Jargon, the biggest conversation killer in financial history. Here at WiseAlpha we want to open up the corporate bond market to the everyday investor so you can make your money work as hard for you as you did for it. To do this it’s important to get your head around the financial terminology used, so here it is, our jargon busting investment glossary…
Interest that has accumulated but has not yet been paid. Interest accrues from the date the last interest payment was made until it is paid at the next interest payment date.
A bond is a loan issued by a government, company or other institution. Instead of taking a loan out through a bank, the borrower approaches investors for money (capital). The issuer promises to pay a fixed rate of interest (a coupon) for a fixed period at regular intervals until maturity, upon which they will repay the original loan or capital back to the investors (bondholders).
A capital gain is the profit made on the face value of an investment purchased. Any income that may have also been earned is not included.
Compound interest simply means earning interest on the interest you’ve already earned by reinvesting it.
The interest rate agreed by the borrower and paid at a predetermined frequency. Most bonds pay coupons semi-annually, while some pay quarterly, and others annually.
This means owning a wide range of different investments to avoid single investment risk. In other words, not having all of your eggs in one basket.
Floating Rate bonds pay interest that is a specified margin above the LIBOR rate (the basic rate of interest used in lending between banks). This means the interest on the bond changes in line with the interest rate.
The Financial Times Stock Exchange (FTSE) is a list of companies you can invest in on the London Stock Exchange. FTSE 100 is the top performing 100 companies.
An Innovative Financial ISA (IF ISA) is something we offer here at WiseAlpha that allows you to hold up to £20,000 of bonds this tax year as a tax free investment.
An investment strategy is the actions taken and investments made to help reach a predetermined goal.
An Individual Savings Account (ISA) is a government scheme allowing you to hold funds/investments free of tax on dividends, capital gains and interest. They come in many forms including cash, stocks and shares, lifetime ISA and innovative finance.
How quick and easy…
As with all investments your capital is at risk. WiseAlpha members purchase Notes which are fractions of individual corporate bonds.