Term Definition
Bond A loan, usually taken out by a government or company, which normally pays a fixed rate of interest over a given time period, at the end of which the loan is repaid.
Coupon The interest paid by the government or company that has raised a loan by selling bonds.
Default When a borrower does not maintain interest payments or repay the principal sum at maturity.
Diversification The practice of investing in a variety of assets. This is a risk management technique where, in a well-diversified portfolio, any loss from an individual holding should have less impact on the overall portfolio.
Equities Shares of ownership in a company.
Fixed income security See bond.
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. There are two inflation indices in the UK – the Retail Prices Index (RPI) and the Consumer Prices Index (CPI).
Issuer An entity that sells securities, such as bonds and equities
Macroeconomic Refers to the performance and behaviour of an economy at the regional or national level. Macroeconomic factors such as economic output, unemployment, inflation and investment are key indicators of economic performance. Sometimes abbreviated to 'macro'.
Maturity  The date at which a loan or bond is contracted to be repaid (also known as redemption).
Risk The chance that an investment's return will be different to what is expected. Risk includes the possibility of losing some or all of the original investment.
Par value The initial price of a bond, also known as face value.