MFS

Investment Jargon Buster

Asset allocation

The spread of investments across the asset classes.

Asset classes

The underlying investments ? shares, bonds, property and cash deposits.

Bonds

A loan to a company or the government.

Bond funds

Pooled investments investing in bonds.

Capital

The money you invest.

Capital growth

An increase to your original investment after costs, charges and depreciation.

Collective investment scheme

A way of pooling contributions from lots of people into a single investment fund.

Corporate bonds

Loans issued by companies.

Corporate bond funds

Funds that invest in a selection of individual company bonds.

Coupon

A bond?s fixed rate of interest as a percentage of its nominal value.

Debt securities

Another name for a bond.

Derivatives

A right or an obligation to buy or sell another type of asset ? such as a share or a bond ? to someone else at a specific date and time in the future.

Distribution bond

A type of investment bond that provides a regular income.

Diversification

Spreading your investments across different asset classes, or types of investments within an asset class.

Equities

Another name for shares in a company.

FCP

Fonds communs de placement. A type of open-ended investment fund.

Friendly Society

Similar to a mutual life assurance company but with different tax rules.

Gearing

The use of borrowing potentially to increase the amount you get back, but will also increase the risk.

Gilts

Bonds issued by the UK government.

Gross

Before tax.

High-yield bond funds

The same as bond funds but investing in higher risk bonds that offer a higher interest rate.

ICVC

Investment Company with Variable Capital, also known as an OEIC. A type of open-ended investment fund.

Investment/Insurance bonds

A pooled investment; a lump sum life assurance investment.

Investment trusts

A pooled investment. You are buying shares in a company that invests in other investments. It has shares and is quoted on the stock exchange. It is a closed-ended fund as there are a set number of shares available.

ISA

Individual Savings Account ? a tax wrapper for savings and investments.

Life assurance investment

A pooled investment offered by a life assurance company.

Net asset value (NAV)

An expression used with investment trusts to mean the value of the fund’s underlying assets.

Nominal value

Sometimes called the face value, this is the cost of the bond when it is issued and the amount you get back at the end of the term.

OEIC

Open-Ended Investment Company, also known as an ICVC. A type of open-ended investment fund.

PEP

Personal equity plan, a wrapper for investments but no longer available to buy ? similar to ISAs.

Pooled investments

A way of putting various levels of contributions from lots of people into a single investment fund. There are different types and they work in different ways.

Rate of return

The change in the value of your investment taking into account both income and growth.

Rating

A formal opinion of a security?s or organisation’s investment quality and credit risk.

Redemption date

Usually associated with gilts or bonds ? the date set in advance when the gilt or bond will be repaid by the issuing government or company and you will receive the nominal value of the bond.

Shares

A stake or share in a company.

SICAV

Société d?investissement à capital variable. A type of open-ended investment fund.

Stocks

Another term for shares.

Tax year

6th April one year till 5th April the following year.

Trading at a discount/at par/at a premium

Expressions used with investment trusts meaning the value of all the investment trust’s shares combined are below (discount), equal to (par) or higher (premium) than the underlying investments.

Unit trusts

A pooled investment, this is an open-ended investment that gets bigger as more people invest and smaller when they take money out.

With-profits funds

A type of fund available within a life assurance investment. You share the return from these investments and the profits and losses of the company (if it’s a mutual) or the with-profits business fund (in the case of a plc).

Yield

What the bond pays to investors by way of interest as a percentage of the bond’s price.