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Glossary Of Investment Terms (A)

The following are useful investment terms beginning with ‘A’

ABI (Association of British Insures)
As the name suggests, the ABI is an association which represents British insurers who are one of the largest investors in stocks, shares and other investment assets in the UK. The ABI is a very influential association and one which carries an awful lot of sway in the UK.

Accumulation Date
The date when income will be paid by a Unit Trust. This income is reinvested back into the Unit Trust, increasing the value of the units instead of being paid out to the investor.

Accumulation Units
These units reinvest the income a Unit Trust earns, instead of paying it out to investors as an income. Unit holders or Policyholders get the benefit through the increased value of the fund.

Active Management
A traditional investment approach where fund managers actively build and change a portfolio of assets (e.g. stocks and shares) in order to take advantage of the best opportunities at any given time.

Active Market
A market in which the volume of securities traded is heavy or above normal.

Active Position
The difference between the actual level of investment made in a particular asset class and the benchmark level of investment in that asset class.

A professional person qualified to make calculations and valuations in respect of pension funds, insurance funds or other forms of investment. Actuaries apply mathematical, statistical, economic and financial analysis with a particular emphasis on longer-term financial assessment of risk, or uncertain financial outcomes.

Aggressive portfolio
A portfolio which is designed to provide above-average returns by taking above-average risk. Typically, such portfolios have a relatively high exposure to equity investments.

Allocation Rate
The percentage of a customer's money that is actually invested in the policy after any initial charges have been taken out.

Alternative Investment Market (AIM)
A list of young and growing companies that do not meet the requirements of the London Stock Exchange listing.

American Option
An option which may be exercised any time between its initiation and expiration dates (inclusive).

The expression of a rate of return over periods other than a year converted to annual terms. For example, if an investment earned minus 2% in year one and 23.5% in year two, the compound annual return would be 10%.

Annual Management Charge (AMC)
A charge made each year by managers of Unit Trusts, OEICs or Investment Trusts to cover the expenses associated with running the fund. Although it is expressed in annual percentage figures it is usually split into 12 monthly amounts and taken from the fund monthly.

An arrangement under which periodic payments are made to a person in return for the investment of a lump sum, usually for the purpose of providing retirement income.

Annuity Rate
The percentage rate used to calculate the amount of income payable, following investment of a lump sum in an Annuity.

The process of taking advantage of prices which are out of line in different markets - e.g. the purchase of an asset for a low price in one market and its sale for a higher price in another market.

Asset Allocation
The percentage split of an investment portfolio among different asset classes (shares, bonds, property, cash etc).

Asset Classes
The different types of assets available to investors. For example, equities, cash, fixed interest or property.

Items that are owned by an individual such as property and investments etc. Money in a bank or building society account is known as liquid assets.

The transfer of ownership to another party.

At a Premium
A security is said to be selling at a premium when its market price is above its par value.

Attribution Analysis
The process by which the return on an investment portfolio is attributed to its manager's investment decisions. Typically, the decisions in respect of which performance is attributed are stock selection, asset allocation and market timing.

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