Glossary

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Capital
The value of your investment.
Capital gains tax (CGT)
You may have to pay UK capital gains tax on gains you make when you sell, for example, shares. UK tax payers have an annual allowance before they have to pay the tax. Some gains are exempt from CGT so for example you wouldn't have to pay CGT on gains in an Individual Savings Account.
Capital performance
The performance of your investment.
Cash equivalents
Short term investments held instead of cash and, which can be converted quickly back into cash. An example would be investments in a cash fund.
Certificate of deposit
A written certificate issued by a bank or financial institution stating that an amount has been deposited with it for a fixed period of time at a set rate of interest.
Closed-ended fund
A fund which has a fixed number of shares, usually listed on a major stock exchange. The price of shares in a closed end fund is linked to the demand for its shares and the value of its investments. An investment trust is an example of a closed end fund.
Collective investment scheme
A collective investment scheme is a type of fund where investors' money is combined with other investors' money to buy investments. Examples of a collective investment would be open-ended investment companies and investment trusts.
Company shares
An investment representing a proportion of a company's value.
Concentrated portfolio
A fund with a limited number of holdings, typically 30-40.
Contract for difference (CFDs)
A type of derivative that means that an investor can have exposure to the movement of a price of a share or an index or interest rate without physically having to own the share or invest on the index. In a CFD, the contract provides that one party will pay the other party the difference between the current value of an asset and its value at contract time.
Convertible loan stock
Fixed interest stock issued by a company that can be converted into ordinary shares at a future date. In the meantime, they pay interest.
Corporate bond
An investment where investors lend money to a company that borrows the funds for a set period of time at an agreed rate of interest. The company borrowing the money gives the lender a written promise (bond) to repay the loan at the agreed rate over an agreed time. Usually the higher the interest rate the more risky the bond. Corporate bonds are considered to be higher risk than government bonds.
Correction
A word used to describe a general fall in share prices but which is needed to stop investors getting carried away and creating a bubble. A correction brings prices to realistic levels in line with likely profits.
Correlation
A statistical measure showing the relationship between two different types of assets or benchmarks.
Coupon
The rate of interest on a bond.
Credit
A contract where a borrower has an agreement to repay the lender at some date in the future, but is also sometimes used to describe a corporate bond.
Credit default swap (CDS)
A derivatives contract which transfers the risk of a bond issuer defaulting between two parties. The parties form an agreement under which one party pays a fee to the other in return for insurance against the default of a particular bond or index. By doing this, the risk of default associated with the fixed income security/index is transferred from the holder of the fixed income security to the CDS issuer.
Credit risk
The risk that an investor might lose money because of the failure of an issuer to meet its contractual obligations.
Cyclical stock
A share whose performance is closely linked to the economy. Cyclical shares tend to rise when an economy is recovering, but fall markedly on any signs of an economic downturn. An example would be luxury items.