ideal suits your needs.

Total return

The return from an investment calculated by combining dividends or interest received with any capital gain or loss. Investment trusts quote two total return figures, one calculated on the net asset value (NAV) performance of the trusts and the other calculated on the share price performance of the trust (See share price total return).

Toxic Assets

An asset, such as a mortgage-backed security, that becomes illiquid when its secondary market disappears. Toxic assets can’t be sold, as they are often guaranteed to lose money.

Toxic Debt

Debt that has a poor and often very poor chance of being repaid and therefore toxic to the person or institution that will receive the payments.

Tracker Fund

Investment fund that tries to match the performance of a stock market index by investing in all or a representative sample of the companies listed in that index. They are cheap compared to actively-managed funds.

Trading bands

Lines plotted in and around the price structure to form an envelope, answering whether prices are high or low on a relative basis and forewarning whether to buy or sell by using indicators to confirm price action.

Trading range

Ranges of prices over which market action has been taking place during the time frame under study.

Trailing stop

A stop-loss order that follows the prevailing price trend.

Transfer value

The value given to the pensions benefits you’ve built up in a pension scheme if you decide to transfer them to another pension manager. Calculating transfer values is a dark art known only to actuaries, but it always seems to be that if you switch pension provider you end up losing some benefits.

Treasury stock

Shares, formerly outstanding, that were repurchased by the issuing company. Companies often repurchase stock to benefit existing shareholders. Those who sell receive a premium price from the company for their shares, thus substituting a massive capital gain for future dividends. This ploy is used when dividend taxes are higher than capital gains taxes. Remaining investors who keep their shares benefit from a tightened supply, which raises the share price. Companies may later resell treasury stock, or retire it according to a shareholder vote.

Trustee

Someone who looks after assets on behalf of the beneficiaries.

u

UCITS

Undertaking for Collective Investments in Transferable Securities
European Union term for a mutual fund that can be marketed in every EU country.

Uncovered option

The buy or sale of an option without a position in the underlying futures contract – also known as a naked option.

Underperformance

Failure of an investment to grow as fast as its relevant stockmarket index – an all too common phenomenon.

Underweight

If a company represents 10% of the stockmarket by market capitalisation, but only 5% of your portfolio, you would be described as being underweight in that stock.

Underwriter

When a company floats on the stockmarket the flotation is normally underwritten by a major investment bank that concurs to buy the shares on offer should there prove to be tiny demand for the shares from investors. Underwriters get paid handsomely for taking on this risk. In general, an underwriter is anyone who accepts liability should something go wrong, in return for a fee.

Unit Trust

Unitisation

The process of turning an investment bank into a unit trust by ‘unitising’ the shares.

Unlisted investments

Investment in companies which have no stockmarket listing. Also called unquoted investments. Some investment trusts and other collective funds specialise in spotting good unlisted companies to invest in. These are usually small, fast-growing companies. The other way of investing in unlisted companies is through Enterprise Investment Schemes and Venture Capital Trusts both of which offer tax rebates to encourage investment.

v

Valuation

The attempt to assess a fair value for a security.

VC

Venture Capital
The business of making high risk investments in small and young companies, often with a high technology bias, which may already be trading or may be at the planning stage. Some VC companies take an active interest in promoting, managing and advising the companies they invest in. Others just supply the cash in return for a stake in the business and stand back.

VCT

Essentially an investment trust which invests in small unquoted companies with assets of less than £15 million, including AiM and unlisted companies, and which is designed to attract risk capital from higher rate taxpayers by giving them tax concessions. VCTs are quoted on the London Stock Exchange and as with investment trusts, their share price may trade at a discount to net asset value.
They provide 3 types of tax benefit:
- 40% capital gains tax deferral, provided the shares are held for a period of no less than 3 years.
- 20% income tax relief on the amount of the original investment
- All dividends are tax free and all gains on disposal after 3 years tax exempt. But when the shares are sold, the original capital gains tax liability will be re-triggered.
VCTs are only allowed to invest in companies under a certain size, and there is a limit on how much they can invest in any one company. The idea is that they must apply their funds to genuinely risky entrepreneurial ventures. There has been some criticism, that while they are tax efficient there has been a problem with a secondary market, ie selling them when they mature.

Volatility

How quickly the price of security rises and falls over time. A highly volatile share can be risky for short-term investors who stand a greater chance of buying at a peak and selling in a trough at a loss.

Volume

The number of shares purchased and sold on a stock exchange. A useful measure of the popularity of a share on a given day.

Voting right

The right of a shareholder to take part in a company’s decision-making process. Most common shares entitle the holder to one vote each. The shareholder can delegate someone to vote on his or her behalf.

w

Wall Street

Famous home of the New York Stock Exchange and other major financial institutions. Also an Oliver Stone film starring a greasy-haired Michael Douglas.

Warrant gearing

The ratio of share price to warrant price, when added to the exercise price, exceeds the underlying share price.

Warrant premium

The percentage by which the current warrant price, when added to the exercise price, exceeds the underlying share price into which the warrant can be exercised.

Warrants

Risky investments that give the holder the right, but not the obligation, to buy investment trust shares at a pre-determined price within a set period. Buying the shares is called exercising the warrant. Warrant holders don’t enjoy the same rights that ordinary shareholders have.

Wedge

A pattern in which two converging lines connect a group of price peaks and troughs.

Whipsaw

Losing money on both sides of a price swing. Never fun.

Whole of life insurance

Life insurance that last until you die, unlike term assurance which lasts only for a fixed period.

Winding-up

Ending a company by selling off its assets, paying off creditors and distributing the remaining assets to shareholders. This is also called Liquidation.

With profits policies

Investment-based insurance policies that attempt to smooth out the usual ups and downs associated with stockmarket investments through the addition of annual bonuses. Once granted, these bonuses are guaranteed. There is usually a ‘terminal bonus’ paid out at the end of a policies life as well, so these are products that really need to be kept until maturity to enjoy the full benefit.

x

xd

Short for ‘ex dividend’ which means that when you buy the share you won’t get the next dividend payment because it has already been allocated. Ex is Latin for ‘without’.

y

Yankee bond

A bond issued in the United States by a foreign corporation.

Yield

The annual dividend or income on an investment expressed as a percentage of the buy price.

z

Zero dividend preference share

zeroes
A low-risk share that provides a fixed capital return when the investment trust is wound up. They do not provide any income, so there is no income tax to pay.

ZigZag

In a bull market, an Elliott three-wave pattern that subdivides into a 5-3-5 pattern with the top of wave B noticeably lower than the begin of wave A. In a bear market, this pattern will be inverted.

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Submited at Tuesday, May 17th, 2011 at 10:00 pm on Uncategorized by Alina
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