Glossary

Term Definition
Asset Anything having commercial or exchange value that is owned by a business, institution or individual
Asset class Category of assets, such as cash, company shares, fixed income securities and their sub-categories, as well as tangible assets such as real estate.
Bonds A loan in the form of a security, usually issued by a government or company, which normally pays a fixed rate of interest over a given time period, at the end of which the initial amount borrowed is repaid.
Consumer Prices Index (CPI) An index used to measure inflation, which is the rate of change of prices of a basket of goods and services. The contents of the basket are meant to be representative of products and services we typically spend our money on.
Corporate bonds Fixed income securities issued by a company. They can offer higher interest payments than bonds issued by governments as they are often considered more risky.
Credit The borrowing capacity of an individual, company or government. More narrowly, the term is often used as a synonym for fixed income securities issued by companies.
Default When a borrower does not maintain interest payments or repy the amount borrowed when due.
Emerging markets Economies in the process of rapid growth and increasing industrialisation. Investments in emerging markets are generally considered to be riskier than those in developed markets.
Fundamentals A basic principle, rule, law or the like, that serves as the groundwork of a system. Economic fundamentals are factors such as inflation, employment, economic growth.
Government bonds Fixed income securities issued by governments, that normally pay a fixed rate of interest over a given time period, at the end of which the initial investment is repaid.
High yield bonds Fixed income securities issued by companies with a low credit rating from a recognised credit rating agency. They are considered to be at higher risk of default than better quality, ie higher-rated fixed income securities, but have the potential for higher rewards. Default means that a company or government is unable to meet interest payments or repay the initial investment amount at the end of the security's life.
Inflation The rate of increase in the cost of living. Inflation is usually quoted as an annual percentage, comparing the average price this month with the same month a year earlier.
Inflation-linked bonds Fixed incomes securities where both the value of the loan and the interest payments are adjusted in line with inflation over the life of the security. Also referred to as index-linked bonds.
Investment grade bonds Fixed income securities issued by a company with a medium or high credit rating from a recognised credit rating agency. They are considered to be at lower risk from default than those issued by companies with lower credit ratings. Default means that a company or government is unable to meet interest payments or repay the initial investment amount at the end of a security's life.
Monetary policy A central bank's regulation of money in circulation and interest rates.
Quantitative easing (QE) The worth of an asset or company based on its current price.
Retail Prices Index (RPI) A UK inflation index that measures the rate of change of prices for a basket of goods and services in the UK, including mortgage payments and council tax.
Valuations The worth of an asset or company based on its current price.
Yield (bond) This refers to the interest received from a fixed income security and is usually expressed annually as a percentage based on the investment's cost, its current market value or its face value.