Glossary

The annual percentage fee charged by the asset managers for their investment management and administration services for the fund. It is deducted from the fund value and therefore reflected in its unit pricing.  The charge varies depending on the funds you choose to invest in.

See also OCF and price per unit.

This is when something is calculated on a yearly basis. If it costs £20 million a month to run a business, the annualised amount is £20 million x 12, or £240 million. Data is often compared on an annualised basis by stating the percentage increase or decrease over a year, for example the rate of inflation.

Benchmarks are made up of a large number of similar companies to those which the investment strategy of the fund allows it to select investments from. A benchmark is used by asset managers and investors to compare a fund’s performance and asset breakdown against. This provides a useful point of reference to check whether the fund is meeting its performance objectives.

Bonds are issued by companies or governments to raise capital. A bond investor is making a loan for a specified time (typically 1-10 years) in exchange for regular interest payments (the coupon). When a bond reaches maturity, the issuer pays back the initial sum borrowed (the face value of the bond) to the holder but, until then, the bond can be bought or sold. The price of a bond will rise and fall depending on many factors including company or industry news, geopolitics, the economic outlook, interest rates and inflation.

Simply put, a bundle is a collection of different funds. Our independent Investment Committee put these bundles together based on risk, but they only include funds that exist on The Big Exchange, so you know they'll be making a positive impact too. By investing in multiple different funds, you are spreading your chance of losing money.

When you invest through The Big Exchange into funds (which in turn invest in listed companies or in bonds) we refer to this money as your capital.

The FCA requires us to carry a suitable risk warning or disclaimer for investment products, therefore you'll see this disclaimer or "risk warning" around the Big Exchange website. It is something that we are required to let you know when making an investment decision. It is important for you to understand that when investing you are accepting the risk that your investments can go down in value as well as up, therefore you could get back less than you invested.

The principle of compounding applies to both savings and investments. In simple terms, it means reinvesting any income earned alongside your initial capital. This gives it the potential to grow over time, although there is no guarantee since investments can fall as well as rise in value. Accumulation units in a fund automatically reinvest any dividends or interest so they will be added to your holding instead of being paid out.

These are payments made by companies to their shareholders (including equity funds on The Big Exchange). Equity funds in turn pay out the dividends they receive to their unitholders. Bond funds differ as they pay out interest received from the bonds they hold.

Dividends are usually paid out of profits so if a company is trading  well, it is more likely to increase its dividend year on year, Conversely, dividends can be cut if a firm falls on hard times, although most try to avoid this if possible as it signifies a lack of confidence in the prospects for their business. Companies in mature industries often pay higher dividends than those with attractive growth opportunities in which to reinvest their cashflows. On our fund details pages you will find a dividend yield figure, expressed as a percentage, which may be helpful for comparing funds.

See also Yield.

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This is another name for shares in a company. If you hold equity (i.e. are a shareholder) you are a partial owner of that company. On The Big Exchange however, it is the funds themselves which are shareholders of the companies they invest in, rather than you directly. However, the job of the fund manager is to look after the investment on your behalf, including engaging with the company and voting at the Annual General meeting (AGM) on company resolutions.

Although sometimes used as an umbrella term for any investment style that aims to ‘do good’ and ‘avoid harm’, ethical investing is a long-standing approach that primarily considers ethical values alongside financial returns. Ethical funds found on The Big Exchange are likely to exclude controversial activities, for example fossil fuel production, arms, tobacco and gambling, or companies in breach of widely recognised standards or norms, such as the UN Global Compact.  

The main difference between ethical investing and sustainable investment is that  the primary aim of the latter is to achieve positive environmental and/or social outcomes). That said, many ethical investment strategies have evolved over time and may additionally incorporate environmental and social sustainability characteristics as secondary considerations.

Under the SDR fund labelling regime ethical (and responsible) approaches are classified as "values-based" by the FCA, meaning they fall outside of SDR's scope.

See also Responsible Investing, Sustainable Investing, and SDR.

