Glossary of terms

Calendar year returns relate to the performance of an investment from 1 January to 31 December in any given year.

Where a client has purchased units or shares in a fund under advice from a professional adviser, the fund provider is obliged to give the client the right to cancel their investment within 14 days. These rights are outlined in the Notice of Cancellation which will be sent with the contract note.

The lowest bid price allowed for authorised dual-priced unit trusts under the Financial Conduct Authority's pricing rules. This no longer applies to Artemis funds as they operate a 'single-priced' model where units/shares are sold and bought at the 'mid price'. See 'mid price'.

A capital gain occurs when an investment is sold at a price higher than that originally paid- ie- the investor has made a profit on his/her investment.

Individuals are usually required to pay capital gains tax (CGT) on an increase in value that crystalises on a sale of assets. Each UK individual has a personal, annual capital gains allowance, and may be able to claim taper relief depending on how long the asset has been held. Investors should contact their professional advisers for further details of CGT on their own investments. Holding investments within a tax efficient wrapper, such as an Individual Savings Account (ISA), can mitigate against capital gains tax.

If a fund states as its objective 'to seek capital growth', the underlying investments will be those the investment manager believes have the potential to grow in value over time. Conversely, a fund with an objective of paying income is one that seeks to invest in stocks (or other asset types) that pay higher dividend yields.

Capital markets refers to investment markets where funds are raised from those who want to invest and then make those funds available to businesses or governments. Capital markets enable the wealth of savers to be channeled to those who can put it to long-term productive us, such as companies or governments making long-term investments.

Capital protection is an investment where the aim is to preserve a specifed amount of the initial investment.

Capitalisation (usually referred to as 'market capitalisation' or 'market cap') is the total value of a company, calculated by multiplying the number of shares in issue by the current price of the shares. Companies are often referred to as being 'large-cap', 'mid-cap' and 'small-cap', reflecting their relative total value – large-cap being the largest companies and small-cap being the smallest (though it's important to remember that small-cap can still mean companies with values in the hundreds of millions or even low billions).

Cashflow is the net amount of cash moving into and out of a business. Positive cashflow indicates that a company's liquid assets are increasing, enabling it to settle debts, reinvest in its business, return money to shareholders, pay expenses and provide a buffer against future financial challenges. Negative cashflow indicates that a company's liquid assets are decreasing. Net cashflow is distinguished from net income, which includes money payable to the company. Cashflow is used to assess the quality of a company's income - ie- how liquid it is - which can indicate whether the company is positioned to remain solvent. (See also 'free cashflow').

Citywire is an independent financial publishing and data group. Citywire rates qualifying individual fund managers as AAA, AA, A or 'plus', depending on their risk-adjusted performance. Ratings measure both a manager's outperformance against suitable benchmarks and also how much risk the manager took in order to generate the returns. Only a small percentage of fund managers generally qualify for a rating from Citywire. See http://citywire.co.uk/wealth-manager/rated-fund-managers.

Many funds issue different ‘classes’ of units or shares with different charging structures; some have a low minimum investment but a higher annual charge, while others have a high minimum investment but a lower annual charge.

A closed ended fund, such as an investment trust, has a fixed number of shares and is structured in a similar way to a company. Conversely, an open ended fund, such as a unit trust or OEIC, has no limit on the number of shares or units. See also 'Open ended funds'.

A collective investment scheme is a generic term for investment funds with more than one investor, such as unit trusts, OEICs and investment trusts, which are managed by professional managers.

Commission is sometimes paid by a financial services company to professional intermediaries who distribute products on their behalf. In some cases, the intermediary will rebate some or all of the commission received to his or her clients.

Intermediaries, such as independent financial advisers, are obliged to disclose to their clients the amount of commission they will earn on the products they sell to their clients.

Commodities are a type of asset (an 'asset class') which include a broad range of physical assets such as oil and gas, metals and agricultural products.

This is a unique number allocated by Companies House to every company (both 'limited' and 'plc') or limited liability partnership ('LLP').

The Consumer Price Index (CPI) is a measure that examines the purchasing power of money. It is a weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living; the CPI is one of the most frequently used statistics for identifying periods of inflation or deflation.

CFDs provide investors with the benefits and risks of owning a security without actually owning it. There is no delivery of physical goods or securities, which means that CFDs are generally regarded as an easier method of settlement because losses and gains are paid in cash.

A contract note will be sent out to investors when a transaction is completed - it is a legal document including all the details relating to the deal.

Conversion is the process of changing an existing investment within a fund from one type of unit or share to another - for example, converting accumulation units/shares into distribution units/shares.

Corporate bonds are issued by companies as an alternative to issuing an increased number of shares. Similar to government bonds, corporate bonds will pay a regular rate of interest and will generally be redeemed at their issue price on a set date.

Professional investors and analysts will refer to a 'correction' when a market is falling, but they believe share prices are simply coming back to more realistic levels following a period of over-valuation.

A coupon is the regular interest payment that is paid on a bond. It is described as a percentage of the face value of an investment. If a bond has a face value of £100 with a 7% coupon, for example, the bond will pay £7 a year in interest.

The Consumer Price Index (CPI) is a measure that examines the purchasing power of money. It is a weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living; the CPI is one of the most frequently used statistics for identifying periods of inflation or deflation.

The creation price of a unit in a dual-priced unit trust is the price before the initial charge has been applied. It represents the value of the trust at current market levels, with all expenses included, and is then divided by the number of units in issue. The creation price is used to calculate the offer price (purchase price). See also 'initial' charge. This no longer applies to Artemis funds as they operate a 'single-priced' model where units/shares are sold and bought at the 'mid price'. See 'mid price'.

In general terms, a credit rating is an assessment of the credit worthiness of a borrower, or of a particular debt or financial obligation. A credit rating can be assigned to any entity that seeks to borrow money – an individual, corporation, authority or sovereign government. Credit assessment and evaluation for companies and governments is generally carried out by a commercial credit rating agency (such as Standard & Poor’s or Moody’s).

Credit risk is the risk that a bond issuer may not be able to meet its contractual obligation to investors and will default on debt payments.

Crowded trades are trades (ie purchases and sales of stocks and other asset types) in which market participants (ie buyers and sellers) have large and similar positions, so creating the risk that there will be insufficient liquidity should the participants seek to unwind their positions simultaneously.

Currency exposure refers to the potential for a fund that invests overseas to lose or gain money solely because of changes in a currency exchange rate - ie the vulnerability of the value of an investment to variations in the exchange rate of two currencies.

In simple terms, currency hedging is the act of entering into a financial contract in order to protect against unexpected, expected or anticipated changes in currency exchange rates. Hedging can be likened to an insurance policy that limits the impact of foreign exchange risk. Hedging is often achieved through the use of derivatives such as options or futures.

When a fund invests in assets that are priced in a different currency to that which the fund is priced in, there is a risk of losses occurring due to adverse currency movements.

The current yield is the annual interest on an asset, divided by the asset's current market price.