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Glossary Of Investment Terms (E)

The following are useful investment terms beginning with ‘E’

EAFE Index
Abbreviation for Europe, Australia and Far East Index - a stock market index, often used as an ex-United States world equity benchmark by United States investors.

Early Retirement
When a member starts to take his/her pension before the normal retirement date of the scheme.
Pension regulations change on a regular basis and it is vital that you seek professional advice before taking any action.

Earnings Per Share (EPS)
A measure of a company's profitability, calculated by dividing the company's net operating profit after tax divided by the number of shares in issue.

Earnings Yield
A ratio calculated by dividing a company's earnings per share by its current share price - expressed as a percentage.

Efficient Frontier Modelling
An investment portfolio is said to reside on the "efficient frontier" if it is expected to produce returns greater than other portfolios (i.e. with different asset mixes) of the same or lesser risk, where risk is defined as the standard deviation of the returns.

Electronic Trade Confirmation System (ETC)
The generic term for any message or interface service that enables investors, brokers and custodians to electronically exchange confirmations that trade settlements have occurred.

Emerging Markets
So called immature financial markets in countries with developing economies, where industrialisation has commenced but is relatively under-developed. These markets provide potentially high returns but are subject to high risk and volatility.

Endowment Assurance
A life assurance policy that pays out a lump sum after a specific period of time, or upon the death of the policyholder. Considered to be a long term investment.

An alternative name for shares.

The net value of an asset where all liabilities have been deducted - e.g. the value of a property after deducting an outstanding mortgage.

Equity Investment Funds
An investment fund that invests in shares in UK or overseas companies.

Equity Risk Premium
The difference between the forecast rate of return from a risk-free investment (such as government bonds) and that available from a riskier investment such as shares. Otherwise known as the risk/reward ratio.

Common in the pensions industry, where a pension in payment is automatically increased at regular intervals by a fixed percentage rate (or some by the increase in an index such as the Retail Price Index).

Ethical Investment
An investment approach which takes into account considerations other than solely the financial return potential of particular investments. An ethical portfolio might, for example, avoid investing in alcohol, tobacco or certain parts of the world.

Ex gratia
A payment made that is not legally necessary under the terms of a contract - often known as a discretionary payment.

Excess Return
The return achieved by a security over and above that obtained from a risk-free asset (such as a short-term government bond) held over the same period.

Exchange Rate
The rate at which one currency can be exchanged into another currency.

Exchange Rate Risk
The risk that the value of an investment may be diminished by movements in the exchange rate on a foreign currency. For example, you could make a profit on an investment in local currency terms, but lose out when converting back to your domestic currency.

Individual(s) or Company(s) who are appointed in a will to deal with the wishes of the deceased, in administering their estate.

External Manager
An organisation (e.g. an investment management company) engaged to manage and invest funds on behalf of a client. Often used when particular investment expertise in a sector or country are not available "in house".

This is the extension of a company's intranet out onto the Internet, for example, to allow selected customers, suppliers and mobile workers to access the company's private data and applications via the World Wide Web - in effect a private closed network with limited access.

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