Jargon buster · 46 terms

What the words mean

ADR: American depositary receipt: a certificate traded in New York that stands for shares in a foreign company, such as Novo Nordisk.
After-hours trading: Buying and selling that happens after the main exchange session closes, often when companies release results.
Bank Rate: The Bank of England's main interest rate, which influences mortgage, savings and borrowing rates across the UK.
Basis point (bp): One hundredth of a percentage point. A yield rising 25bp goes from 4.00% to 4.25%.
Benchmark: A yardstick, usually an index fund, to judge your results against.
Bid and ask: The bid is the best price a buyer will pay right now; the ask (or offer) is the lowest price a seller will accept.
Capex: Capital expenditure: money a company spends on long-lasting things like data centres, factories or equipment.
Correlation: How closely two investments move together; highly correlated shares tend to rise and fall at the same time.
Discount: When an investment trust's share price is below its NAV; the opposite, a price above NAV, is a premium.
Diversification: Spreading your money across many different investments so that one bad result can't do too much damage.
Dividend: Cash a company pays to shareholders out of its profits.
Drawdown: How far an investment has fallen from its previous peak, in per cent, before it recovers.
ESG: Environmental, social and governance: rules used to screen out or favour companies.
ETF: A fund that trades on a stock exchange like a share. Most track an index.
Fractional share: Part of one share, so £300 can buy into a £1,200 share.
Free cash flow: The cash a business has left after paying its running costs and its capex.
Fund: A pot of many investors' money, spread across many holdings by a manager.
FX fee: What a platform charges to convert pounds into dollars or euros to buy a foreign share.
GBX / pence: How London quotes most prices. 2,485p is £24.85.
GDP: Gross domestic product: the total value of everything an economy produces, the main measure of growth.
Gilt: A bond issued by the UK government; its yield is the interest rate the government pays to borrow.
Guidance: The forecast a company gives for its own future sales or profits.
Index: A list of companies whose combined price tracks a market, like the FTSE 100.
Investment trust: A company listed in London whose business is owning other investments, such as wind farms.
IPO: Initial public offering: a company selling shares to the public for the first time.
ISA: A UK account where investment gains and dividends are tax-free, up to £20,000 paid in per tax year.
Market breadth: How many shares are rising versus falling, which shows whether a market move is broad or driven by a few big names.
Market cap: Share price times number of shares: what the market says the whole company is worth.
Market maker: A firm that is always ready to buy and sell a share, earning the spread in return.
Market-cap weighting: Building an index so bigger companies (by total market value) count for more of its moves than smaller ones.
Midterm elections: US elections held halfway through a president's four-year term, deciding control of Congress (the House and Senate).
Net asset value (NAV): The value of everything a fund or investment trust owns, minus its debts, usually given per share.
OCF: Ongoing charges figure: a fund's yearly fee, taken from inside the fund.
Order book: The live list of buy and sell orders for a share, showing how many shares people want to trade at each price.
PCE inflation: The US inflation measure the Federal Reserve watches most closely, based on what people actually spend money on.
Results / earnings: A company's report of sales and profits for a quarter or half-year.
Risk tolerance: How much ups and downs in value you can live with, both in money and in nerves, without selling at the wrong time.
Semiconductor: A computer chip, or the industry that designs, makes and supplies the machines for making chips.
Share (stock, equity): A slice of ownership in a company.
Share buyback: When a company uses spare cash to buy back its own shares, leaving each remaining share a bigger slice of the company.
Spread: The gap between the price you can buy at and the price you can sell at.
Stamp duty: A 0.5% UK tax when you buy most UK shares. ETFs are exempt.
Tracker fund: A fund that simply copies an index, such as the FTSE 100, instead of having a manager pick shares; it is usually cheap.
VIX: An index of how much turbulence investors expect in US shares over the next month, often called the 'fear gauge'.
Volatility: How much and how fast a price swings.
Yield (bond): The interest rate a government or company pays to borrow, as a % per year.