FINANCIAL
GLOSSARY : I
Illiquidity
The difficulty
of changing your investment back into cash.
Income
share
Class of share
within a split capital investment trust that receives a high dividend
yield.
Indemnity
insurance
An Insurance which
is designed to protect a mortgage lender against the risk of you defaulting
or not being able to repay the mortgage. The policy is usually imposed
upon by the lender at the start of the loan and the premium payable
is determined by the level of perceived risk to the home lender of
you defaulting on the loan.
Independent
financial advisor (IFA)
An investment
adviser who must consider to survey the whole financial services market
for a product that best suits your particular circumstances. They
are bound by their profession's rules to give independent advice.
Index-linked
investment
An investment
that increases in value each year by the rate of inflation or by a
fixed percentage above inflation. Index-linking is mostly associated
with income-producing investments, such as, government issued gilts.
Individual
savings account (ISA)
The new tax-exempt
savings scheme launched in April 1999 as a replacement for the personal
equity plan (PEP) and tax-efficient special savings scheme (TESSA).
ISAs can be used to invest in a very wide range of investments and
consist of three components: cash (bank and building society accounts
and National Savings), insurances (investment-type insurance plans)
and stocks and shares ( Unit Trusts, OEICS, investment trusts, direct
investment in shares, corporate bonds and gilts). From 2000-01 the
annual investment limit is £5,000.
Inflation
The general increase
in prices over time. It has the effect of reducing the buying power
of money. The most common measure of inflation is the retail prices
index (RPI).
Inheritance
tax (IHT)
This is a tax
that is levied on the value of your estate (all the assets you own)
when you die. You only pay inheritance tax (at a rate of 40%) once
your estate value exceeds a certain limit - for the tax year 2001-2002
the limit is £242,000
Initial
Public Offering (IPO)
The term used
in America for a new share issue by a company coming to the stock
market for the first time.
Insider
dealing or insider trading
This refers to
the illegal use of privileged information which, if made public, would
significantly affect the share price. For example, if someone knows
that a company is about to make an announcement which will affect
the price of its shares; it would be an insider dealing if he/she
uses that information to buys or sells shares in advance of the announcement
to make a profit.
Institutions
These are organisations
which are in the business of holding assets, such as, pension funds,
unit trusts and insurance companies.
Intangible
asset
An intangible
asset is an asset that you cannot touch but appears on the balance
sheet, such as, brand name, patent or copyright.
Interest
cover
The number of
times the interest payments on debt can be covered by the company's
profits.
Intestacy
Refers to dying
without making a will. A situation where a set procedure is used to
distribute your assets rather than how you wanted to.
Investment
club
A group of individual
investors who club together to buy shares on a collective basis and
then share the profits made. This has the advantages of reduced transaction
costs, shared knowledge and diversification.
Investment
trust
Investment trusts
are companies whose business is to investment in the securities of
a wide range of other companies. Like unit trusts, they pool together
the money of many investors in order to invest it in a portfolio of
companies which will be more varied than what small investors could
achieve on their own.
Investment trusts
are closed ended, which means that they have a fixed amount of capital
which is divided into shares and then purchased by investors. They
pay dividends to shareholders from profits which arise from their
investment income.
