• Jargon buster

    Investment speak made easy

    At AXA Self Investor we try to minimise the jargon, but to help you understand some of the more common terms found in financial services - we have developed a jargon buster for you.

    A
    Active funds
    A fund that is actively managed by a fund manager. This means the fund manager will manage the fund in a way that tries to outperform a pre-determined benchmark index.
    Accumulation units
    The investments held by a fund will usually generate an income in the form of dividends, interest etc. Accumulation units do not pay out this income and instead keep this within the fund.
    AER (Annual Equivalent Rate)
    This is the rate of interest you receive on cash balances which is shown as an annual percentage, e.g. 1% AER.
    Assets
    An asset is something that you invest in such as an individual share. Investment funds are made up of a large number of individual assets.
    Asset allocation
    What this means is, rather than investing all your money in one place, you invest in a mix of different assets, so that potential losses in one asset class may be offset by potential gains in another. For example, you can diversify an investment across a range of different asset classes such as equities, fixed interest and property.
    Asset class
    This refers to a group of different types of investments that funds invest in, such as equities, fixed interest and property.
    B
    Benchmark index
    This will show you how we compare similar funds and give you a point of reference for evaluating a fund's performance. This information can be found in the Fund factsheet and Key Investor Information Document (KIID).
    Bid price
    The price at which you can sell units or shares.
    Bid offer spread
    Some collective investments quote two dealing prices, an offer price and bid price. The offer price is the price at which you buy units or shares and the bid price is the price at which you will sell units or shares. The difference between these prices is known as the bid offer spread.
    Blended funds
    Blended funds combine a variety of investment styles (e.g. passive and active) in managing assets across a broad range of sectors and markets.
    Bonds
    Bonds are a type of loan which typically pay a fixed amount of interest (known as a coupon) over a set period of time (the duration). Bonds issued by companies are known as corporate bonds, whilst bonds issued by governments are known as government bonds or Gilts.
    C
    Capital Gains Tax
    Often abbreviated as CGT, this is the tax on any gain or profit you make when buying and selling investments.
    Cash
    Cash can refer to readily accessible money personally held within a savings or Current Account. Funds may also invest in cash and near cash assets which might include Certificates of Deposit, Loan Notes and Treasuries.
    Cash Account
    The cash account is automatically opened when you open a Stock and Shares ISA or a Trading Account. You can use this cash account to hold money until you're ready to invest in one of these products, or to move money from your Trading Account in to your Stocks and Shares ISA.
    Cash ISA
    A savings account which allows you to save without paying income tax on the interest you receive.
    Closed ended funds
    A collective investment fund that has a fixed number of units or shares in issue - unlike open ended funds, closed ended funds do not have to issue or buy back shares on a continuous basis and the price will be influenced by supply and demand.
    Collective investment
    A generic term for investment funds with many investors, for example unit trusts and investment trusts. These are managed by professional managers. By pooling their investments, investors can gain exposure to a wide number of underlying investments. At the same time, there is the opportunity to spread risk.
    Commodities
    A commodity is a physical material. They can be either 'hard' commodities such as gold, silver or copper, or 'soft' such as coffee and cereals. The price of a commodity is subject to supply and demand.
    Corporate bonds
    Corporate bonds are issued by companies to raise money. These are similar to government bonds (see Gilts) but often carry more risk.
    Coupon
    The interest payment from a bond.
    D
    Diversification
    Whilst there are no guarantees, this means spreading risk by investing across different assets classes so that potential losses in one asset class may be offset by potential gains in another. For example, an investment could be diversified across equities, fixed interest or property.
    Dividends
    A dividend represents a share of the profits that a shareholder receives in return for investing in a company's shares. These pay outs are typically made in cash - called cash dividends - and are normally paid twice a year.
    E
    Equities
    This asset class is also known as stocks or shares. This is where you buy a stake in a company and the value of this stake will be influenced by a number of factors such as the profits that the company makes, how the company is perceived to be performing and whether the company may increase in value in the future.
    F
    Fixed interest
    This asset class refers to investments, usually bonds, which pay out a fixed amount or fixed rate of interest.
    FTSE 100
    Is an index made up of the 100 largest companies listed on the London Stock Exchange (LSE).
    Fund / Investment fund
    An investment fund is a form of collective investment, managed by a fund manager. The money you invest is combined with the money from other investors and used to buy a range of assets such as fixed interest, property and equities.
    Fund of funds
    An investment fund which invests in other funds. This is also known as a multi-manager investment.
    Fund manager
    A fund manager's job is to make the decisions that will help a fund to meet its aims and objectives. That means they will be responsible for both the day-to-day decisions about the fund, such as responding to market changes, and the long-term decisions, such as how and where the fund invests. This is one of the services you pay for through common fund charges.
