| Glossary of Financial Terms and Abbreviations |
| Personal Finance > Financial Glossary |
Large Cap: See Market Capitalisation.
Leverage: The US term for gearing. LIFFE: This is not a typographical error but the name of the futures market in London. It (nearly) stands for "London International Financial Futures and Options Exchange". See Futures.
Life Insurance: See Term Life Insurance and Whole of Life Insurance. (By the way, life insurance means the same as life assurance. It is just that life assurance lasts until your death, which is a guaranteed event. Life insurance is for a defined period that might, if you are lucky, not include your death.)
Listed Company: A Public Limited Company (plc), listed on a Stock Exchange.
Liquidity: The easier it is to turn an asset into cash, the more liquid it is. Shares are very liquid as they can be sold any weekday at any brokerage. Works of art and homes are not nearly as liquid because you need to find an interested buyer. Since every buyer needs a seller and vice versa, penny shares, which are very thinly traded, are more illiquid than larger capitalisation shares.
London Stock Exchange: Where the action happens. The London Stock Exchange is located in the City and is not only by far the most significant stock exchange in the UK, but the largest in Europe. See Alternative Investment Market.
Margin: 1. Borrowing money to use specifically for buying securities of any kind in a brokerage account. 2. A measure of profitability of a company, like profit margin, operating margin or gross margin.
Market Capitalisation: The total market value of all of a firm's outstanding shares. Market capitalisation is calculated by multiplying a firm's share price by the number of shares outstanding. Large cap, medium cap, small cap refer to shares in decreasing order of market capitalisation. Our daily market cap figures uses the daily close price of a stock times the number of outstanding shares.
Medium Cap: See Market capitalisation.
Message Board: Invaluable means of exchanging information and ideas with other investors on the Internet. Remember, though, make all investment decisions on the basis of your own research, not someone else's tip.
Message Board Stroller: A surfer who gets paid for patrolling message boards, fostering discussion and making sure things remain civilised.
Minorities: Profits due to the outside shareholders of a subsidiary company. It is also that element of a company's balance sheet that is funded by outside equity interests.
MIG: Mortgage Indemnity Guarantee. If you borrow more than 75% of the value of your house, you'll probably get stung with one of these. It insures the lender against you being unable to pay. Even though it's you that pays this premium, it still won't stop you ending up at the Salvation Army soup kitchen.
Mis-Selling: Selling a financial product to a customer which is not in their best interests. Mis-Selling happens because of the commission-based payment structure under which Independent Financial Advisers operate. The Financial Services Industry looks set to pay out over £11 billion of compensation for pensions mis-selling from the late eighties and the nineties. FSAVCs and Personal Pension Plans were heavily mis-sold during this period. The next likely mis-selling scandal looks set to break around mortgages and epecially endowment mortgages which provide notoriously poor value. See Personal Investment Authority for contact details of the ombudsman.
Money Purchase Scheme: Pension schemes where you build up a pot of cash, out of which your pension will be generated, also known as a defined contribution scheme. Personal Pension Plans and AVCs work on this kind of system, as do an increasing number of occupational pension schemes. This pot of cash has to be used to buy an annuity.
Mortgage: A loan to buy a home, where you put up the property as a security against you paying back the loan. Mortgages offer by far the best long-term interest rates of any loan because they are the least risky of loans. (You can't make off with your house, no?)
Motley Fool: A multimedia, educational company, brought to life by the many contributions its users make on its Internet message boards. The Motley Fool aims to tell the truth about investing, make making money simple and ensure the whole experience is as much fun as possible. Its tag line sums it up: 'To educate, amuse and enrich'. See Fool, Foolishness, Wisdom, Zamboanga.
Mutual Fund: The US equivalent to our unit trust.
Mutual Society: An organisation set up and owned by its members and run for their benefit. Building societies, friendly societies and some life insurers are examples of mutual societies. See Demutualisation.
Nasdaq National Market: A national US stock market where trades are made exclusively via computers. The second largest market in the country, the Nasdaq is home to many high-tech and newer firms, including Microsoft. It now has its own website for UK investors: http://www.nasdaq.co.uk
Negative Equity: Bought a house for £80,000 and now it's only worth £60,000? Bad luck - that's £20K of negative equity you're sitting on there. See Gearing.
Net profit: Usually enough to support the Chairman's gross habits. What's left for the shareholder after everyone else has taken their cut.
New Issue: The first time a company is floated on the stock market. Selling your company, or a part of it, to outside investors is a way to raise money for expansion plans. Also known as an Initial Public Offering, or IPO.
New York Stock Exchange (NYSE): The largest and oldest stock exchange in the United States, this Wall Street haunt is the one frequently featured on television, with hundreds of traders on the floor staring up at screens and answering phones, ready to trade stocks upon command from their firms.
Nil Paid: Shares on which no payment has yet been made but which are being dealt in on a stockmarket. These shares usually arise from a new issue or a rights issue. Because the price at which a rights issue is made is at a discount to the market price of the existing shares, the rights issue shares have a value in their own right.
Nominee Account: A type of account in which execution-only stockbrokers tend to hold shares belonging to clients, to make buying and selling of those shares easier. Among other things, though, it does mean that any shareholder perks are unlikely to be enjoyed by the investor.
