Investing Glossary

Brush up on investment speak.

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Active fund

The fund’s investment decisions are made by an individual fund manager or team, which aims to outperform stock market indices by carefully choosing profitable stocks.


Something with the ability to generate income or be valuable, such as real estate.


Balance sheet

Part of a company’s annual report and accounts. It lists everything the company owns and owes.

Basis point

Also known as a pip, this is one hundredth of one per cent (0.01%). When dealing with sums of several millions, even the smallest rises or decreases in interest rates can have a significant impact.

Bear market

Stock market conditions where share prices are steadily declining over time. A ‘bear’ market is the opposite of a ‘bull’ market.

Bid/offer spread

If you want to buy an investment, you pay the offer price. If you want to sell, you receive the (lower) bid price. The difference between the two is known as the spread.


Loans to the government or businesses with a low to medium risk and a set interest rate.



The sum of money you put into any kind of savings or investment instrument.

Capital gains tax (CGT)

If you sell investments like stocks or real estate for more than you paid for them, you have made a “capital gain.” Gains up to a particular amount in a given tax year are exempt from taxation.


DAX 30

The index of the biggest 30 companies listed on the Frankfurt Stock Exchange in Germany.


The income from a share investment, usually paid to shareholders twice a year.

Dividend yield

The dividend per share divided by the current share price, expressed as a percentage.

Dow Jones Industrial Average

The oldest stock market index in the US, measuring the performance of 30 blue-chip companies.


EPS (Earnings per Share)

EPS indicates how much money a company makes for each share of its stock. The figure is reached by dividing pre-tax profits by the number of shares in issue.


A common term to describe stocks or shares.


An exchange traded fund (ETF) is a type of security that involves a collection of securities—such as stocks—that often tracks an underlying index, although they can invest in any number of industry sectors or use various strategies. ETFs are in many ways similar to mutual funds; however, they are listed on exchanges and ETF shares trade throughout the day just like ordinary stock.


A place where stocks and shares are bought or sold.



A collective term for top five US tech companies – Facebook, Amazon, Apple, Netflix and Alphabet (Google’s parent company).

FTSE 100

Often called ‘the Footise’, it is the main UK stock market index measuring the performance of the UK’s 100 largest companies by market capitalisation (the number of shares times the share value).


A type of derivative that is a contract to buy or sell shares or commodities in the future at a pre-agreed price. Futures are generally considered too risky for ordinary investors.


GDP (Gross Domestic Product)

A measure of the value of all goods and services produced in an economy in a year.


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.


Types of bonds, usually fixed-income or index-linked, issued by the UK Government to raise money.

Gross earnings

Earnings before income tax and other deductions are taken.


Hedge fund

An investment fund established to allow investors to transfer risk, either by offsetting it or taking an extra risk in return for expected higher returns. Hedge funds are not open to the public; only certain types of investors, such as institutions and pensions funds are deemed to have the necessary knowledge to undertake the risk.



A persistent rise in prices in an economy.

Interest rate

The charge for money borrowed, calculated as a percentage of the capital that has been loaned.


Any product in which money is spent with the aim of receiving more money back at a later date. The Financial Services Market Act 2000 defines it in terms of specified activities, which are regulated by the Act.

IPO (Initial Public Offering)

The first sale of shares from companies launching to the stock market for the first time. IPOs are used to raise capital, often by small companies to fund expansion. All money invested in newly issues shares goes straight to the company.


Junk bond

A high risk bond of below Investment Grade issued by a company or government.



Everything that a company owes.


Describes 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.

Listed company

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


Market capitalisation

Sometimes shortened to ‘market cap’, this is the value of a company, calculated by multiplying the number of shares in issue by the current price of the shares.


The specified date when a policy comes to an end and the policy benefits are paid. In the context of fixed interest investments (bonds), this means the lifetime of the bond.



The National Association of Securities Dealers Automated Quotations system is the second-largest stock exchange in the US, specialising in high-tech and internet-related companies.


This is the sum you have remaining when there is nothing else to be deducted.



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 a ‘call’ and the right to sell is called a ‘put’.


Passive fund

A style of management associated with mutual and exchange-traded funds (ETFs) where a fund’s portfolio mirrors a market index rather than being actively managed by a fund manager.


Your collection of investments, regardless of whether they are shares, bonds or funds.


The amount of a particular share, commodity or currency owned by an investor or company. Short positions are borrowed then sold, long positions are owned then sold.



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



A swift rise in the value of the stock market or of a particular share.

REIT (Real Estate Investment Trust)

A listed company that owns property, such as hotels, shopping centres and warehouses, and provides private investors with a tax-efficient income. REITs work in a similar way to mutual funds, trade on exchanges and must, by law, pass on 90% of their profits to shareholders.


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


S&P 500

Standard and Poor’s 500 index is the US equivalent of the FTSE 100, though much bigger. It is a market cap-weighted index of 500 stocks.


The term used to cover all stocks and shares.

SIPP (Self-invested Personal Pension)

A type of pension that gives the holder the freedom to choose where it is invested.


A security that represents part-ownership of a company.


The difference between the buy price (offer) and the sell price (bid).


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.


In the UK, the Treasury is the government department responsible for all financial and fiscal decisions and for the regulation of the financial services sector. It is overseen by the Chancellor of the Exchequer.



Standing for ‘Undertakings for Collective Investments in Transferable Securities’. These are collective investments which can be sold across national borders within the EU having complied with regulations on investments and administration.



The attempt to assess a fair value for a security.


How quickly the price of a share rises and falls over time. A highly volatile share can generate either large gains or large losses for short-term investors, unable or unwilling to ride out market swings.



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

Yield curve

A graph showing the relationship between short-­term and long-­term Yields for a given type of asset, usually Bonds.