Introduction
Understanding the language of finance is fundamental to making informed and confident decisions about your money. Whether you are a seasoned investor or new to the world of financial planning, having a solid grasp of basic financial terms is essential.
At MHG Wealth, we recognise that navigating wealth management, investment, and planning services can be overwhelming without clear explanations. That’s why we’ve created this comprehensive financial terms glossary, a curated collection of the most important financial terms and definitions used across the industry today.
This resource covers a wide range of topics, from core financial services terms to complex business concepts, providing clarity and consistency for both professionals and private clients. With this glossary, we aim to support your journey in mastering financial language, enabling smarter decision-making and greater financial empowerment.
Accumulation Phase
The stage in life when an individual is actively saving and investing money to grow their wealth for long-term goals such as retirement.
Asset Allocation
The strategy of dividing investments among different asset classes to balance risk and reward according to personal goals and risk tolerance.
Alternative Investments
Non-traditional assets like hedge funds, private equity, real estate, and commodities are often used to diversify a portfolio beyond stocks and bonds.
Annuity
A financial product that provides a series of payments at regular intervals, typically used as a retirement income stream.
Annual Percentage Rate (APR)
The yearly interest rate charged on loans or credit, expressed as a percentage, including fees and other associated costs.
Asset-Backed Security (ABS)
A financial instrument backed by a pool of underlying assets, such as loans or receivables, offering investors income from repayments.
Authorised Financial Adviser
A certified professional in the UK licensed by the FCA to provide financial advice and recommend suitable investment solutions.
Annual Allowance
The maximum amount you can contribute to your pension each year without incurring tax charges, currently capped by HMRC.
Assets Under Management (AUM)
The total market value of assets a wealth manager or investment firm manages on behalf of clients.
Active Management
An investment strategy where fund managers actively select securities to outperform the market or benchmark index.
Bond
A fixed-income investment representing a loan from an investor to a borrower, typically a corporation or government, with regular interest payments.
Balanced Portfolio
A diversified investment portfolio combining equities, bonds, and other assets to reduce risk and achieve moderate returns.
Base Rate
The interest rate set by the Bank of England, influencing lending and savings rates across the UK financial system.
Beneficiary
A person or entity legally entitled to receive assets or benefits from a trust, will, or financial account.
Benchmark
A standard or index used to evaluate the performance of an investment portfolio or financial product.
Blue-Chip Stock
Shares in a large, established company with a history of stable earnings and reliable dividend payments.
Business Property Relief (BPR)
A form of tax relief in the UK that allows certain business assets to be passed on free from inheritance tax.
Behavioural Finance
A field of study examining how psychological factors influence investor behaviour and financial decision-making.
Bond Yield
The return an investor earns from holding a bond, typically expressed as a percentage of its current market price.
Buy-to-Let Investment
Purchasing property with the intention of renting it out, commonly used in wealth-building and retirement strategies.
Capital Gains Tax (CGT)
A UK tax on the profit made when selling certain assets, such as property or shares, above a tax-free allowance.
Cash Flow Planning
Projecting income and expenditure over time to ensure you meet both short-term needs and long-term financial goals.
Collective Investment Scheme
A pooled investment vehicle where investors’ money is combined to purchase a diversified portfolio of assets.
Compound Interest
Interest calculated on both the principal amount and any previously earned interest, accelerating wealth growth over time.
Credit Rating
An assessment of a borrower’s creditworthiness, influencing their ability to obtain loans and the interest rates offered.
Custodian Bank
A financial institution responsible for safeguarding a client’s securities and managing administrative tasks for investment portfolios.
Capital Preservation
An investment strategy focused on protecting the initial amount invested while generating modest returns.
Central Bank
A national financial institution, such as the Bank of England, responsible for monetary policy and economic stability.
Currency Risk
The potential loss due to fluctuations in exchange rates, particularly relevant for international investments or offshore portfolios.
Consumer Price Ind ex (CPI)
A measure of inflation tracking the average change in prices paid by UK consumers for a basket of goods and services.
Corporate Bond
A debt security issued by a company to raise capital, typically offering higher yields than government bonds with varying risk levels.
Diversification
A risk management strategy that spreads investments across different assets, sectors, or geographies to reduce volatility.
