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Glossary
Balance sheet - a snapshot, usually taken on the last day of the accounting period of a business' assets and liabilities. Also gives details of the capital and long-term debt.
Bear market - a market in which prices are falling or expected to fall. .
Bull market- a market in which prices are rising or expected to rise.
Collective investment - another name for an investment. They are professionally managed portfolios, normally containing 50-100 shares so as to reduce risk.
Commission - money paid to a stockbroker when shares are bought or sold. It is usually based on a percentage of the value of the transaction.
Cyclical investment - buying or selling shares to take advantage of moments in the economic cycle when businesses are most likely to be affected.
Dividend - shareholder's share of profits (dependent on number of shares held), usually paid twice a year. A company will usually only distribute a proportion of the tradfing profits - it will retain an element as capital in the business.
Equities - another word for shares.
FTSE indices - share indices operated by FTSE International, tracking the collective performance of a range of companies (e.g. the FTSE 100 is the index of the top 100 UK companies).
Footsie - another name for the FTSE 100.
Indices - allow easier monitoring of share price performance by creating 'groups' of companies whose prices can be measured together. Examples of indices include the FTSE 100 (top 100 UK companies by size), the FTSE All Share (all companies with a full listing on the London Stock Exchange), the Dow Jones in New York, Nikkei in Tokyo, Hang Seng in Hong Kong and the GAG 40 in France.
Investment - an item (e.g. shares) purchased in the hope of obtaining more income or capital growth.
Investment trust - a limited company whose shares are quoted on the stock market. It concentrates on forming portfolios of shares quoted on the world's stock markets. The price of a share in an investment trust is determined by supply and demand. Unlike a unit trust or OEIG, the price at which they are bought or sold does not always reflect the value of the underlying investments.
Listed - if a share is listed, it is traded on a major exchange e.g. the FTSE.
London Stock Exchange - the UK market where shares are traded.
Limited company - a company whose shares cannot be sold to the general public.
Margin call- where an investor buys shares or other assets and puts down only part of their value. The stockbroker can 'call in' that margin at certain times, requiring the investor to come up with the shares' full price.
Market sector - see Sector.
Momentum investing - where a share is bought or sold on the expectation that there is an upwards or downwards movement in its share price independent of the underlying value in the share itself.
OEIC - these investment funds are collective investments that are structured as a company.
Open outcry - the traditional method of buying and selling shares or other assets on exchanges: traders in a room, dealing with each other face-to-face. Now largely superseded by electronic trading.
PIE (Price Earnings) - a ratio showing how many years of net profits it would take for earnings to equal a share's current share price.
Personal pension - a means of saving for retirement. The money saved is invested in shares or other assets. At retirement, between the ages of 50 and 75, the final pot (minus up to 25%, which can be taken as a tax-free lump sum), is used to buy an annuity, a guaranteed annual income.
Portfolio - a collection of investments.
Pooled fund - a fund or other investment vehicle which invests in other shares. Also known as 'collective' fund. Examples are unit or investment trusts.
Pound-cost averaging - the process of investing in shares or funds through regular contributions rather than a large single lump sum. If shares fall, the price of all the shares bought are 'averaged' down. The reverse happens if shares rise.
Private limited company - a company whose shares cannot be sold to the general public nor traded on a stock exchange. Denoted by the letters 'Ltd'.
Profits before tax (Pre-tax profits) - profits made by a business after income and other expenses have been taken into account.
Profit and loss accounts - a statement showing an organisation's profit or loss over time, normally 12 months. All limited companies, both private and public, are obliged to provide this information as part of their annual accounts submitted to Companies House.
Public limited company - A business whose shares are traded on the stock market. Denoted by the letters 'plc'.
Sector - a subset of the market where the component shares are grouped together, based on similarities in their businesses.
Stamp duty - a tax of 0.5% levied on all purchases of shares traded on the London Stock Exchange.
State pension - an income paid by the state to people who reach retirement age (currently 65 for men and 60 to 65 for women).
Stakeholder pension - a type of personal pension introduced by the government in April 2001. To be classified as a stakeholder, it must have no initial charges, annual charges of 1 % or less a year, accept minimum contributions of £20 a month and be transferable between managers without penalty. Income can be taken at any age between 50 and 75 and up to 25% of the amount saved can be taken as tax-free cash.
Stock market - the market where shares are traded (e.g. London Stock Exchange).
Stockbroker - someone who buys and sells shares on behalf of a client. May also give advice.
Tracker funds ('trackers') - funds which 'track' a given index of shares, e.g. the FTSE 100, and replicate its movement up or down.
Unit trust - a collective investment that is open-ended. The underlying securities are held in the name of an independent trustee. Investors acquire units. To reflect the cost of buying and selling the units, these are sold to investors at the offer price and repurchased at the lower bid price.
Value investing - where a share is bought on the basis of an examination of its 'real' value (based on profit and loss and other factors).
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