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ARBITRAGE

In financial markets small pricing anomalies can arise which some traders like to exploit. These are called arbitrage opportunities. For example, the same contract might briefly be priced slightly differently in two parts of the global market. A trader will buy the contract in the market where it is cheap and sell it where is …

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AUDITOR

It is a legal requirement that most companies have their accounts certified as being “true and fair” and prepared in accordance with the relevant legislation. This is the job of an auditor. The job is typically done by a firm of accountants appointed by the firm with the report that they prepare being sent to …

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ABSOLUTE RETURN FUND

Most traditional funds make money when markets are rising and lose it when they are falling. As such they are judged by the returns that they achieve relative to their peer group. However absolute return funds are judged on their ability to generate positive returns regardless of market conditions and the performance of other funds. …

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ADVISED PORTFOLIO

This phrase describes a comprehensive stockbroking service where you are the manager of your investment portfolio. A broker will provide advice on the design and construction of a portfolio and its on-going management plus provide individual stock recommendations. READ MORE

ALPHA

This is the amount of added value that a fund manager brings to a portfolio that can be ascribed to their stock picking skills. It is the gain above and beyond the one that an investor could expect from a portfolio based simply on the overall direction of the market and the extent to which …

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AMORTISATION

This describes the way a firm writes off the value of an intangible fixed (long-term) asset over its remaining useful life. For example if a firm has a software license worth £100m and the directors decide it has a useful life of ten years, then each subsequent profit and loss account will bear an amortisation …

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ACTUARY

An important part of managing a pension fund is being able to forecast key variables such as how long people will live in retirement, what their pension will cost the fund and what sort of investment returns the pension fund can earn on its assets. Actuaries are employed to make this type of estimate. Typically …

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ASSET CLASS

A general term used to describe very broad investment categories. Typical asset classes could include cash, property and shares. The first step in diversifying wealth is to ensure that it is spread across different asset classes. READ MORE

ADVISED DEALING

An entry level stockbroking service where a client manages their own portfolio. A broker typically offers advice on single securities and funds rather than the composition or suitability of an entire portfolio. This service level suits investors who take an active interest in the market and are happy to be directly involved in making their …

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AIM

The London Stock Exchange alternative investment market (AIM) is a market place for small, fast-growing firms that don’t qualify for a full listing but that want to raise capital from the public. It helps these younger firms to gain recognition and also raise capital. Aim shares tend to be more volatile than their main market …

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