This is a debt security where the interest paid to the holder floats up or down in accordance with a benchmark rate of interest (such as LIBOR) rather than being fixed. Since the coupon payments are less predictable for the issuer with this type of security they are less common than simple fixed income securities. …
This is a metric used to get a view on whether a firm is over, or under, valued in cash flow terms. It compares the annual free cash flow per share to the price per share as a percentage. So if FCPS is 10p and the share price is 100p, then the FCF yield is …
This is the proportion of a firm’s total shares that can be freely bought and sold and are therefore not held solely for directors, other firms within a group, or even the government. This is an important number because if a firm has a low free float the shares may be very volatile if there …
The analysis of a company, sector or even economy from the bottom up, often using ratios. This approach is common amongst “value investors” who believe that inefficient markets present opportunities to buy stocks for less than they are really worth. READ MORE
Most funds invest directly in a particular asset class whether that is shares, bonds, property, currencies or commodities. However fund of funds specialise in investing in the best funds instead. They focus on selecting the best managers and allocate their capital to those funds. As a result of this two-tier approach, which means an investor …
These are derivatives that try to mirror the movement in an underlying asset without requiring a buyer or seller to actually take or make delivery. This can be useful for hedging purposes. For example you might hold a large portfolio of FTSE 100 shares and be worried about a short term price dip. Rather than …
This is the cash flow that is left once a firm’s operating cash flow (the cash it generates from the heart of its trading operations as shown towards the top of a cash flow statement) has been adjusted for non-discretionary payments such as the interest on debt and the tax bill. It is also common …
These are the long-term assets of a business intended for revenue generation and not onward sale. Examples include land and buildings, motor vehicles and computer equipment. Usually they are recorded in a firm’s balance sheet at their acquisition or purchase price and then gradually written off via a depreciation charge against profits at a rate …
These are increasingly rare pension schemes (unless you are a government employee) where an employer guarantees to link your pension to your final salary whilst you were in employment. The reason they are rare is that this puts all the risk onto an employer in terms of whether they will have the funds available to …
Someone paid to run an active or passive fund. Active funds are those where a fund manager makes decisions about what should be held within the fund according to an investment mandate. They are free to buy and sell securities on behalf of investors in order to meet the objectives of the fund (for example …
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