Glossary

The world of financial planning is littered with confusing jargon and technical terminology.

At HW&P we strive to ensure that our clients understand what financial solutions are, how they work and the benefits associated with them. Our easy to follow glossary helps you beat the jargon and get a clearer understanding of the financial services marketplace.

Asset

Investment funds are full of assets. An asset is something that can normally be bought and sold, such as shares of a company or government bonds or property.

Bonds

These are issued by governments or companies in order to raise funds. In exchange, the investor (or buyer of the bond) is paid a set amount of interest regularly. This is why they are also known as fixed-interest securities. Bonds issued by the UK Government and traded on the stockmarket are known as gilts. Bonds issued by companies usually carry a higher rate of interest since they don’t have the Government’s guarantee behind them. Bond prices move up and down with market conditions. Bonds in this context should not be confused with financial services products such as investment or life assurance bonds sold by financial services organisations.

Capital growth

This is a term used to describe the aim of most of the investment funds in this brochure. It simply means the increase in the value of an investment fund.

Cash

By ‘cash’ we mean money held on deposit in building societies or bank accounts, where it attracts interest, rather than being invested in other financial products such as equities or bonds.

Derivatives

A derivative is a financial contract. It gets the name ‘derivative’ because the contract is ‘derived’ or linked with something else. This could be a specific stock market index, government bonds or shares. So basically a derivative’s value is linked to the price of another asset.

Equities

Another term for company shares.

Fixed interest or fixed-interest securities

Please see the explanation for bonds.

Fund Manager

Fund managers look after investment funds for customers like you. They create portfolios, buy and sell assets and monitor the performance of the investment funds they manage.

Gilts

Please see the explanation for bonds.

Hedging

Hedging is an investment strategy used to guard against a negative change in the price of a certain asset or assets.

Income

The money shareholders receive as dividends is income. It can also mean the interest payments from government bonds and other investments.

Index-linked gilts or index-linked securities

These are bonds issued by the UK Government that pay regular interest payments, which rise and fall in line with the Retail Prices Index.

Portfolio

The assets in a particular investment. This could be a fund’s portfolio or an individual’s portfolio, made up of different assets and investment funds.

Securities

A term for an instrument which represents ownership of assets e.g. stocks and shares, or ownership of debt (a bond or gilt), or the rights to future ownership of an asset (derivatives).

Stocks

In the UK, stocks can mean both shares and Government bonds. Many years ago, stocks meant UK Government bonds only, hence the phrase ‘stocks and shares’. In the US, shares are widely known as stocks. Some UK-based fund management offices use the US terminology.

Units

Each fund is made up of units. Units are your notional share of the investment fund. Unit prices rise and fall with the overall value of the investment fund.

Volatile, volatility

Stockmarkets are described as volatile if they move up and down quickly. An asset that has many variations in its price is also described as volatile.