Dividend
A portion of a company’s profits paid to shareholders, often used by investors seeking income from equities.
Drawdown
The process of withdrawing money from a pension or investment fund, particularly relevant during retirement.
Debt-to-Income Ratio
A personal finance metric that compares monthly debt payments to monthly gross income, used in credit assessments.
Derivatives
Financial contracts whose value is based on an underlying asset, such as futures or options, often used for hedging or speculation.
Discretionary Portfolio Management
A service where an investment manager makes decisions on behalf of the client, within agreed risk and investment parameters.
Defined Contribution Pension
A retirement plan where individuals contribute regularly, and the final value depends on investment performance and contribution levels.
Defined Benefit Pension
A retirement scheme promising a fixed, pre-agreed income, usually based on salary and length of service.
Donor-Advised Fund (DAF)
A philanthropic vehicle allowing individuals to donate assets for charitable purposes while retaining advisory privileges over distribution.
Dollar-Cost Averaging
An investment strategy of regularly investing a fixed amount, reducing the impact of market volatility over time.
Equity
Ownership in an asset or company, often referring to shares in a business or the value of a property minus liabilities.
Estate Planning
The process of organising your assets and affairs to manage inheritance, reduce taxes, and ensure smooth succession.
Exchange-Traded Fund (ETF)
A diversified investment fund traded on stock exchanges, offering exposure to indices, sectors, or asset classes with lower fees.
ESG Investing
Investing that considers environmental, social, and governance factors alongside financial returns to promote sustainability.
Earnings Per Share (EPS)
A key financial metric showing the portion of a company’s profit allocated to each outstanding share.
Early Repayment Charge
A fee charged by lenders when a borrower repays a loan or mortgage ahead of schedule.
Enterprise Investment Scheme (EIS)
A UK government initiative offering tax relief to investors who buy shares in qualifying start-ups or small businesses.
Equity Release
A financial product allowing homeowners to access the value tied up in their property, typically used in retirement.
Exchange Rate
The price at which one currency can be exchanged for another, significantly impacting international investments and spending.
Estate Planning
Organising how your assets will be managed and distributed after death, including wills, trusts, and tax strategies.
Economic Cycle
The recurring pattern of economic expansion and contraction, influencing investment decisions and market performance.
Fiduciary Duty
A legal obligation for financial advisers to act in the best interests of their clients, with honesty and transparency.
Fixed Interest Securities
Investments, such as government or corporate bonds, that pay a fixed rate of interest over a specific term.
Fund Manager
A professional responsible for making investment decisions and managing portfolios on behalf of clients or institutions.
FTSE 100
An index of the 100 largest companies listed on the London Stock Exchange, widely used as a UK market benchmark.
Financial Planning
A comprehensive process of setting goals, evaluating assets and liabilities, and developing strategies to achieve financial wellbeing.
Family Office
A private wealth management advisory firm serving ultra-high-net-worth individuals or families, offering tailored services including investment and estate planning.
Foreign Exchange (Forex)
The global market for buying and selling currencies, used for international trade, investment, and speculation.
Fund of Funds
An investment strategy that pools capital into multiple underlying funds to gain broad diversification and risk management.
Fixed-Term Deposit
A savings account where funds are locked in for a set period at a guaranteed interest rate.
Flexible ISA
A type of Individual Savings Account allowing money to be withdrawn and replaced within the same tax year without affecting allowance.
Growth Investing
An investment strategy focused on companies expected to grow at an above-average rate, often reinvesting profits instead of paying dividends.
Gearing
The use of borrowed capital to increase the potential return of an investment, also known as leverage.
Gilts
UK government bonds regarded as low-risk investments, offering fixed interest payments over a set period.
Gross Income
The total income earned before any taxes or deductions, often used for financial planning and loan assessments.
Guaranteed Minimum Pension (GMP)
A minimum pension benefit for members of certain occupational pension schemes, accrued during periods of contracted-out National Insurance.
Green Bonds
Bonds issued to finance environmentally friendly projects, increasingly popular among ESG-conscious investors.
Grant of Probate
A legal document confirming the authority to deal with a deceased person’s estate, required for most inheritance processes.
