Explaining
terms & expressions is important but nothing beats Regulated and Qualified
Financial Advice
· Cut through the jargon
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Asset allocation
This is the spread of
investments across the asset classes.
Asset classes
The underlying
investments – for example, shares, bonds, property and cash deposits.
Bonds These are loans made to a company (often called Corporate Bonds) or
the Government (often called Gilts).
Capital
The money you invest.
Capital growth
Any increase to your original investment after costs, charges and depreciation
have been taken into account.
Collective investment scheme
A way of pooling contributions from lots of people into a single investment
fund.
Contracts for Difference (CFD)
An agreement between two people to settle at the close of their contract the
difference between the opening and closing price of a company's share price.
Cooling off period
A cooling off period
is defined as the period of time you're allowed, after signing an agreement, to
cancel it without incurring a financial penalty. This does not normally apply
in Spain.
CNMV
Comision Nacional del
Mercado del Valores is the principal
financial services regulator in Spain and responsible for
authorising investment products. A CNMV adviser can be recommended, please click here
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.
DGS
Direccion General
de Seguros y Fondos de Pensions is the Spanish regulator for insurance products
which can be marketed in Spain. Email me
to be referred to an authorised adviser.
Diversification
Spreading your investments across different asset classes, or different types
of investments within an asset class
Equities
This is another name for shares in companies.
Friendly Societies These are similar to mutual life assurance companies
but with different tax rules.
FCA
The Financial Conduct
Authority - the UK's
financial services regulator. For a recommended adviser click here
Gearing The use
of borrowing potentially to increase the amount you get back, but can also
increase the risk.
Gilts
These are bonds
issued by the Government.
Gross
Before tax has been
deducted (as opposed to 'net', which is after tax has been deducted).
High-yield bond funds
The same as bond funds but investing in higher-risk bonds that offer a higher
interest rate.
Investment or Insurance Bonds
These are pooled investments or lump-sum life-assurance investments. They can
also be called Life Assurance Bonds and With-Profits Bonds.
Investment Trusts
A pooled investment. The investor is buying shares in a company that invests in
other investments. The Investment Trust 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 is a UK tax-efficient way of saving
or investing, with limits on how much you can pay in each tax year. These are
not available to UK non-residents.
Life assurance
investment
A pooled investment offered by a life assurance company.
MiFID
Markets in Financial
Instruments Directive is the EU legislation which covers investment
intermediaries and their activities. It also enables, for example FCA approved
advisers to be' passported' into other EU countries such as Spain
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, this is a type of open-ended investment fund.
PEP
Personal equity plan
– a wrapper for investments. No longer available as all PEPs have now
automatically became stocks and shares 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
This is the change in the value of your investment taking into account both
income and growth.
Rating
This is a formal opinion of an organisation's investment quality and credit
risk.
Redemption date
Usually associated with gilts or bonds, it is 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
These are the stake or share in a company.
Stocks
These are often
linked directly to Shares, but have the same meaning.
Tax year
In the UK,
the tax year is from the 6thApril in one year to the 5th April in the next
year. In Spain the
fiscal year is the same as the calendar year
Unit trusts
A pooled investment, which 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. The investor
shares the return from these investments and the profits and losses of the
company (if it's a mutual) or the with-profits business fund (if it's a plc).
Most Investment
Advisers, including the ones that I recommend, will be happy to cut through the
jargon. Email me for a recommendation.
David Goodall
Financial Pages in Spain
