Investing glossary
Here’s our investing glossary – a treasure trove of the key terms and phrases you need to know to become a confident investor.
a
- Accumulation fundA fund that reinvests any profit you make, which increases the number of units you hold in the fund over time.Learn more
- AssetAn asset is anything that holds value and which can be bought and sold freely.Learn more
b
- Base rateThe interest rate that’s set by a country’s central bank. Commercial banks can sometimes use it to determine the interest rates they offer on their savings accounts and loans - including mortgages.Learn more
- Bear marketA market where prices have been steadily declining over time, and have fallen by 20% or more from a previous market peak. Learn more
- BondThe financial world’s version of an ‘I owe you’, bonds can be issued by companies or governments. You’d invest in bonds to receive an annual interest payment, plus the initial value of the bond back when it ‘expires’.Learn more
- Bull marketA market where prices have been rising over time - and haven’t fallen by more than 20% from their most recent peak. Learn more
c
- Capital gainsThe profit you get when you sell an asset for a higher price than you paid to buy it. Quite literally, the ‘capital’ you’ve ‘gained’.Learn more
- Compound interestThe return you earn on top of your investment gains by reinvesting your profits instead of withdrawing them.Learn more
d
- DiversificationThe act of spreading your investments over a range of different assets, sectors, and geographical regions. This way, if one of these falls in value, the value of your entire portfolio won't fall with it.Learn more
- DividendThe amount of profit that a company returns to its shareholders.Learn more
e
- Earnings per shareUsed to calculate the value of each publicly traded share in a company relative to the company's earnings. Investors can use EPS to show how profitable a company is on a share-by-share basis. Learn more
f
- FTSE 100The main stock market index in the UK, the FTSE 100 tracks the performance of the 100 largest companies on the UK stock market.Learn more
h
- Hawks and dovesHawks and doves are different words that people use to categorise policymakers who shape a central bank’s monetary policy.Learn more
i
- Intrinsic valueIntrinsic value is the real or ‘true’ value of a financial asset - and it can be higher or lower than what the asset is currently being bought and sold for.Learn more
l
- LiquidityHow easy it is to buy or sell an asset. Some assets are less liquid than others, which increases their risk.Learn more
m
- Market capitalisationA company’s market value, calculated as the total number of its shares in circulation multiplied by the price to buy one share.Learn more
- Market indexA benchmark that tracks the collective performance of a group of different companies and other assets.Learn more
- Market valueThe price that a stock, fund or other financial asset is currently being bought and sold at.Learn more
p
- P/E ratioCan help you compare a company’s current stock price to its current earnings - helping you to decide whether the stock is currently over or undervalued. Learn more
- Passive investingAn investment strategy that focuses on building wealth gradually by investing in funds that track the performance of market benchmarks. These funds are called tracker funds or index funds.Learn more
- PortfolioIf you're an investor, this is the collection of investments and assets that you’re investing in.Learn more
- Pound cost averagingA way to reduce the impact of market volatility on the overall performance of your investments.Learn more
r
- RiskThe potential for loss. Usually, but not always, higher risk assets can have the potential for higher returns.Learn more
s
- S&P 500A stock market index that tracks the performance of the 500 largest companies listed on US stock exchanges.Learn more
- Share classA company’s board of directors can use share classes to grant certain rights and privileges to different shareholders, depending on the class of share they hold.Learn more
- StockStocks, also known as shares or equities, represent units of ownership in a company.Learn more
- Stock marketThe global network of stock exchanges that lets investors buy and sell shares in publicly listed companies.Learn more
t
- Tracker fundFunds, also called 'tracker funds', are financial instruments that have been set up to match or 'track' the price of a market index. Investing in a fund lets you get exposure to different financial assets like shares and bonds, without having to buy them directly.Learn more
It's important you know
Capital at risk. All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest.
Tax treatment depends on individual circumstances and may be subject to change in the future.
