A

Ammortisation: The paying down of debt. Or, the reduction in an asset's value due to the effect of inflation.
Annuity: A contract (usually with an insurance company) that provides for the regular payment of income in exchange for a lump sum. May be either permanent or temporary. When interest rates are low annuities offer lower rates. Once an annuity contract has been purchased and settled it usually cannot be amended.

B

Bed & Breakfasting: The act of selling a share to re-purchase it the next day, typically to re-establish the price for Capital Gains Tax (CGT) purposes.
Bid: The bid price is the price paid to a seller of units to an investment house. The bid/offer spread is the difference between this price and the price at which the same units would be sold by the investment house.
Bear Market: A 'bear' market is one which is falling over a period of time.
Bull: A 'bull' market is one which is rising over a period of time.

C

Capital Gains Tax: The tax paid on the sale of qualifying assets in excess of one's CGT nil rate band.
Capitalisation: The value of a company expressed as its share price multiplied by the number of shares in issue.
Correction: When a market moves to correct a previous abnormality in its value, either up or down.

D

Dividend: The income produced by an asset.
Dead Cat Bounce: A short-lived recovery in share prices (typically after a rapid drop in prices).
Deflation: The downward movement in the price of goods and services.

E

Equity: What something is worth net of associated debt. (In the case of a house, this is the value minus any mortgage).
Escrow: Where something is held in trust until specified conditions are fulfilled.

F

Final Salary: The colloquial term for a defined-benefit pension scheme. In a final salary scheme, members' benefits are defined by the number of years service, their final salary (hence the term) and the basis of the scheme in terms of the amount of pension entitlement earned for each year of service. For example, many public sector schemes are 1/80ths schemes. Thus, after 40 years of service the member would be entitled to 1/2 their salary as a pension. NB Not all salary/benefits is pensionable.
For Value: A payment 'for value' means one that has been cleared (if a cheque) or has arrived as cleared funds, as in a bank transfer. When providing your solicitor with your deposit to purchase a property he will require it 'for value' to protect the interests of other clients who have money in his client account.
FTSE-100: The Financial Times Stock Exchange 100. The 100 leading shares on the UK market by capitalisation (value).
Fundamentals: Conditions that affect the value of something (asset value/debt/loan obligations/earnings).

G

GDP: Gross Domestic Product. The measure of the economic activity of a country.

H

Hedge Fund: A fund for private investors that uses sophisticated strategies to maximise returns for investors including debt (leveraging), hedging and derivatives trading.
Hedging: Making an investment to decrease the risk of price fluctuations of an asset.

I

ISA (Individual Savings Account): The successor investment to PEPs and TESSAs. A convenient and straight-forward way to shelter money from the taxman. The name has led to much confusion because an ISA can hold either investments, savings or both.
Interest: The price paid for the use of borrowed money, or, money earned by deposited funds
Inflation: The upward movement in the price of goods and services.
Inheritance Tax: Tax paid on a person's estate.
Investment Bond: A single premium whole of life assurance policy. Usually used as an investment vehicle for which it is well suited in terms of certain favourable attributes. Also, a very convenient and appropriate inclusion as the property of a trust.
Investment Trust: A company which invests in other companies' shares. Because no new shares are created to reflect demand, the added variable of the price of the investment trust itself can result in the underlying assets effectively being purchased at either a discount or a premium.

J

Junk Bond: A bond offering a high yield as an induecement to investors to accept a SUBSTANTIAL risk.

K

Keynesian: John Maynard Keynes was an economist who suggested that government can stimulate demand in a recession by borrowing money to build roads, schools and hospitals, etc. thereby giving rise to the term 'Keynesian economics'.

L

Leverage: Debt. To leverage an aquisition is to buy it with other peoples' money. Or, to multiply the benefit of an aquisition by exploiting the synergy or overlapping assets/skills contained within the aquired company.
LIBOR: London Interbank Offer Rate. The rate at which banks lend money to each other.
Limited Liability: The basis on which most companies trade. The liability of a shareholder is limited to their investment even though the business may incur debts that are higher. For a new start company, limited liability can be a handicap as in the absense of a trading record it may be difficult to obtain credit.
LTV: Loan To Value. The percentage that the buyer's deposit represents of the value (not purchase price) of a property.

M

Mid: The Mid price is the price of a share quoted in the newspaper. Typically, this is midway between the offer price and the bid price.
Money Purchase: The type of pension scheme in which an accumulated fund (usually a personal pension plan) is used to purchase an annuity (the pension income). Variables that affect the pension income include the member's age, annuity rates and the fund value. As annuity rates are heavily influenced by interest rates there is great deal of uncertainty about the level of benefits such an arrangement will actually provide.
Mortgage-backed-security: The result of the securitisation of mortgage accounts into something that can be sold on to another institution, thus freeing up funds to lend to new borrowers.

