Term Definition
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.
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.
Consumer Prices Index (CPI) An index used to measure inflation, which is the rate of change of prices for 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.
Assets Anything having commercial or exchange value that is owned by a business, institution or individual.
Asset classes Category of assets, such as cash, company shares, fixed income securities and their sub-categories, as well as tangible assets such as real estate.
Fixed interest securities 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.
Bonds See fixed interest security.
Index-linked bonds Fixed income 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 inflation-linked bonds.
Coupon The interest paid by the government or company that has raised a loan by selling bonds.
Principal The face value of a fixed income security, which is the amount due back to the investor from the borrower when the security reaches the end of its life.
Maturity Date The length of time until the initial investment amount of a fixed income security is due to be repaid to the holder of the security.
Yield 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.