The Legal & General Group is responsible for investing £440 billion worldwide on behalf of investors, policyholders and shareholders.
We've created our Jargon Buster to explain some of the most commonly-used investment words and terms.
An actively managed investment fund is one where your money is invested in a portfolio of assets selected by a professional fund manager. Each fund manager constantly monitors companies, economic conditions and markets, and decides where it’s best to invest to meet the investment fund's objectives.
Covers the fund manager's management costs and is taken out of the assets as a percentage of the fund's value.
Is the process of deciding what proportion of an investment portfolio should be invested in different types of investments (for instance, shares or bonds), in what markets (what regions and countries) and in what sectors.
There are four main categories of asset class for investment funds:
This facility gives you the opportunity to switch your unit trust investment to an ISA. Your investment moves to a more tax-efficient position automatically at the start of each new tax year.
Banks’ Automated Clearing Services. A system supported by the major UK clearing banks for automated cash transfers between accounts, eliminating the need for cheque payments.
The spread is the difference between the buying and selling price of units on any day. The spread is made up of two parts:
The price at which units are 'sold' or cashed in by the customer.
Generally viewed as the amount of the original investment.
The difference between the price at which you buy an asset and the price at which you sell, transfer or give it away.
This is a tax which could be charged on certain capital gains.
You can currently save up to £5,760 in a cash ISA, to benefit from tax-efficient savings.
The Financial Conduct Authority requires companies like us to send confirmation of customer transactions every six months. With many of our customers' transactions, for example lump sum investments or withdrawals, they receive a Contract Note and will also be notified of these transactions in their annual statement. However, for some transactions such as regular investments, the customer doesn’t receive a Contract Note every time the regular investment is made. Instead, the confirmation of those transactions is consolidated and provided twice a year.
Corporate bonds are a type of fixed interest security. When you invest into a corporate bond fund, instead of 'lending' money to a bank - which is effectively what happens when you place money on deposit - we lend your money to companies who agree to pay an agreed level of interest over a certain period of time.
Some investment funds can use investments known as derivatives. Their name reflects the fact that their price is derived from a change in value of the investment that they're linked to, such as shares, property or bonds. Experienced managers use derivatives as part of an investment strategy to manage the effect of possible market falls or changes in exchange rates. This reduces the cost of investing in assets and helps to manage cash flow.
For some investment funds, derivatives will be used to seek to enhance overall investment returns, manage risk and to help protect returns from market falls. This includes investing in derivatives whose value rises when the market falls, but whose value falls if the market rises.
If you invest in a unit trust in your name for the benefit of someone else, such as a child or grandchild, then the investment is still yours. You'll pay whatever taxes you would normally pay on it. It’s possible for you to 'designate' the investment in the name of the other person as a way of identifying that the investment has been made for that person.
Shares issued by a company normally listed on a stock exchange. Individuals who buy equities hold a share in that company and are entitled to dividend payments and voting rights.
An investment that conforms to a range of ethical and environmental guidelines.
In addition to the annual management charge, the investment fund may also pay other management expenses each year, such as auditors, trustees, custodian, registrar and regulator fees, which are paid out of the fund.
A fixed interest security is a way of 'lending' money to a government, or to a company, in return for an agreed level of interest over a set period. This type of investment is intended to provide a regular, reliable income.
Is the Financial Times Stock Exchange, an independent company owned by the London Stock Exchange Group.
A person professionally qualified to manage funds to meet financial goals for the benefit of the investor(s). A fund manager will make the decisions about which assets to invest in and is responsible for the day-to-day management of the fund.
Allows you to invest in several funds to create a diverse portfolio through a single investment.
Fixed income or index-linked bonds issued by the UK Government to raise public funds, also known as gilt-edged securities. They are usually secure but they are not entirely without risk.
Income before tax is deducted.
Interest before income tax has been deducted.
HM Revenue and Customs. They’re responsible for collecting taxes.
This is where any income earned by the investment fund is paid direct to your bank or building society account, and isn't reinvested into the investment fund. If you choose to receive an income you’ll receive ‘distribution units’.
This is where any income earned is reinvested back into the fund. This increases the value of the investment fund. For most investment funds, if you choose to reinvest your income, you’ll receive ‘accumulation units’.
Index-tracker investment funds invest in most or all of the same shares, and in a similar proportion, as the index they are tracking, for example the FTSE 100 Index. Index-tracker funds aim to produce a return in line with a particular market or sector, for example, Europe or technology. They are also sometimes known as 'tracker funds' or ‘passive funds’.
The increase in prices over a period of time. As prices rise, the value of money falls, so your money has less buying power over time.
The initial charge is a percentage you'll pay each time you make an investment in certain funds or unit classes.
Lets you put your money together with other investors’ to buy a wider range of investments than you would be able to achieve on your own. Funds are managed by professional fund managers.
ISA stands for Individual Savings Account. An ISA is simply a ‘tax-wrapper’ around a product, for example, a unit trust, that makes it tax-efficient. You can invest in a cash ISA and/or a stocks and shares ISA. The tax advantages of ISAs may not be maintained and the value of current tax benefits depends on individual circumstances.
You can transfer stocks and shares and cash ISAs between providers without losing their ISA status. You can transfer a cash ISA to a stocks and shares ISA but not the other way around.
A Junior Individual Savings Account allows you to save up to £3,720 this tax year for an eligible child, tax-efficiently.
Provides you with key information about the fund to help you make an informed decision about whether to invest. You can find the most recent version of the document here.
