AI

Artificial intelligence.

Capital expenditure

Money invested to acquire or upgrade fixed assets such as buildings, machinery, equipment, or vehicles in order to maintain or improve operations and foster future growth.

Cash flow

The net balance of cash that moves in and out of a company. Positive cash flow shows more money is moving in than out, while negative cash flow means more money is moving out than into the company.

Dividend

A variable discretionary payment made by a company to its shareholders.

Equity

A security representing ownership, typically listed on a stock exchange. ‘Equities’ as an asset class means investments in shares, as opposed to, for instance, bond. To have ‘equity’ in a company means to hold shares in that company and therefore have part ownership.

Exchange traded fund (ETF)

A security that tracks an index, sector, commodity, or pool of assets (such as an index fund). ETFs trade like an equity on a stock exchange and experience price changes as the underlying assets move up and down in price. ETFs typically have higher daily liquidity and lower fees than actively-managed funds.

FTSE World Index

The FTSE World Index is a market-capitalisation weighted index representing the performance of the large and mid cap stocks from the Developed and Advanced Emerging segments of the FTSE Global Equity Index Series and covers 90-95% of the investable market capitalisation.

Inflation

The rate at which the prices of goods and services are rising in an economy. The consumer price index (CPI) and retail price index (RPI) are two common measures; the opposite of deflation.

Interest rates

The amount charged for borrowing money, shown as a percentage of the amount owed. Base interest rates (the Bank Rate) are generally set by central banks, such as the Federal Reserve in the US or Bank of England in the UK, and influence the interest rates that lenders charge to access their own lending or saving.

NAV total return (investment trusts)

The theoretical total return on shareholders’ funds per share reflecting the change in NAV assuming that dividends paid to shareholders were reinvested at NAV at the time the shares were quoted ex-dividend. A way of measuring investment management performance of investment trusts which is not affected by movements in discounts/premiums.

Portfolio

A grouping of financial assets such as equities, bonds, commodities, properties, or cash. Also often called a ‘fund’.

Share price

The price to purchase (or sell) one share in a company, not including fees or taxes. For investment trusts: The closing mid-market share price at month end.

Share price total return (investment trusts)

The theoretical total return to the investor assuming that all dividends received were reinvested in the shares of the company at the time the shares were quoted ex-dividend. Transaction costs are not taken into account.

Valuation metrics

Metrics used to gauge a company’s performance, financial health, and expectations for future earnings, e.g. P/E ratio and ROE.

Volatility

The rate and extent at which the price of a portfolio, security, or index, moves up and down. If the price swings up and down with large movements, it has high volatility. If the price moves more slowly and to a lesser extent, it has lower volatility. The higher the volatility, the higher the risk of the investment.