The Financial Conduct Authority ( FCA) is the regulator for UK financial services firms and financial markets, with a remit to ensure that financial markets work well for individuals, for businesses, and for the UK economy. Their focus is on reducing and preventing serious harm to consumers from bad practice in financial services, setting higher standards for market integrity, and promoting competition and positive change so that all consumers are treated fairly.

The ‘gross’ figure relates to any  type of revenues or income  before the deduction of associated costs or taxes. In contrast, a when a ‘net’ figure is cited  this is after the deduction of all costs and taxes due.

An increase in the value of an investment from a set point in time, including any income generated.

An Individual Savings Account (ISA) helps you to save and invest money tax efficiently. There are four different kinds of ISA:  a cash ISA, a stocks and shares ISA, a Lifetime ISA, and an innovative finance ISA. The main benefit of an ISA is you can save or invest without paying income tax on any earned interest or dividends, or capital gains tax.

The Big Exchange offer a stocks and shares ISA as a tax-free wrapper in which to hold your investments. Each tax year (6th April one year to 5th April the following year) the government sets a limit on the amount you can save in an ISA. The annual allowance is currently £20,000. Read more in our guide to ISAs here.

An impact report is typically published by the asset managers of impact strategies, on a yearly basis, to demonstrate the measurable impact their investments have made. Funds with a defined sustainability strategy usually produce a sustainability report which contains similar information about its investments but has less of a focus on outcomes data.

A type of sustainable investing approach (see Sustainable Investing) with a stated intention to create significant and measurable positive environmental or social impacts alongside a financial return. The key differentiator is intentionality; a theory of change model is used to identify solutions to problems affecting people or the planet. Impact investors actively seek investments that can create tangible benefits and drive positive change, such as renewable energy, clean water, financial inclusion, tackling poverty, or improving health and education.  

The FCA’s SDR label for Sustainability Impact states that the sustainability objective must be explicit and consistent with an aim to achieve a pre-defined positive measurable impact in relation to an environmental and/or social outcome. Firms must provide a ‘theory of change’ and specify a robust method for measuring and demonstrating this positive impact.

See also SDR.

Income can be taken in the form of interest or dividends, as well as realised capital gains from equities. Bond funds pay interest whereas equity funds pay dividends and may also deliver capital growth, although none are guaranteed. Funds roll up the income they receive from their investments and payments to unitholders may be made annually, 6-monthly, quarterly or even monthly. If you opt for income units, any interest and dividend income is paid out as cash whereas if you have accumulation units the income is reinvested into the fund, increasing the value of your holding.

As Junior Individual Savings Account (JISA) is a tax-free savings or investment account for children below the age of 18. Under the current annual allowance, up to £9,000 every tax year can be contributed to a JISA on behalf of the child by the parent or guardian. Find out more in our JISA guide here.

The OCF is a comprehensive breakdown of what it costs to invest in a fund. It is made up of the annual management charge (AMC) and various other costs of maintaining and operating the fund, such as fees for trustees, regulators and auditors, as charged by the fund manager to the investor. However, it may not include all costs incurred, for example trading costs or any performance fee due. The OCF is deducted within the fund but the amount, in percentage terms, will be stated on the fund factsheet which is published monthly and can be found in the fund details pages on The Big Exchange website.

See also AMC.

When you invest in a fund, you are purchasing units within that fund. The value of a fund is equal to the underlying value of all its assets minus any outstanding liabilities – this is called the Net Asset Value (NAV). Dividing the NAV of a fund by the number of outstanding units, gives the price per unit. When the value of the investments in the fund goes up, the unit price goes up and vice versa.

Like ethical investing, responsible investing is sometimes used as an umbrella term for any investment style that aims to ‘do good’ and ‘avoid harm’. To be more specific, when adopting a  responsible investing strategy, it usually means that ESG (Environmental, Social & Governance)   factors are fully integrated into the investment process. This is done first and foremost to mitigate and manage risk, with the primary aim being to protect and grow the value of the fund. Although positive sustainability criteria may be considered when selecting investments, it is not the primary consideration as is the case for sustainable strategies.  