Is a Thomson Reuters company and a global leader in supplying fund information, analytical tools, and commentary. Lipper is recognised as one of the industry standard providers of benchmarks and classifications for asset managers, fund companies and financial intermediaries.
An investor can choose to make regular monthly contributions into a fund or pay a larger amount as a lump sum. Lump sum payments are often one-off payments, with an initial minimum investment amount of £500 for ISA or unit trust investments. There is no maximum lump sum investment for unit trusts, although you can invest a maximum of £50,000 online. The maximum lump sum investment for an ISA is currently £11,520.
An investor can choose to make monthly contributions to their chosen investment fund, known as regular investing. The minimum monthly contribution is £50 for ISA or unit trust investments. There is no maximum monthly contribution for unit trusts.
A company which provides information about the investments industry. It has operations in 27 countries and currently provides data on more than 422,000 investment offerings.
Multi Manager investment funds allow you to invest in several funds at the same time through one simple investment. Professional fund managers select, monitor and change the underlying funds based on set criteria, for example, the investment quality and investment objective of the providers.
Multi Manager investment funds invest in funds, not shares. Each multi manager investment fund holds a mix of funds covering many different types of asset, industry sectors and markets. The funds may also be sourced from more than one provider. For example, our Multi Manager investment funds may invest in funds managed by well-known and respected companies such as Invesco Perpetual, Schroders, M&G, as well as in our own funds.
Our online account management service. It allows you to manage your investment or pension online. You can change your contributions, switch funds or simply check up on your investment funds whenever it suits you. Register here.
Is a company or person who looks after the ownership of investments on behalf of someone else.
The price at which we ‘sell’ units to customers.
Shows the European Union standard disclosure of annual costs of a unit trust or OEIC, which includes the Annual Management Charge and any additional costs for managing the fund.
OEICS are similar to unit trusts, but are established as companies that issue shares to investors. Often, OEICS are made up of a series of sub-funds. Each sub-fund has its own investment objective. The value of each sub-fund, and each share price, is usually calculated on a daily basis.
Allows you to use your annual ISA allowance any time in a tax year but have your investment phased into your chosen investment fund(s) over time. Your money is phased or distributed into the investment fund over 12 months in equal instalments. This allows you to invest in an ISA but not expose your money to the stock market all at once.
A holding of investment funds. This could be split across ISA and unit trust investments. A balanced portfolio is made up of a number of different types of assets such as cash, shares, corporate bonds and property.
A legal document provided by businesses to describe the investments/products they offer customers. The Prospectus usually provides investors or potential investors with fund information.
All investment funds have risk factors and some have higher overall risk ratings than others. Higher-risk investment funds offer the potential for higher returns but carry with them an increased risk of not getting back all the money you initially invested. The lowest risk type of investment is cash.
Capital of a company raised through the issue and subscription of shares.
The price at which you can purchase shares in a company on the stock market. The share price is determined by the financial market and so can fluctuate on a daily basis.
Legal & General’s share price
Shares are sold by companies to raise money. If the company is a Public Limited Company or Plc, its shares will be available to purchase on the stock exchange. Shareholders are entitled to a share of company profits, usually paid as dividends, and have the right to vote on major decisions. (Also, see Open-Ended Investment Companies (OEICs)).
Any unit trusts that invest in UK shares, have to pay SDRT each month. This is paid out of the assets of the fund. The tax is paid on any units the manager buys back from one investor and sells to another. The amount of SDRT paid is reduced if part of the fund is not invested in UK shares, including any un-invested cash.
As the name suggests, a stock exchange is where stocks and shares in companies can be bought and sold. The Financial Times Stock Exchange 100 Index (FTSE 100) lists the 100 largest companies on the London Stock Exchange. These companies are the largest in terms of market capitalisation, the total value of the shares issued by the company. See also FTSE.
You can invest your full ISA allowance, currently £11,520, in a stocks and shares ISA each tax year. Alternatively, you can invest £5,760 in a stocks and shares ISA and save the remaining £5,760 in a cash ISA.
Switching is when you change your fund choice. You can make a switch at any time and this service is currently free of charge. You can switch online if you’re registered with My Account. If you decide to switch into a unit class with an initial charge, the initial charge may be taken.
Please see Index-tracker.
Dividend payments are made to shareholders from a company's profit. The amount of payment is decided by the company directors and cannot be guaranteed. Some unit trusts pay their income in the form of ‘UK dividends’.
A unit trust:
Is the point in time on each business day that the unit trust is valued and a price calculated. The valuation point can be found in either the Additional fund information document (PDF:655KB) or 'Key Investor Information' documents.
The degree of unpredictable change over a period of time.
A ‘wrapper’ is designed to go around an investment to make it tax-efficient. For example, an ISA is a wrapper that allows you to invest in a unit trust without having to pay personal income or capital gains tax.
There are three different types of yield
Funds paying a dividend distribution have a Historic Yield.
The Historic Yield reflects distributions declared over the past 12 months. It does not include any initial charge and investors may be subject to tax on their distribution.
Funds paying an interest distribution have a Distribution Yield and an Underlying Yield.
The Distribution Yield reflects the amounts that may be expected to be distributed over the next 12 months. It is based on a snapshot of the portfolio. It does not include any initial charge and investors may be subject to tax on distributions.
The Underlying Yield reflects the annualised income net of expenses of the fund. It is a snapshot of the portfolio. It does not include any initial charge and investors may be subject to tax on distributions.
If the Distribution Yield is higher than the Underlying Yield this is either because the fund distributes coupon income and/or a portion of the fund's expenses are taken from capital. This has the effect of increasing distributions and constraining the fund's capital performance.
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