Glossary of terms

Barriers to entry describes the existence of obstacles that prevent new competitors from easily entering an industry or area of business, such as high start-up costs, regulatory controls and licenses, strong existing brands, long product development timescales and high customer switching costs. Barriers to entry benefit existing companies because they protect their revenues and profits.

The interest rate that a central bank – such as the Bank of England or Federal Reserve – will charge commercial banks for loans.

A basis point is equal to one hundredth of one per cent. When analysts refer to interest rates being decreased by 50 basis points, they mean, for example, from 6.0% to 5.5%.

A bear market is a falling market - ie- when share or other asset prices are going down. In contrast, a bull market is a rising market, when prices are going up.

A benchmark is a standard (for example, a stockmarket index, or other market measurement), which a fund manager will use as a comparison against the performance, risk and holdings of his/her fund portfolio.

Beta represents a measurement of the expected volatility of an investment compared with the volatility of the market as a whole during the same period. A beta of 1.0 indicates that an investment is likely to closely follow the market's movement, while a beta lower than 1.0 indicates lower volatility than the market. If beta is a negative number, it is likely that the investment and the market are moving in opposite directions.

The bid price is the price at which units in a dual-priced unit trust fund are usually sold. ie- the price which investors will receive when they sell their units. Also see 'cancellation price'. This no longer applies to Artemis funds as they operate a 'single-priced- model where unit/shares are sold and bought at the 'mid price' - see 'mid price'.

The bid/offer spread is the amount by which the asking price for a unit of a dual-priced unit trust fund (the offer price) exceeds the bid price. This is essentially the difference between the highest price that a buyer is willing to pay and the lowest price for which a seller is willing to sell for. 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' so there is no bid/offer spread involved.

Bloomberg is a commercial organisation providing financial news and data services. It assigns unique codes to each security and fund that it tracks and provides news and data about.

'Blue chip' refers to companies which are generally considered well established, highly regarded and usually large in size and scale.

A bond can be issued by either a company or a government and is a way of raising capital. Investors buying a bond are effectively lending money to the issuer of the bond (ie- the company or government). Most bonds will have a fixed term, at the end of which the investor will receive the original issue price, although some bonds (known as 'perpetual bonds') have no fixed maturity date. Interest is normally paid by the issuer to the investor during the lifetime of the bond. Broadly, there are three types of bonds: 'government bonds', issued by governments to support national spending and generally considered to have a low risk of default (ie not being repaid); 'investment grade bonds', issued by companies and similarly generally considered to have a lower risk of default; and 'high-yield bonds', also issued by companies but considered to have a higher risk of default. Broadly, the lower the risk of default by the bond issuer, the lower the rate of interest paid on the bond (known as the 'yield'); conversely, a bond with a higher risk of default would be expected to pay a higher yield. See also 'government bond', 'investment grade bond', 'high-yield bond', 'credit rating' and 'yield'.

A bottom-up fund manager will build a portfolio by focusing on selecting stocks which he or she believes to be the best opportunities within their industry or sector. Economic issues and asset allocation guidelines are considered, but are not of primary importance in the construction of the investment portfolio. In contrast, a 'top-down' fund manager will make investment decisions based on the macro-economic environment and related data rather than on stock specific criteria. See also 'Top-down'.

Box is the name given to the system where unit trust managers store units that have been redeemed by unit holders for subsequent onward sale.

A 'bull market' is rising market - ie- when share or other asset prices are going up. In contrast, a bear market is a falling market, when prices are going down.