Financial glossary

What is an IPO?

August 30, 2011

If you have to ask “What is an IPO” then with respect you’re probably not yet ready to invest in them yet!

Subscription shares

January 27, 2011

Subscription shares are not very well-known among private investors, but they can greatly multiply your returns (or conversely lose you a lot of money!)

7 comments

Gilts (UK government bonds)

January 21, 2011

An introduction to gilts – the fancy name for UK government bonds that are sold by The Treasury to balance the nation’s books.

7 comments

Tracking error: A hidden cost of passive investing

January 18, 2011

It’s vital to take tracking error into account when choosing your index tracker funds. Funds with high tracking error can add substantially to your costs.

16 comments

Know your investing risks

November 11, 2010

If an investment looks too good to be true, it may be because it’s fraudulent or over-optimistic, or perhaps you need to look harder at all the risks.

4 comments

Naked short selling: All shout, no trousers

May 19, 2010

What is naked short selling, and why is it so unpopular in Germany, the home of the nudist? (Oh I see! Not that kind of naked…)

4 comments

Preference shares

May 18, 2010

Preference shares offer a fixed income like corporate bonds, but with fewer of their safety features.

5 comments

UK capital gains tax

January 1, 2010

Not many people become liable for capital gains tax in the UK, but it’s worth understanding how it works to ensure you avoid paying it.

0 comments

Tax avoidance versus tax evasion

October 14, 2009

Don’t ask your accountant to help you ‘evade’ taxes. You could both end up in jail!

9 comments

The Alternative Investment Market (AIM)

September 2, 2009

AIM can be a rich hunting ground for private UK investors looking for bargains, since shares listed on AIM are less well researched than on the main market.

2 comments

What is mark to market?

August 25, 2009

While it’s primarily an accounting practice, mark to market is relevant for private investors in several ways.

1 comment

Investment trusts explained

August 7, 2009

Investment trusts are companies that invest money in other companies, both listed and private, and/or other assets like bonds and property.

7 comments

Growth investing

June 22, 2009

Growth investing is about putting your money into companies you think will make much bigger profits in the future.

2 comments

Horizontal diversification is when you hold different instances of the same asset class. In this form of portfolio diversification, you’re trying to reduce localised or industry sector specific risks. A broad index-based ETF is a good example of horizontal diversification.

0 comments

Vertical diversification

March 4, 2009

Vertical diversification is when your investment portfolio is spread across different types of assets. Cash, government bonds, corporate bonds, property and shares can each be expected to behave slightly differently and so produce different returns, as circumstances change. For instance, government bonds may soar when stock markets crash, because frightened investors sell their shares to [...]

0 comments

Portfolio diversification

February 26, 2009

When deciding whether to buy a particular asset, we should also pay attention to the assets we already own. A collection of assets is called a portfolio. By buying and holding assets with different characteristics, we can try to create a portfolio that offers the greatest return for the risk we’re prepared to take. Holding [...]

10 comments

Currency risk

January 30, 2009

Currency risk arises from exchange rate moves between pairs of currencies. If you have investments or assets in a foreign country with a different currency, you face currency risk, unless the foreign currency is pegged to your domestic currency or your exposure is hedged.

0 comments

Time value of money: Why locking money away earns a better return

January 29, 2009

Time value reflects how you’d rather get a fixed sum of money now than exactly the same amount of money in the future.

1 comment

Liquidity explained

January 19, 2009

Liquidity indicates how quickly an asset can be converted into cash. Liquidity is a desirable trait to investors, and so generally the more liquid an asset the lower the return it offers, due to investors bidding up its price.

0 comments

Risk/return: Nothing ventured, nothing gained

January 9, 2009

Some assets are riskier than others, both in terms of the security of the income they generate and the potential for capital loss. Generally, the higher the risks of holding a particular asset, the higher the potential return for the investor.

0 comments

Assets: The building blocks of a portfolio

January 9, 2009

An asset is an item of economic value that can be converted into cash. Assets likely to be held by private investors include: cash in bank deposits, securities (such as shares issued by private companies, and government or corporate bonds), property, insurance policies, foreign currencies, cars, art and antiques. Company assets include plants and machinery, [...]

0 comments