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Private investors

Glossary of terms

From A to Z, understand investment jargon with our glossary of terms

‘Sector’

Sector is the term given to a group of companies engaged in a similar type of industry/business or a group of funds investing in similar stocks. Also see 'IA sector'. Further information can be found on the Investment Association's website www.theinvestmentassociation.org under the section 'Fund sectors'.

‘Sector weighting’

The proportions of a fund, relative to its total net assets, held in industry sectors. For example, a fund with 15% of its net assets invested in companies in the technology sector will have a 15% weighting to the technology sector.

‘SEDOL’

SEDOL stands for Stock Exchange Daily Official List, a list of codes used in the UK and Ireland to uniquely identify each security, including unit trusts, OEICs, investment trusts and other types of funds. The codes are assigned by the London Stock Exchange, on request by the security issuer. SEDOLs serve as the national securities identifying number for all securities issued in the United Kingdom and are therefore part of the security's 'ISIN' as well. The SEDOL Masterfile (SMF) provides reference data on millions of global multi-asset securities, each uniquely identified at the market level using a universal SEDOL code.

‘Share class’

Share class is a designation applied to a share in a fund. Different share classes within the same fund will confer different rights on their owners. Also see 'class R / class I'.

‘Share price’

A share price is the price of a particular company's shares at a particular time.

‘Share type’

In investment funds terms, a share in an OEIC fund represents a proportion of the property of the fund. A share can be either an 'accumulation' share, where income is not distributed to investors but instead retained within a fund (so increasing the value of each share but leaving the number of shares held unchanged) or a 'distribution share', where income will be paid to investors on set dates relating to the financial year of the OEIC fund.

‘Shares in issue’

Shares in issue refers to the number of shares of a company or OEIC fund that have been allotted to shareholders.

‘Short position (or short exposure)’

A short position is when an investor borrows a share or other financial instrument (for a fee) and then sells it. The investor does this in the expectation that the price will fall and the share or position can be bought back at a lower price later, thus making a profit. The investor then returns the borrowed shares. Conversely, a 'long position' is the purchase of a similar asset in the belief that its price will rise, with the aim of making a gain from the increase.

‘Spread’

In investment terms, a spread is used to describe the difference between the buying and selling price of an investment (the bid-offer spread). This can vary depending on the demand for the investment and the volumes in which it is normally traded. Collective investment schemes (funds) normally have a set spread between the buying and selling prices.

‘SRRI (Synthetic Risk and Reward Indicator)’

Some funds are riskier than others (ie- have a greater or lesser chance of losing value). The Synthetic Risk and Reward Indicator (SRRI) is a risk rating indicator intended for investors and potential investors. It displays the historic volatility of a fund’s performance and categorises it accordingly. The SRRI's range of values is from 1 (lower risk) to 7 (higher risk). All collective investment schemes (funds such as OEICs and unit trusts) are required to calculate and disclose the SRRI for the scheme. It is important to understand that the risk rating of a fund is not static as it will be calculated on an ongoing basis using the most recent data about a fund.

‘Stamp duty’

Stamp duty is a tax of (currently) 0.5% levied on purchases of shares listed on the London Stock Exchange. With effect from 28 April 2014, stamp duty is no longer chargeable on purchases of AIM and ISDX-listed securities.

‘Stamp duty reserve tax (SDRT)’

SDRT was a tax that was previously chargeable on the value of surrenders and issues of fund units and shares. Although the UK government abolished this tax with effect from 30 March 2014, there are some instances in which SDRT continues to be levied. If an investor redeems fund units ‘in specie’ and receives a non-pro rata share of the fund’s underlying assets, SDRT will arise to the extent that those underlying assets include chargeable securities. SDRT might also continue to arise on sales of units or shares by one investor to another, where the holding remains registered in the same name.

‘Standard & Poor's’

Standard & Poor's is an American financial services company that publishes financial research and analysis on stocks, bonds and funds.

‘Stock selection’

Stock selection is the process by which a fund manager selects stocks (shares) for inclusion in a fund's portfolio.

‘Stock transfer’

Stock transfer is the process of transferring the beneficial ownership of shares/units from one party to another.

‘Subscription share’

A subscription share issued by a company carries the right to be exchanged for ordinary shares at a pre-determined price within a specified period. Holders may have the right to a dividend before the shares are exchanged. Also see 'ordinary share'.

‘Switch’

Switching is the process of moving an investment from one fund to another within the same provider's range of products.


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