With this type of investment, your money is invested in a portfolio which is actively managed by a single manager or team of managers.
Active managers constantly monitor companies, economic conditions and markets and rely on research, forecasts, and their own judgement to make investment decisions.
The opposite of active management is “passive management” or indexing.
Annual management charge (AMC)
Funds levy an AMC from which they make their profits and cover the ongoing annual costs of running the fund. In most actively managed funds it is around 0.75%.
New to investments? Read our guide to understanding the basics of investing.
This involves deciding what proportion of an investment portfolio is to be invested in different asset categories, such as stocks, bonds and cash.
This is the amount of the original investment.
Capital Gains Tax (CGT)
CGT is a tax that may be charged on the profit or gain made when selling, gifting, transferring, exchanging or disposing of an asset.
To invest without jargon, go here
A cash ISA is a simple tax-efficient account in which money can be held. You can hold money in a cash ISA with a bank or building society.
Under recent changes to the ISA rules you can now put your entire ISA allowance (£20,000 as of April 2017) into a cash ISA in the current tax year.
For more information on ISAs as an alternative saving option, please click here.
What is an ISA?
Corporate bonds are issued as a way of raising money for firms. They are essentially a certificate of debt issued by major companies.
They are popular among investors, typically offering lower risk and higher income than shares.
A derivative is anything that is valued based on upon some other asset. The name reflects the fact it derives its value from something else.
A dividend is a distribution of a portion of a company’s earnings. The amount is decided by the board of directors to a class of shareholders.
Avoid the investment pitfalls with Annie Shaw's guide to the common mistakes investors make
When you buy shares in a company, you have an equity stake in a business; this is why shares are also known as equities.
If you buy equities, you hold a share in that company and are entitled to dividend payments and voting rights. While shares have historically outperformed safer investments, such as bank accounts, they are seen as the riskiest asset class.
Fixed interest securities
These are a way for companies or governments to raise money by borrowing money from investors.
Securities issued by the UK Government are also called “gilts” or “gilt-edged securities”. Securities issued by companies are known as corporate bonds.
The FTSE (which originally stood for Financial Times Stock Exchange) is the common name for a set of British stock market indices that show how well companies listed on the London Stock Exchange (LSE) are performing.
Curious about what Saga Share Direct can offer you? Find out more today...
How does the stock market work?
This is the financial professional who is in charge of an investment fund and responsible for the day-to-day running of that fund.
They will make decisions about which assets to invest in and must supervise in a way consistent with their stated goals, while working to maximise returns to benefit investors.
Fund of funds
With a fund of funds, one manager picks a whole range of investments for you based on the amount of risk you are happy to take.
Gilts are securities issued by the UK Government to raise public funds.
Index-tracker or tracker funds or passive funds
These funds, such as the FTSE 100 Index, invest in most of the same shares – and in a similar proportion – as the index they are tracking. They aim to produce a return in line with a particular market or sector.
Seven signs you need to get on top of your finances
A charge imposed by a fund management company to cover administrative and marketing costs.
An investment fund is a way of investing your money alongside other investors to buy a wider range of investments than you would be able to achieve on your own.
Avoid these investment mistakes
Lump sum investments
These are one-off payments into an ISA or unit trust investment.
These are regular monthly contributions into your chosen investment fund.
What is investment risk?
Multi manager funds
These investment funds allow you to invest in several different funds through one single investment.
Open-ended investment companies
OEICs operate in a similar way to unit trusts, except the fund is actually run as a company that issues shares to investors.
A portfolio is a holding of investment funds. As an investor, you are seeking to create a balanced portfolio which consists of different types of assets, such as cash, shares, corporate bonds and property.
The share price is the price of a single share of a number of saleable stocks of a company, derivative or other financial asset. Share prices can fluctuate on a daily basis.
Stocks and shares ISA
You can put money in a stocks-and-shares ISA with an investment provider.
You can invest your full ISA allowance (£20,000 from April 2017) in a stocks-and-shares ISA.
Over the longer term, you are likely to earn better returns by putting your ISA allowance in stocks-and-shares than in cash.
Subscribe to Saga's FREE weekly email newsletters for more of the articles you love, delivered straight to your email inbox.
Unit trusts are a form of collective investment that allows investors to pool their money.
The yield is the income return on an investment.
There are different types of yield. For example, funds paying a dividend have a historic yield, while funds paying an interest distribution have a distribution yield and an underlying yield.
The new look Saga Magazine is available now for just £12 for 12 issues...
Next article: Different types of investment >>>