Under the SDR fund labelling regime responsible (and ethical) approaches, are classified as "values-based" by the FCA, meaning they fall outside of SDR's scope.

See also Sustainable Investing, Impact Investing, and Ethical Investing.

The money a company makes from selling products or services.

Investment risk is usually measured in terms of volatility (of a company or stock market) which simply means how much shares move up and down in relation to their average price over a stated period of time. Higher volatility means that you must be able to accept greater losses (at any point in time), as well as having the potential for stronger gains.  

As an investor, there are two aspects of risk to consider. The first is your ‘capacity for risk’ which depends on your income and overall financial standing, or how easily can you withstand any loss of your capital invested. This may change over time as your personal circumstances change. The other aspect is your personal attitude to risk which will affect your investment choices. This means considering how much risk you feel comfortable taking without it keeping you awake at night.

It is important for you to understand that when investing you are accepting the risk that your investments can go down  in value as well as up, therefore you could get back less than you invested.

Stewardship involves using share ownership rights (notably voting and engagement) to have input into the way companies are run. The objective is to ensure the value of the business is enhanced over time. Engagement activity takes the form of meetings and dialogues on specific issues, including ESG challenges and opportunities between the companies and the Asset Managers. Asset managers may undertake collaborative engagement; by pooling resources they can add weight when voicing any concerns to company board members.

The SDR Policy from the UK’s regulator, the Financial Conduct Authority (FCA), introduced a labelling regime for UK sustainable funds, with four distinct labels for use by UK domiciled funds from 31st July 2024. The aim of the labels is to help individuals navigate the sustainable investment market and identify which funds are best aligned to their preferences. In addition, anti-greenwashing rules (to ensure sustainability-related claims must be fair, clear and not misleading) demonstrate the FCA’s clear intention that financial products marketed as sustainable should do as they claim and provide the evidence to back it up.

Sustainable investing is an umbrella term for a range of strategies which aim to support a more sustainable future for people and planet. Sustainable funds invest primarily in companies that meet specific ESG (Environmental, Social, and Governance) criteria. They may pursue a sustainability-related theme, such as clean energy, or explicitly aim to create measurable impact across multiple industries (see impact investing).

Whilst responsible investing integrates ESG factors to limit risk, sustainable investing takes this further and aims to capture ESG opportunities, such as those presented by the transition to a low carbon economy. In addition, stewardship is likely to be more actively pursued, particularly where improvements in the sustainability of assets are sought. Asset managers actively monitor, encourage, and challenge companies by using their voting rights and direct or indirect influence.

See also Stewardship.

If investments are held in a tax-free wrapper, such as an ISA or JISA, you will not have to pay income tax on any earned interest, or capital gains tax.

However, if you have a General Investment Account with The Big Exchange you may be liable for either income tax or capital gains tax, depending on whether any of your available tax-free allowances have already been utilised.

This is an investing approach (sustainable or otherwise) which focuses on a particular trend or theme. The Big Exchange offers funds investing in companies with certain defined sustainability characteristics, to access specified themes. Managers use positive screening to selecting investments. Some funds follow a single theme, for example water or clean energy. However, a thematic approach is often incorporated into broader sustainable or impact strategies, with multiple themes identified.

See also Sustainable Investing and Impact Investing.

The total return on a fund investment includes any capital gain (increase in the value of your original investment) plus any interest or dividends declared. The return figure shown on our fund details page and in the fund factsheet will be net of fees charged by the asset manager. However, it does not include The Big Exchange platform fee which will also be taken from your account to cover the services we provide.

The yield on an investment is, in simple terms, the amount of income paid out expressed as a % of the share or unit price. For example, if an annual dividend of £50 was received from an investment of £1000, the yield is £50 divided by £1000, expressed as a percentage, which is 5%.   Historic Yields, which can usually be found on fund factsheets or the fund details page of our website, reflect dividend distributions declared over the past twelve months as a percentage of the unit price, as at the date shown. Fund dividends are paid from gross income before fees and charges. The yield shown is not guaranteed going forward and will fluctuate over time.