Glossary Of Investment Terms (A)
ABI
As the name suggests, the Association of British Insurers (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.
Actuary
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,
Alpha
Alpha is a coefficient that measures the risk-adjusted performance, or the excess return, considering the risk due to the specific fund and its underlying investments, rather than the overall market. A high alpha indicates that the fund has performed better than would be predicted given its beta (volatility).
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).
Annual Compound Return
The annual rate of return earned on an investment which includes any growth, for example:
1. Investment of £100 grows by 5% in the first year
2. You then have £105 at the start of year 2, this then grows by a further 3%, so at the beginning of year 3 the investment is worth £108.15. This is the effect of compounding.
3. So a growth of £8.15 on £100 over 2 years is actually an annual compound return of 4% per year, not 8.15% divided by 2.
Annual Exemption (for Capital Gains Tax)
Each tax-paying individual in the UK is entitled to an annual exemption of £9,600 on capital gains for the 2008/2009 tax year. This means that they can make this level of gains (on for instance share sales) without paying Capital Gains Tax.
Annualising
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.
Annuity
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.
Arbitrage
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.
Assets
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.
Assignment
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.
Note : It is vital to take investment advice before carrying out any transactions.
Share this..
Related stories
UK government set to issue "death tax"
As we covered in one of our earlier articles, the UK government is set to push through a so-called "death tax" which will see a one-off levy charged against all estates in the UK. While the proposed levy is being put forward as a way to spread the ever increasing cost of home care for the elderly it is being seen by many people as an attack on the rich. There is no doubt that a higher proportion o...
Read MoreBLT 'greed' forces FTBs out
Paul Diggory, vice president of the Chartered Institute of Housing, has said that buy to let landlords are forcing first time buyers out of the housing market by buying up quantities of stock.Speaking on BBC Radio 4's Money Box programme, Paul Diggory said that the government needs to tackle the problem of the increasing number of landlords who purchase properties on buy to let mortgages only to l...
Read MoreHave the Alliance & Leicester started a battle in the banking sector?
It has been revealed that the Alliance & Leicester, the popular UK bank, appears to have started something of a free for all in the current account market. The company is offering new account holders a £100 cash back payment (which would be paid within four months of opening an account), 6.5% interest and a 0% overdraft (within an agreed limit) for the first 12 months. This offer relates to the c...
Read MoreUK government attempt to play down potential for tax cuts
The UK government has tonight attempted to play down talk of £15 billion tax cuts although the potential for a move in this area has not been ruled out completely. Yet again the markets will be confused as to the future direction of the government and its economic policy, a throwback to the housing sector and the on-off on-off stamp duty reduction programme.
As we have covered on a...
National Express opens its books to CVC
National Express has today opened its books to the CVC consortium looking to acquire the operation for a price in the region of five pounds a share. While there has been no official takeover offer as yet, those close to the situation believe the opening of the company's books is the final precursor to a bid which is expected to value the company at around £765 million. The CVC consortium now has...
Read More