The market value of a company, determined by multiplying the number of shares by their current share price.
Money Market Investments
Forms of cash and near cash, such as bank deposits, certificates of deposit, fixed interest securities or floating rate notes, with a maturity date of under a year.
Net Asset Value (NAV)
Total assets of a fund or company minus all liabilities and prior charges. Net asset value per share is calculated by dividing this figure by the number of ordinary shares/units in issue.
Ongoing Charge Figure (OCF)
The majority of funds now refer to the OCF instead of the total expense ratio (TER), it includes the annual management charge and is very similar to the TER, but it does not include any performance fees or transaction costs.
The price at which the unit trusts are bought by investors. The offer price tends to be higher than the bid price, which is the price at which investors sell their units.
Open Ended Investment Company (OEIC)
OEICs, unlike unit trusts, are single priced so buyers and sellers of the fund pay the same price, although they may both have to pay a dilution levy. A dilution levy is only charged where a fund provider incurs additional costs and it is intended to protect existing investors in the fund.
Legal agreements giving the holder the right, although not the obligation, to buy or sell the underlying asset at a specified expiration date, and at a price determined at the time of dealing. The price the seller receives for selling the option is called the 'option premium'. The option premium is more expensive the longer the contract lasts and the more volatile the underlying security. See call and put options.
This term refers to when the holding of an individual stock, industrial sector, or country in a fund is greater than the proportionate share of its relevant benchmark index.
As opposed to active management, a passively managed fund will invest in a basket of securities and try to replicate a pre-determined benchmark index. Tracker funds are an example of a passively-managed fund.
How much of a fund’s performance can be attributed to specific factors such as stock selection or asset allocation.
Price to Book Ratio
This ratio is calculated by dividing the current share price by the companies book value per share. The price to book ratio is used as a measure of how expensive a company's share price is. A company with a price to book value of exactly 1 would theoretically be worth exactly the same as its share price if it was liquidated immediately (assuming its balance sheet was accurate).
Price to Earnings Ratio (P/E)
This is a valuation measure calculated by dividing the current share price by the last published earnings per share (net profit divided by the number of ordinary shares). The ‘P/E ratio’ gives investors a quick and easy way of seeing how a company is priced relative to its peers (with a higher P/E being more expensive), although it should not be relied upon by itself.
Property Authorised Investment Fund (PAIF)
Property Authorised Investment Funds (PAIFs) are a hybrid between an OEIC a REIT. They have improved tax advantages for ISA investors (no withholding tax is charged) and are able to invest in a wider range of property investments than other types of property fund.
An agreement that gives the buyer of the put, the option to sell a security for a specified price within a specified time. The opposite of a call option. A holder of a put benefits when the value of a security declines.
A fund's performance relative to its peers is often referred to in terms of quartiles. For example, a first quartile fund is one which its performance ranks it within the top 25% of all funds in that sector. First quintile (top 20%) and first decile (top 10%) are also used.
A statistical measure between 0-100 that represents the percentage of a fund or company’s movements that can be explained by movements in a benchmark index. A fund with an R squared of 100 can be completely explained by movements in the index. You would expect index funds to have an R squared very close to 100. A low R squared (usually less than 70) means the fund doesn't act much like the index and you should ignore its beta.
Real Estate Investment Trust (REIT)
A real estate investment trust (REIT) is a listed company whose primary activity is property investment. REITs own many types of commercial real estate, for example, offices, warehouses, hotels, hospitals and shopping centres,. Some REITs also engage in financing real estate. They can be very tax efficient as no corporation or capital gains tax is paid on the company profits made from property investments. However, dividends are treated as income and are taxed accordingly and withholding tax is charged on distributions, unless held within a tax-efficient investment, such as an ISA.