    G
    Gilts
    Gilts (or Gilt Edged Securities) are bonds issued by the UK government, usually paying a fixed interest rate for a predetermined length of time.
    Gross interest
    This is the interest payable on your cash before income tax is deducted.
    Growth funds
    A fund that aims to increase in value over time.
    I
    Income funds
    A fund that aims to make regular payments through dividends or interest (like an income).
    Income reinvested
    If you are holding income units then you can choose to use any distribution payments to purchase additional units rather than taking it as cash.
    Income units
    Most investment funds offer both income units and accumulation units. With income units, any income generated by the fund is distributed to the fund’s investors on specific dates (often monthly or quarterly).
    Index / Stock market
    An index measures the change in value of a group of stocks or company shares which together represent an entire market or market sector. Examples include the FTSE 100 which reflects the changing value of the UK's biggest 100 companies, or the S&P 500 which measures the change in value of 500 of the largest companies listed on North American stock markets.
    Inflation
    Inflation is a measure of the increasing cost of living. Prices will usually rise as result of the increased demand for goods and services, meaning that in future your money may not have the same buying power as it currently does.
    Investment trust
    Investment trusts are collective investments which are structured as public companies, listed on the stock exchange and have fixed share capital. Unlike unit trusts or OEICs, the share price fluctuates with the level of demand rather than being directly linked to the value of the underlying assets.
    K
    Key Investor Information Document (KIID)
    This document sets out the essential information and key facts about individual funds, to help you assess whether a particular investment fund meets your needs. The aim is to enable you to make comparisons between different funds and allow you to make informed decisions when choosing an investment.
    M
    Multi asset
    Multi asset funds will invest in a broad range of assets and markets. They typically invest in bonds, property and money market - both here and overseas.
    Money market
    Placing investors' money with banks, building societies and a mixture of financial investments. Sometimes known as 'near cash' - this can include Certificates of Deposits, Floating Rate Notes and Treasury Bills.
    N
    Net interest
    This is the interest payable on your cash after income tax is deducted.
    O
    OEIC (Open ended investment company)
    An OEIC is a collective investment which is structured as a company and therefore operates under corporate law. This is very similar to a unit trust, which operates under trust law but is otherwise comparable from an investor's perspective.
    Open ended fund
    Most collective investments are open ended funds. The number of shares or units can be varied on a daily basis depending on supply and demand. The unit or share price will be directly linked to the value of the underlying investments within the fund.
    P
    Passive funds
    Unlike active funds, passive funds aim to track or mirror the overall performance of a particular sector or index rather than trying to outperform the market. Typical examples include funds that track the FTSE 100 (investing in the UK's biggest 100 companies) or the FTSE ALL Share, which reflects the performance of the UK stock market as a whole.
    Property
    This asset class refers to real estate including land and buildings that can be bought and sold.
    R
    Return
    A return is what you've earned on an investment during a certain time period.
    S
    Shares (equities)
    A company listed on a stock exchange will be divided into shares, and the price of these shares will fluctuate depending on a number of market forces and factors. Shares may also refer to the investments which you purchase in an OEIC.
    Single asset
    Single asset funds will mainly invest in either equities, fixed interest - corporate and government bonds, property, money market or commodities. Investment may be based in a single market, such as UK equity fund that only invests in the shares of UK companies, or across a range of geographic markets such as a global equity fund.
    Single priced fund
    A fund with the same price for buying and selling units or shares.
    Stocks and Shares ISA
    A Stocks and Shares ISA allows you to invest in stock market investments and investment funds, with no further liability to income tax or Capital Gains Tax on any returns you might receive.
    T
    Tax advantages / Tax treatments
    The key purpose of putting your money in an ISA is that it offers a number of tax advantages. You don't have to declare your ISA investments to HM Revenue and Customs (HMRC) and any gains you make are exempt from Capital Gains Tax. You'll also pay no income tax on any returns you receive from your ISA - which is why you'll often hear ISAs described as being 'tax efficient'.
    Trading Account
    Also known as a General investment Account, a Trading Account allows you to invest in our range of funds. Unlike a Stocks and Shares ISA there is no annual limit to the amount you can invest, however a Trading Account does not offer any tax benefits.
    U
    Underlying assets
    This is a collective term used to refer to where the assets are invested in a fund.
    Units
    A collective investment such as a unit trust is divided into equal parts called units. These units are then bought and sold by investors in a fund. The number of units held is multiplied by the unit price to determine the value of the investors' holding in the fund.
    Unit price
    This is the price of a single unit in a fund.
    Unit trust
    A unit trust is a form of collective investment and is set up under the investment guidelines which pools investors' money to invest in different companies.
    W
    Wrapper
    A collection of different types of investments held together in one place.