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Glossary of Investment Terms (I)

The following are useful investment terms beginning with ‘I’

ICVC (Investment Company with Variable Capital)
This is the generic term for an OEIC or similar investment vehicle where investors pool their contributions with those of other people, to create a portfolio of assets.

IMA sectors
Grouping of funds for performance measurement by the Investment Management Association.

Money received by an individual as a salary, or from investments.

Income Drawdown
Enables people with certain types of pension plans to take income directly from their pension fund before age 75 (at age 75 the money must be used to purchase a pension annuity). Please note that pension regulations can change on a regular basis and you should seek professional advice before any action is taken.

Income Portfolio
A portfolio consisting of securities whose principal attractiveness lies in the steady income they provide.

Income Tax
Tax paid by individuals on income received over a certain threshold. The amount paid will depend on the amount earned and unearned during a tax year period. Tax bands can and do change on a regular basis.

Indemnity Insurance
An insurance designed to compensate a policy holder for any loss suffered.

An index is a measurement tool which tracks the weighted share price movement of a number of companies traded on stock markets around the world. Examples of stock market indices are the FTSE 100, FTSE All-Share, Nikkei and Dow Jones.

1. Making an adjustment to allow for the effects inflation can have on money, used to reduce the amount payable in Capital Gains Tax.

Index Fund
A portfolio of securities structured in such a way that its value will closely follow a nominated market index, e.g. FTSE100, etc. More commonly known as a tracker fund.

Index Linked
The value of an investment which is linked to a particular index, whether this be a particular stock market index or for example the rate of inflation (as used with Index Linked Gilts).

Index Linked Gilts
A UK government gilt whose redemption value and interest payments are linked to inflation (as measured by the Retail Prices Index).

An increase in the level of prices of goods and services in the economy. It is typically measured by examining a basket of goods and services which the average member of the population would purchase.

Inheritance Tax (IHT)
IHT is a tax that your estate pays at a flat rate of 40% on assets over a certain limit (the IHT threshold) that you leave on your death. The Inheritance tax threshold for the 2008/2009 tax year is £312,000.

Referring to an activity which is conducted within an organisation rather than contracted out to an external party.

Initial Charge
A charge made by an investment provider when you first take out an investment, often referred to as a set-up fee.

Initial Public Offering (IPO)
The first sale of shares of a company to the public.

Insider Trading
The illegal practice of trading in securities on the basis of "inside" or secret information which is not available to the public at large.

Insurance Premium Tax
A tax levied on most non-life insurance policies.

A person covered by an insurance policy.

A company that offers an insurance policy.

Inter-spouse Transfers
A tax-free transfer between husband and wife under Inheritance Tax rules.

The return earned on funds which have been loaned or invested (i.e. the amount a borrower pays to a lender for the use of his/her money).

Interest Rate Risk
The risk borne by fixed interest securities, and by borrowers with floating rate loans, when interest rates fluctuate. When interest rates rise, the market value of fixed interest securities declines and vice versa.

Interest Rate Sensitivity
The degree of movement in the price of a security, usually that of a bond, resulting from moves in interest rates.

International Monetary Fund (IMF)
An international organisation founded in 1947 to promote maintenance of equilibrium in the balance of payments among the various nations of the world.

When someone dies without a valid will.

An asset acquired for the purpose of producing income and/or capital gains for its owner.

Investment Analyst
A financial expert trained to analyse the activities and future prospects and earnings of companies and securities for the purpose of investment.

Investment Company
This is a company whose main business consists of specific activities relating to investments. Examples of Investment Companies include stockbrokers and investment fund managers.

Investment Grade Bonds
Bonds which have a credit rating which is sufficient for them to be purchased by most institutional investors.

Investment Management Agreement
A contractual agreement between an investor and an investment manager which confirms the terms and conditions applying to the management of the stated assets.

Investment Management Regulatory Agreement (IMRO)
A regulatory organisation for the UK investment management industry.

Investment Philosophy
The set of principles or systems used by investors to govern the way they manage portfolios. Sometimes confused with investment style, which tends more to be associated with the level of risk in the portfolio.

Investment Trust
A company that invests in shares of other companies. When investing in an Investment Trust, customers actually own shares in the Investment Trust rather than owning the shares it invests in. Investment Trusts are closed ended investment vehicles where the number of share in circulation remains constant.

ISA (Individual Savings Account)
A savings vehicle that allows customers to invest in equities, life assurance policies or save in cash without having to pay tax on the returns gained from them.

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