General Investment Account (GIA)
A flexible, non-tax-advantaged investment account allowing individuals to invest in a range of assets without contribution limits.
Global Diversification
Spreading investments across international markets to reduce risk and access growth opportunities worldwide.
Growth Portfolio
An investment portfolio primarily designed to achieve capital appreciation over time rather than generating income.
High-Net-Worth Individual (HNWI)
A person with substantial financial assets, typically over £1 million, requiring bespoke wealth management and estate planning solutions.
Hedge Fund
An alternative investment fund using diverse strategies to generate returns, often involving leverage, derivatives, or short selling.
HMRC (His Majesty’s Revenue and Customs)
The UK government body responsible for collecting taxes and enforcing tax laws, including personal and business taxation.
Holding Period
The duration for which an investment is held before being sold, influencing capital gains tax and return calculations.
Hybrid Investment
A financial product combining characteristics of equities and fixed-income securities, offering both growth and income potential.
Hard Assets
Tangible assets like real estate, precious metals, and commodities, often used as a hedge against inflation.
Horizon Risk
The risk that an investment’s time frame is shortened due to unexpected liquidity needs or life changes.
Hedging
A strategy used to offset potential losses in investments by taking an opposing position in a related asset or market.
Holding Company
A parent corporation that owns controlling interests in other companies, typically used for tax and asset protection purposes.
Household Wealth
The total value of assets owned by a household minus liabilities, including savings, property, pensions, and investments.
Income Fund
A mutual fund or investment trust primarily focused on generating regular income through dividends or interest, rather than capital appreciation.
Index Fund
A type of mutual fund or ETF designed to replicate the performance of a specific market index, offering broad market exposure and low operating expenses.
Inflation
The rate at which the general level of prices for goods and services rises, eroding purchasing power over time.
Inheritance Tax (IHT)
A tax levied on the estate of a deceased person, including property, money, and possessions, above a certain threshold.
Individual Savings Account (ISA)
A tax-efficient savings or investment account available to UK residents, allowing tax-free income and capital gains.
Investment Grade
A credit rating that signifies a relatively low risk of default, indicating that a bond or debt instrument is a safe investment.
Investment Trust
A publicly listed company that pools investors’ money to invest in a diversified portfolio of assets, with shares traded on stock exchanges.
Inheritance Tax Planning
Structuring your estate and assets to reduce or eliminate the inheritance tax burden on your beneficiaries.
Investment Management
Professional management of various assets—such as stocks, bonds, and funds, tailored to the investor’s goals, risk appetite, and timeline.
Income Drawdown
A method of withdrawing income from a pension fund while keeping the remainder invested, offering flexibility in retirement income planning.
Interest Rate Risk
The potential for investment losses due to fluctuations in interest rates, particularly affecting fixed-income securities.
Index-Linked Bond
A bond where interest payments and principal are adjusted in line with inflation, protecting investors from the eroding effects of rising prices.
Joint Account
A bank or investment account shared by two or more individuals, each with equal access and responsibility.
Junior ISA
A tax-free savings account for children under 18 in the UK, allowing parents or guardians to save on their behalf.
Junk Bond
A high-yield, high-risk bond with a lower credit rating, offering higher returns to compensate for increased default risk.
Joint Tenancy
A form of property ownership where two or more individuals hold equal shares, with rights of survivorship upon death.
Jobseeker’s Allowance (JSA)
A UK government benefit for unemployed individuals actively seeking work, providing financial support during job searches.
Joint Life Annuity
An annuity that provides income payments to two individuals, typically spouses, continuing until both have passed away.
Judgement Debt
A court-ordered sum of money that one party must pay to another, enforceable through legal means if unpaid.
Joint Venture
A business arrangement where two or more parties collaborate on a specific project, sharing profits, losses, and control.
Job Retention Scheme
A UK government initiative to support employers in retaining employees during economic downturns by subsidising wages.
J-Curve Effect
An economic theory suggesting that a country’s trade deficit may initially worsen following a depreciation of its currency before improving.
Key Person Insurance
A life insurance policy taken out by a business on a vital employee, providing financial protection against their loss.
KYC (Know Your Customer)
A regulatory process requiring financial institutions to verify the identity and assess the risk profile of their clients.
