Top stocks & shares ISA recommendations
Newton Real Return
Fund manager: Iain Stewart
"This fund invests across different asset classes and manager Iain Stewart will focus solely on producing a positive absolute return. The fund is targeted to outperform cash by 4% on a rolling three-year basis."
Jupiter Strategic Bond
Fund manager: Ariel Bezalel
"With interest rates likely to remain low, corporate bond funds can provide an opportunity to boost income. This is a ‘go anywhere’ bond fund, meaning that it will invest across the fixed-interest spectrum, while aiming to achieve high income with the prospect of capital growth."
Trojan Income fund
Fund manager: Francis Brooke
"Dividend-yielding shares currently look a good place to provide an attractive total return of income plus potential for capital growth. The fund is positioned for the long term and focused on robust companies with steady and increasing dividend yields."
Fidelity Multi-Asset Strategic
Fund manager: Trevor Greetham
"The fund aims to achieve long-term capital growth by investing in a range of global asset classes, providing exposure to bonds, equities, commodities, property and cash. Performance since launch has been very good."
Henderson European Special Situations
Fund manager: Richard Pease
"At a time when many investors are shunning European equities, there are contrarian opportunities for brave investors in 2012. Manager Richard Pease’s long-term, buy-and-hold strategy focuses on out-of-favour companies that have an attractive business model and strong pricing power."
Aberdeen Emerging Markets
Fund manager: Aberdeen management team
"While risk-aversion and inflation concerns saw emerging market stockmarkets suffer heavy falls in 2011, the crisis of doubt from Western investors means these markets are now on cheap valuations. The fund provides widely diversified exposure across different developing regions."
An individual employed by an institution to manage an investment fund (unit trust, investment trust, pension fund or hedge fund) to meet pre-determined objectives (usually to generate capital growth or maximise income) in prescribed geographic areas or investment sectors (such as UK smaller companies, technology or commodities). The manager also carries the responsibility for general fund supervision, as well as monitoring the daily trading activity and also developing investment strategies to manage the risk profile of the fund.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
All investment returns are measured against a benchmark to represent “the market” and an investment that performs better than the benchmark is said to have outperformed the market. An active managed fund will seek to outperform a relevant index through superior selection of investments (unlike a tracker fund which can never outperform the market). Outperform is also an investment analyst’s recommendation, meaning that a specific share is expected to perform better than its peers in the market.
An interchangeable term for shares (UK) or stocks (US). Holders of equity shares in a company are entitled to the earnings and assets of a company after all the prior charges and demands on the company’s capital (chiefly its debts and liabilities) have been settled. To have equity in any asset is to own a piece of it, so holders of shares in a company effectively own a piece proportionate to the number of shares they hold. (See also Shares).
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.
Corporate bonds are one of the main ways companies can raise money (the other is by issuing shares) by borrowing from the markets at a fixed rate of interest (the reason why they are also known as “fixed-interest securities”), which is called the “coupon”, paid twice yearly. But the nominal value of the bond – usually £100 – can fluctuate depending on the fortunes of the company and also the economy. However it will repay the original amount on maturity.
If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.
A term applied to raw materials (gold, oil) and foodstuffs (wheat, pork bellies) traded on exchanges throughout the world. Since no one really wants to transport all those heavy materials, what is actually traded are commodities futures contracts or options. These are agreements to buy or sell at an agreed price on a specific date. Because commodity prices are volatile, investing in futures is certainly not for the casual investor.