Annuity – A set amount of income paid to you every month/ year in retirement.
Assets – An item an individual owns.
Asset Class – Investments that fall under the same category (Shares, Bonds, Property etc. are all asset classes and things people can own).
Auto-Enrolment – On completion of a probationary period, you will be automatically enrolled onto your company’s pension scheme. The conditions differ company to company to it’s worth checking the details of your scheme with your HR department.
Bear Market – When a particular financial market experiences significant falls – typically 20% – from recent highs.
Bonds – Often considered an I.O.U, Bonds are an agreement between the borrower and the lender in order to provide a fixed income for the lender. Bonds can be issued by companies and governments.
Broker – A company that acts as the ‘middle man’ between the investor and the company/ fund manager you’re looking to buy the shares of.
Bull Market – When a particular market experiences significant rises – typically 20% – from recent lows.
Capital Gains – When you sell an asset for more than the value you purchased it for. If these are outside of an ISA, they can be subject to tax.
Cash Back – A benefit of some credit and debit cards, as well as some plug-in sites online – that give you a percentage of the money you spend using those cards back.
Compound Interest – An investment term when your interest earns you interest. This doesn’t happen on standard savings accounts.
Credit – An amount an individual can borrow for a short or long period of time.
Defined Benefit – A type of pension plan where the benefits upon receivership are defined by length of employment and salary.
Defined Contribution – A type of pension plan where the amount received in retirement is defined by how much has been paid in by the employee and employer.
Diversification – The inclusion of more than one type of asset/ share/ fund within a portfolio.
Dividend – A percentage paid to an investor of the amount of money they have invested with a company, much like how a bank will pay savers interest on their savings. Not all companies offer this and the rate can go up or down.
Drawdown – A way to take money out of your pension once you hit retirement age. You take out small/ medium sized amounts from your pot while keeping the rest invested.
ESG – Environmental, social and governance. This financial approach prioritises how savings/ investments have an impact on the wider world.
Financial Markets – The name given to a place where securities are bought and sold.
Final Salary – Another phrase to describe ‘Defined Benefit‘ (see above).
FinTech – ‘Financial Technology’: The term used to refer to new technologies in the financial sector.
Fiscal Year – A one year period companies and governments use to report on finances and budgets.
FTSE – (Financial Time Stock Exchange) The acronym given to the U.K stock markets: 100, 250, 350, All-Share, AIM etc.
Funds – An accumulation of a number of investor’s capital that will then be invested in a series of assets (shares, bonds, property etc.). When you put money into a fund, you buy ‘units’; you don’t have to buy a whole unit, you can buy part of one.
(Accumulation) – Earnings earned from these funds are reinvested automatically to purchase more units.
(Income) – Earnings earned from these funds are paid out to the investor as a form of income.
Gilts – Another way to describe bonds (see above) that are specific to the U.K and a number of other Commonwealth countries. These generally have a lower risk but will also generally have a lower rate of return.
Holdings – A name given to the contents within your investment portfolio (see below).
Income Tax – Money taken from your earnings once you earn over £12,500 a year.
Index – A list of securities that make up a particular financial market (S&P500, FTSE 100 etc.).
Inflation – The increase in the price level of the RPI (see below) over a period of time.
Insurance – A guarantee given by a company or government to provide compensation if a set criteria is met.
Interest – The cost of borrowing money either in the form of a loan or savings.
ISA – A type of savings account that is free from tax as long as you do not exceed depositing £20,000 a year per type of ISA (there are 6 types: Cash, Stock and Shares, Lifetime, Help to Buy, Innovative Finance and Junior).
Large-Cap – Any company with a market capitalisation (see below) value of over $10billion.
Liquidity – The ability to quickly convert an asset to cash.
Market Capitalisation – The value of a corporation calculated by multiplying the value of the stock price by the number of outstanding stocks.
Mid-Cap – Any company with a market capitalisation (see above) between $2billion and $10billion.
National Insurance Tax – A type of tax taken from your pay as long as you’re over 16 and earning over £183 a week. This contributes to a number of different benefits such as, state pension, jobseeker’s allowance, maternity allowance, bereavement support and a few others.
Overdraft – A type of credit (see above) given to an individual, company or institution when the balance on an account reaches zero.
PAYE – ‘Pay As You Earn’: An employee who has their Income Tax and National Insurance Tax taken out of the pay cheque automatically at source.
Peer-to-Peer Lending – A way for individuals to obtain a loan directly from an individual/ group of individuals without having to go through a bank. This is also used a type of savings vehicle by the individuals lending their money to loanees.
Pension – A savings vehicle for individuals to utilise once they retire. A private pension can’t be touched until you’re 55 and the state pension until you’re 65 (this may change).
Personal Tax Allowance – You don’t pay tax on the first £12,500 you earn over a tax year unless you earn over £125,000.
Platform – An online site where you can buy shares, funds and bonds.
Portfolio – A collection of assets (see above) held by an individual, group or company.
Pound Cost Averaging – A method of investing whereby you invest small amounts at regular intervals, rather than investing all your money all at once.
Premium Bonds – A savings vehicle that allows you to save up to £50,000 and each month your money is entered into a prize draw to win a lump sum between £25 and £1million. You can withdraw your money at any time and do not lose any money.
Publicly Listed – Companies listed on one of the world’s stock exchanges that investor’s can buy shares of.
Recession – A business cycle that reports two economic quarters of negative economic growth (U.K definition).
RPI – ‘Retail Price Index’: A measure of inflation (see above) that calculates the cost of living through the price of an average basket of essential goods.
S&P 500 – An index of the top 500 publicly listed companies in the U.S.
Salary Sacrifice – Money taken from PAYE employees, before tax is taken out, and used put towards the employees pension.
Sector – A part of the economy:
(Private) – that is run by individuals and for-profit companies and not by the state.
(Public) – that is run by the state.
Security – A tradable financial asset (see above).
Shareholder – The owner of a share.
Shares – A type of financial security offered by companies in exchange for funding.
SIPP – ‘Self Invested Personal Pension’: A pension vehicle used primarily by self-employed people who don’t receive a company pension, but can be utilised by anyone if necessary.
Small-Cap – Any company with a market capitalisation (see above) between $300million and $2billion.
SPAC – A ‘blank cheque company’. Sponsors will pull a group of investor money together with a view to acquire a company that isn’t currently publicly traded.
Trust Fund – A legal agreement that holds and manages assets on behalf of an individual or group.
Valuation – A process of detraining the worth of an asset or company.
YTD – ‘Year To Date’: the time between the beginning of the current calendar or fiscal year (see above) and the current date.