You’re not alone if you think finance comes with a language of its own. But investing doesn’t have to be confusing. Here at Calculis we like to try to keep things as simple as possible, so to help you navigate the array of financial terminology we’ve put together our Investment Jargon Buster.


Annuity – an income for life purchased from an annuity provider with the proceeds of a pension fund. Annuities were designed to be a safer way for people to grow their pensions and receive regular funds throughout their retirement.

Asset class – a particular type of investment, using equities or shares, bonds, stocks, fixed incomes or cash equivalents. Financial advisers view the various asset classes as ‘investment vehicles’ and advise using a range of them to diversify investment portfolios and minimise risk.

Asset allocation – the process of spreading or ‘diversifying’ your investments across a range of assets and geographical regions in order to help minimise risk.

Blue chips – companies that have a long history of good earnings, good balance sheets, and regularly increasing dividends. These are solid companies that are likely to provide reasonable returns over time.

Bond – an IOU for a loan. Governments, companies and other organisations issue bonds to raise money; in doing so, they have an obligation to repay the bondholder according to specific terms. Bonds are commonly referred to as fixed-income securities and are one of the three main generic asset classes. Owners of bonds are debtholders, or creditors of the issuer.

Broker – an entity that buys and sells investments on your behalf. Usually, a fee is paid for this service.

Capital  any financial resources or assets owned by a business that are useful in furthering development and generating income.

Capital gain – an increase in the value of an asset that gives it a higher worth than the purchase price.

Custodial Account – a savings account accessible through a financial institution, mutual fund company or brokerage firm that an adult controls for a minor under the age of 18. It can also be a retirement account handled for eligible employees by a custodian. In a custodial account, approval from the custodian is mandatory for a minor to transact securities.

Developed markets – well-established developed economies with a high degree of industrialisation, standard of living and security. Common criteria for evaluating a country’s degree of development are found through per capita income or gross domestic product (GDP).

Diversification – a risk management technique that mixes a wide variety of investments within a portfolio. It means choosing to buy investments in different sectors, industries, or geographic locations.

Dividends  a payment made from an organisation’s profits to its shareholders. Usually decided by a board of directors, the dividend payback will be proportional to the number of shares owned. Dividends can be issued as cash payments, as shares of stock or other property.

Emerging markets – a term used to describe a developing country, in which investment would be expected to achieve higher returns but be accompanied by greater risk.

Exchange – a place where investments, including stocks, bonds, commodities, and other assts are bought and sold. It’s a place where brokers (buyers and sellers) and others can connect.

FTSE – independent organisation jointly owned by the Financial Times and the London Stock Exchange. The group creates and manages indices of shares, the most famous of which in the UK is the FTSE 100. This shows the real-time performance of the top 100 UK based and international companies.

Gilts – units of debt issued by the UK government. When buying them, you are effectively lending money to the government, which promises to pay back the amount in full at a set date, along with interest or in line with inflation. Gilts are considered a low-risk investment as the government is a more stable body to lend to over other organisations and the investments can be long-term.

Investment strategy – a plan of attack to guide investment decisions based on individual goals and attitude to risk.

Mutual Funds – an investment vehicle made up of a pool of funds into one professionally managed investment. Mutual funds can invest in stocks, bonds, cash or a combination of those assets.

Net Profit – a company’s total earnings or profit. Simply put, net income is the difference calculated when subtracting all expenses (including tax expenses) from revenue. Net Profit is an important measure of how profitable a company is over a period of time.

Portfolio  a set of assets that an investor holds, such as stocks, bonds, property etc. Portfolios are held directly by investors and/or managed by financial professionals and will grow in line with their attitudes to risks and goals.

Return On Investment (ROI) – a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. ROI measures the amount of return on an investment relative to the investment’s cost.

SIPP (Self Invested Personal Pension) – a personal pension that lets you invest your pension contributions in a wide variety of investments, allowing the owner more control over how their money is invested.

Shares – commonly known as stocks or equities. A share is a unit of ownership interest in a company giving the right to dividends. Investors purchase shares in companies with the interest in growing their profits as the company increases theirs.

Yield – the annual income earned from an investment, expressed usually as a percentage of the money invested. A yield is not a guarantee from an investment; instead, the listed yield is functionally an estimate of the future performance of the investment.

If you have any questions about investing, please call Calculis on 01794 525500 or email info@calculis.co.uk.


Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>