N

Nationalisation: The act of taking land or other assets into state ownership.
Negative Equity: Where the value of an asset is less than the debt secured against it.
Net Asset Value: The value of a company in terms of the cash in the bank and the value of any other assets it owns.

O

OEIC: Open Ended Investment Company. A collective investment which combines the attributes of unit trusts and investment trusts.
Open Market Option: A personal pension plan holder's right to purchase an annuity from whichever company is offering the best rates.
Option: A contract giving the holder the right or 'option' to purchase an asset on pre-determined conditions such as price and date. A 'call' option gives the right (but not the obligation) to purchase an asset at a given time in the future. A 'put' option gives the buyer the right (but not the obligation) to sell an asset at an agreed upon price.

P

Pension Plan: A hackneyed term which can be applied to any pension arrangement. Types of pension include, state, personal, occupational.
PEP (Personal Equity Plan) The predecessor to stocks and shares ISAs. PEPs are now classed as ISAs.
Preference Shares: A class of share that usually does not give voting rights but offering a superior dividend, usually ahead of that given to ordinary shareholders, with preferential eligibility as a creditor of the company in the event of it's liquidation.
Ponzi Scheme: A fraudulent 'pyramid' type investment in which early investors are paid out high returns from money given by later joiners. Named after the Italian American Charles Ponzi, these schemes fail as soon as any reduction in confidence causes new investments to dry up. As there is no real investment at the heart of the scheme (investors are being paid out with new investors' money) these schemes always collapse.

Q

Quantitative Easing: The act of a central bank (e.g., the Bank of England) causing more money to enter circulation either by purchasing their government's debt or by physically printing money. The risk is hyperinflation, especially when combined with very low interest rates.
Quartile: Investment funds are often ranked by their 'Quartile'. Thus, a 1st Quartile fund is in the top 25% by performance against its peers. By contrast, a fund that is 4th Quartile is doing poorly.

R

Recession: A period of two (or more) consecutive quarters in which economic output falls. (The US has a different definition of recession and for this reason direct comparisons between the UK and US economies is difficult).
Reinsurance: The practice of spreading a risk amongst (often specialist) insurance companies.

S

Securitisation: Selling one or more mortgage accounts to another institution.
Short-selling: The technique of borrowing an asset from its owner to sell in the belief that the price will drop. The asset is then repurchased and returned to the lended with the seller pocketing the difference. So-called 'naked short-selling' is where the seller does not even confirm that he is able to borrow the asset in the first place.
SIPP: (Self Invested Pension Plan) A type of personal pension which allows the member to include within the arrangement investments from the full range of Inland Revenue approved investments.
Stagflation: The very uncomfortable situation in which prices are rising (inflation) in an economy that is not growing (stagnation).

T

TESSA (Tax Exempt Special Savings Account): A now defunct predecessor to the ISA.
Trust: An arrangement in which the settlor places assets (securities/property/money) into the management of trustees for the benefit of another. An oft encountered example is the will trust in which the testator (the person making the will) arranges that on his death a trust is created to manage certain of his estate. An example is where income is given to his wife during her lifetime but on her death the assets then go to his children.

U

Underwriter: The person assuming the risk. In the case of a rights issue, it is the institution that pledges to purchase a certain amount of the share if others do not. In the case of life assurance, it is the person who reviews the application and assesses the risk.
Unit Trust: A collective investment scheme dating from the 1930's and still very popular. Investors purchase units the price of which reflects the value of the scheme's underlying assets. Because the manager creates/cancels units to reflect sales and redemptions the unit price is not dependent on demand.
Unwind: The act of reversing a deal.

V

Valuation: The professionally arrived at indication of the market value of a property on the basis of a willing seller and a willing buyer.

W

Warrant: A contract entitling the holder to buy an asset at a stated price. Colloquially, it can also be used of an investment that may offer further perceived benefits. E.g., 'Buying shares in a company that does business with China is a warrant on the Chinese economy'. In other words, buying the shares of a local company that does business with China is like buying shares in Chinese companies but without the hassle.
Winding-up: The closure of a final salary pension scheme by the trustees. During this process members of the scheme are obliged to transfer the Transfer Value that the trustees have offered them to another provider.
Winding-up Order: An Order secured by a creditor of a limited liability company.

X

Y

Yield: The amount of dividend income when expressed as a percentage of the price of an investment

Z