Cash ISA
A Cash ISA is not a product on its own, it's a tax wrapper around a savings product, which protects your interest from being taxed.
Cash ISAs generally pay a higher interest rate than normal savings accounts, and the interest earned is free of income tax.
Funds
The investment funds available through Nationwide are Unit Trusts or Open Ended Investment Companies (OEICs). These are collective funds that allow private investors to pool their money in a single fund, and benefit from professional fund management
Individual Savings Account / ISA
ISA were launched by the Government in April 1999 to encourage people to save and invest. They are designed to help the value of your money grow over time and/or provide an income.
Each tax year everyone over the age of 16 has an ISA 'allowance', which sets the maximum that can be saved within the tax wrapper from April to April.
There are two types of ISA, a cash ISA and a Stocks and Shares ISA. You have to be 16 (18 for Stocks & Shares ISAs) and a UK resident to be eligible for an ISA.
Investment objective
Your investment objective refers to what you want to achieve by investing. Examples can include investing for long term capital growth, or investing to provide a variable/fixed income
Investment portfolio
An investment portfolio is where you invest in a range of investments or funds. This helps to spread the risk of investing – so that you are not putting all your eggs in one basket.
Investment products
This is the collective name we use for Stocks & Shares ISA and investment fund.
ISA allowance
Each tax year, you have an allowance that you can use for your ISA. For this current tax year (6 April 2012 - 5 April 2013) your maximum is £11,280, of which you can save up to £5,640 as a cash ISA, with the remainder in a Stocks & Shares ISA, or you can invest your entire allowance of £11,280 in a Stocks & Shares ISA.
Long term investments
We believe customers should approach every investment with the view of investing for at least five years. This is because you will be investing in assets that can go up and down in value, and therefore they are not suitable for investing in over short periods of time.
Lump sums
A lump sum investment is where you invest a one off payment on an ad hoc basis without setting up a direct debit or monthly payment. You can invest in more than one fund at a time, subject to the minimum investment amount.
Management style
Active managed: The fund manager will be selecting the assets that they believe will perform the best. This will be based on research and would typically include the potential prospects of stocks and shares, and economic conditions. The fund manager will generally aim to out perform a specified benchmark, often an index or combination of indices. These are typically more expensive than passively managed funds.
Multi Manager: A Multi-Manager fund is slightly different. Instead of investing in actual assets, Multi Manager funds invest in funds provided by their own business and other fund management companies. The multi manager will aim to build a portfolio of the best funds available in the market, often including funds that are only available to professional investors. A research team will look at economic conditions, with the aim of identifying which assets should be included in the portfolio. Due to the additional layer of fund management, they are more expensive than actively managed funds.
Passive managed: Often called 'index tracking funds'. The fund's aim is to track the performance of a specified index as closely as possible. The fund manager will typically put in place a series of systems and controls to ensure that the fund performance is in line with the index it is tracking.
Monthly payments
Monthly payments may also be called 'regular contributions'. This is where you make a monthly investment by direct debit into the selected fund. You can invest in more than one fund each month, subject to the minimum investment amount.
Open Ended Investment Company / OEIC
OEIC investment funds are set up using company law. The fund manager will set up a company that is separate from their own company. The OEIC must have an independent depositary, such as a bank, who is entrusted with the safekeeping of the assets that the fund invests in. When you invest in an OEIC you get a specified number of shares.
Past performance
Past performance over 1, 3 or 5 years will give you an indication of how your chosen fund has performed against a sector benchmark.
A sector benchmark is an industry standard against which the performance of an individual investment fund is measured against its peers. There are a number of benchmark providers, for example the Investment Management Association (IMA).
Past performance is not a guide to future performance, and should not be used as the only selection criteria when choosing funds.
Stocks & Shares ISA
A Stocks & Shares ISA is not a product on its own, it's a tax wrapper around an investment product, which protects your investment from being taxed.
By using a stocks & shares ISA you invest in longer-term pooled investments such as unit trusts or open-ended investment funds.
Tax year
The current tax year runs from 6 April 2011 to 5 April 2012
Unit Trust
Unit Trust investment funds are set up using trust law. The fund manager will set up a trust that is separate from their company and will appoint an independent financial institution, such as a bank, to act as the trustee. The trustee's role is to look after the assets that the fund is invested in and to monitor the fund manager. When you invest in a Unit Trust, you get a specified number of units.
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