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Glossary of Investment Terms (R)

The following are useful investment terms beginning with ‘R’:

A sharp rise following a decline in the price of an investment.

Rate of Return
The yield earned in relation to a capital amount invested.

Real Estate
Real Estate takes into account land, buildings or housing, and is distinct from personal property (e.g. cars) to distinguish itself from Property Trusts.

Real Interest Rate
The nominal interest rate after deducting the impact of inflation.

To sell an asset.

Real Return
The level of return from an investment, after taking into account the impact of inflation.

The return of a proportion of a payment which effectively reduces the total outlay or obligation.

Rebate-only Personal Pension
A Personal Pension which is made up solely of National Insurance rebates, payable by the Inland
Revenue, where the member has elected to contract out of SERPS or the State Second Pension. Pension rules and regulations change regularly and you should take professional advice before making any decisions.

Redemption Fee
A fee charged for the redemption (i.e. withdrawal/cashing in) of units in a unit trust. Also known as Back-end Load.

Redemption Penalties
A penalty payable when moving between service providers - often associated with fixed rate, capped or discounted mortgages.

Redemption Yield
The Redemption Yield shows what the total return on a bond would be if held to its maturity date. It reflects not only the interest payments a bondholder will receive, but also the gain/loss they will make on their original capital investment.

Reduced Allocation
Method of recouping initial expenses when setting up a unit-linked policy, whereby only a proportion of the investment is allocated to the policy for the first few years.

When Governments ‘reflate’, additional money is printed, adding to the supply of money in circulation - can be referred to as Quantitative Easing.

Repurchase Agreement (Repo)
An agreement under which authorised dealers in the short-term money market transfer securities to the Reserve Bank in exchange for cash, on the basis that the transaction will be reversed at a later date on the agreed terms. The transaction can also occur in the opposite fashion (reverse repo).

The proportion of a company's profit not distributed to shareholders as dividends; an account kept aside by the trustees of a pension fund to cover declines in asset values or investment returns.

Retail Price Index (known as RPI)
A monthly indication of the average price changes to a particular 'basket' of consumer goods, and used as a general indicator of price inflation.

Retained Benefits
Pension benefits earned in previous employment that are taken into account when determining Inland Revenue limits for a member of an Occupational Pension Scheme.

Retirement Annuity
An annuity contract offered by insurance companies for individuals not in pensionable employment, or the self employed.

The amount of money in income and capital growth received annually from an investment, usually expressed as a percentage.

In its simplest sense, risk is the variability of returns. Investments with greater inherent risk must provide higher expected yields if investors are to be attracted to them. Risk can take any forms, but a major one is valuation risk - paying too much for an asset.

Risk-Free Asset
An investment with no chance of default, and a known or certain rate of return.

Risk Management
The monitoring and controlling of various risk factors in an investment portfolio with the aim of minimising volatility of investment returns.

Risk Premium
The extra yield over the risk free rate demanded by investors to compensate them for holding a riskier asset. This is an extremely important concept in relation to setting a long-term asset mix.

Risk Return
Risk is a measure of the variability of return. Return, in financial terms, represents the profit - in the form of income and capital appreciation on an investment. The Risk / Return trade off is where an investor is willing to accept greater risk in order to pursue greater returns.

Roll-over Relief
A tax concession, which allows investors and businesses to defer the payment of Capital Gains Tax. CGT rules change on a regular basis and professional financial advice should always be taken before you make any changes.

Roll-up Funds
An Offshore Investment fund that does not distribute its dividends. An important definition for classification and taxation purposes.

Running Yield
Equal to the annual income payable on a bond as a percentage of its current market price.

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