10 Scary finance terms explained for first-time investors

Investing for the first time can feel quite daunting. Trying to figure out where and how is best to invest for you, let alone decoding industry jargon and confusing terms and conditions. To take some of the mystery out of investments, here are 10 scary finance terms explained for first-time investors.

1) Compounded interest

Compound interest is when interest is earned not only on the initial investment, but also on any interest earned since the account was opened. Effectively it is interest earned on top of interest and therefore “compounds”.

2) Capital protection

Capital is a finance terms for ‘money’ so when an investment product offers ‘capital protection’ it means that your initial investment is protected from any loss on the invested amount. It is a guarantee that you won’t get back less than what you put in.

3) Annual management charge

Annual management charge is a fee that is paid to providers like Unity Mutual in exchange for a one year investment.

4) Investment Bond

An Investment Bond allows you to invest a lump sum into stocks and shares or other investment fund. How much you get back depends on how well the investment has done, however the idea is that over the long-term your investment will increase in value. Therefore the value can fall as well as rise, you could get back less than has been paid in.

5) ISA

ISA stands for ‘individual savings account’. It is a tax-free way of saving or investing with a set limit every year of how much you can put into it.

6) Guaranteed return

A guaranteed return means that you receive a guaranteed rate of return on your investment for a fixed period of time.

Unity Mutual’s Guaranteed Investment Bond for example is a 5 year investment that gives you the peace of mind knowing exactly what interest you’ll earn whilst your initial investment is protected.

7) Equity Fund

An Equity Fund is a fund that invests primarily in stocks and shares. When you invest with Unity Mutual, we will invest your money in stocks and shares on your behalf.

8) Valuation

Valuation means working out what your investment is currently worth.

9) Risk indicator

The risk indicator shows how much risk the investment carries. Unity Mutual measures their product risk on a scale of one to seven, taking into account where the money is invested and the current guaranteed return.

10) Reduction in Yield

The Reduction in Yield (RIY) shows what impact the total costs you pay will have on the investment return you might get. The total costs take into account one-off, ongoing and incidental costs.

If you would like to find out more about investing head over to our savings for you page or give us a call on 0161 214 4650 to speak to one of our friendly members of staff if you need anything explaining further. We’re happy to help!

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