Investing Glossary

Accumulation fundA fund that reinvests any profit you make, which increases the number of units you hold in the fund over time.
AssetAn asset is anything that holds value and which can be bought and sold freely.

Bank of England (BoE)The Bank of England (BoE) is the UK’s central bank
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.
Bear marketA market where prices have been steadily declining over time, and have fallen by 20% or more from a previous market peak.
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’.
Bond yieldBond yield is the return you get from holding a bond, usually shown as a percentage.
Bull marketA market where prices have been rising over time - and haven’t fallen by more than 20% from their most recent peak.

CAC 40France’s main stock market index, tracking the 40 largest companies listed on the Euronext Paris exchange.
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’.
Compound interestThe return you earn on top of your investment gains by reinvesting your profits instead of withdrawing them.
Consumer price index (CPI)The Consumer Price Index (CPI) is one of the main ways that the UK measures inflation.

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.
DividendThe amount of profit that a company returns to its shareholders.
Dividend yieldDividend yield is the percentage of return you get from a share based on the dividends it pays out.

Earnings per share (EPS)Tells you how much profit a company makes for every share you own
European Central Bank (ECB)The European Central Bank (ECB) is the central bank for countries that use the euro (the eurozone).

Federal Reserve (The Fed)The Federal Reserve, or the Fed, is the central bank of the United States.
FeesThe costs you pay to invest your money.
Fixed-income securityAn investment that pays you a set amount of money at regular intervals.
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.

GainAn increase in an asset's market value from its purchase price.
Gross profitThe money a business makes from selling its products or services, minus the direct costs of making or delivering them.

Hawks and dovesHawks and doves are different words that people use to categorise policymakers who shape a central bank’s monetary policy.

InflationInflation is the rate at which prices rise over time. When inflation goes up, your money doesn’t stretch as far - £1 today buys you a bit less than it did a year ago.
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.

JOLTS (job openings and labor turnover survey)A monthly snapshot of the US labour market that shows how many jobs are opening up, how many people are being hired, and how many are quitting or being laid off

KIID (Key Investor Information Document)A short, easy-to-read document that explains the key facts about an investment fund.

LiquidityHow easy it is to buy or sell an asset. Some assets are less liquid than others, which increases their risk.
London Stock Exchange (LSE)The London Stock Exchange (LSE) is one of the oldest and largest stock exchanges in the world, based in London, UK.
Loss When an investment drops in value from its purchase price.

Market capitalisationA company’s market value, calculated as the total number of its shares in circulation multiplied by the price to buy one share.
Market indexA benchmark that tracks the collective performance of a group of different companies and other assets.
Market valueThe price that a stock, fund or other financial asset is currently being bought and sold at.

NasdaqOne of the largest stock exchanges in the world, known for being home to big tech companies like Apple, Microsoft, Amazon, and Tesla.
Nasdaq compositeA US stock market index that tracks the performance of thousands of companies listed on the Nasdaq Stock Exchange.
Net profitThe money a business has left after covering all its expenses - including rent, wages, taxes, and utility bills.
New York Stock Exchange (NYSE)The New York Stock Exchange (NYSE) is the largest stock exchange in the world, based in New York City.
Nikkei 225Japan’s main stock market index, tracking the performance of 225 of the biggest companies listed on the Tokyo Stock Exchange.
Non-farm payroll (NFP)Non-Farm Payroll (NFP) is a key US economic report that shows how many new jobs were added (or lost) in the country - excluding farm workers, government employees, and a few other sectors.

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.
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.
PMI (purchasing managers’ index)The Purchasing Managers’ Index (PMI) is a key economic indicator that shows how businesses are doing.
PortfolioIf you're an investor, this is the collection of investments and assets that you’re investing in.
Pound cost averagingA way to reduce the impact of market volatility on the overall performance of your investments.

Quantitative easingA policy tool used by central banks to encourage economic growth by increasing the money supply.
Quantitative tighteningA policy tool that aims to decrease the money supply.

RiskThe potential for loss. Usually, but not always, higher risk assets can have the potential for higher returns.

S&P 500A stock market index that tracks the performance of the 500 largest companies listed on US stock exchanges.
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.
StockStocks, also known as shares or equities, represent units of ownership in a company.
Stock marketThe global network of stock exchanges that lets investors buy and sell shares in publicly listed companies.

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.

UnitA unit is what you buy when you invest in a fund - it’s your slice of the overall investment

Value investingValue investing is an investment strategy where you look for shares that seem to be underpriced - basically, bargains in the stock market.
VolatilityVolatility is how much and how quickly an investment’s price goes up and down. The more dramatic the swings, the higher the volatility.

YieldYield is the income you earn from an investment, usually expressed as a percentage of its price.