Key Investor Information Document (KIID)
A concise document providing essential information about an investment fund, including objectives, risks, charges, and past performance.
Keogh Plan
A US-based retirement plan for self-employed individuals and unincorporated businesses, allowing tax-deferred savings.
Kicker
An additional feature in a financial instrument, such as a warrant or option, that enhances its attractiveness to investors.
Kiting
Kiting is an illegal practice that involves misusing bank accounts to fraudulently inflate account balances.
Kappa
A measure used in options pricing to assess the rate of change in an option’s value relative to changes in interest rates.
Key Rate Duration
Key rate duration is a measure of a bond’s sensitivity to changes in interest rates at specific maturity points along the yield curve.
K-1 Form
A US tax document used to report income, deductions, and credits from partnerships, S corporations, and trusts to partners and beneficiaries.
Kaldor-Hicks Efficiency
An economic principle states that an outcome is considered more efficient if the beneficiaries could theoretically compensate those who incur losses.
Liquidity
The ease with which an asset can be quickly converted into cash without significantly affecting its price.
Liability
A financial obligation or debt owed by an individual or organisation to another party.
Lump Sum
A single payment of money, as opposed to a series of payments made over time.
Leveraged Buyout (LBO)
The acquisition of a company using a significant amount of borrowed money, often secured against the company’s assets.
Loan-to-Value Ratio (LTV)
A financial term expressing the ratio of a loan to the value of an asset purchased, commonly used in mortgage lending.
Limit Order
An order to buy or sell a security at a specified price or better, providing control over execution price.
Life Assurance
A contract that pays out a sum of money upon the death of the insured person, providing financial security to beneficiaries.
Liquidity Risk
The risk that an entity may not be able to meet short-term financial obligations due to the inability to convert assets into cash.
Letter of Credit
A document issued by a bank guaranteeing a buyer’s payment to a seller, used in international trade transactions.
Long Position
An investment strategy involving the purchase of a security with the expectation that its value will rise over time.
Mutual Fund
An investment vehicle pooling funds from multiple investors to purchase a diversified portfolio of securities, managed by professionals.
Market Capitalisation
The total market value of a company’s outstanding shares, calculated by multiplying share price by the number of shares.
Mortgage-Backed Security (MBS)
A type of asset-backed security secured by a collection of mortgages, providing investors with periodic payments.
Money Market Fund
A mutual fund investing in short-term, high-quality debt instruments, offering liquidity and modest returns.
Management Fee
A charge levied by investment managers for managing an investment fund, typically expressed as a percentage of assets under management.
Market Order
An order to buy or sell a security immediately at the best available current price.
Margin Call
A demand by a broker for an investor to deposit additional funds or securities to cover potential losses.
Monetary Policy
The process by which a central bank controls the money supply and interest rates to achieve economic objectives.
Merger
The combination of two or more companies into a single entity, often to achieve synergies and growth.
Minimum Investment
The smallest amount of money that can be invested in a particular fund or financial product.
Net Asset Value (NAV)
The total value of a fund’s assets minus liabilities, divided by the number of shares; commonly used to determine a fund’s per-share price.
Negative Equity
When the outstanding mortgage on a property exceeds its current market value, often arising from property value declines.
Net Worth
The difference between an individual’s total assets and total liabilities, representing overall financial health.
Nominee Account
An account in which a custodian holds assets on behalf of the real owner, commonly used for simplified share administration.
Non-Discretionary Account
An investment account where the adviser must obtain client consent before making any transaction.
Non-Domiciled (Non-Dom)
A UK tax status that allows individuals to limit tax liability on foreign income and gains, under specific criteria.
Notice Account
A savings account requiring a notice period before withdrawal, typically offering better interest rates than instant-access accounts.
National Insurance
UK contributions deducted from earnings, funding state pensions, unemployment benefits, and the NHS.
Nominal Yield
The annual income from a bond expressed as a percentage of its face value, not adjusted for inflation.
Net Income
Income remaining after taxes and other deductions; also known as take-home pay or net profit for businesses.
Offshore Account
A bank account held outside one’s country of residence, often used for diversification, privacy, or tax efficiency.
Open-Ended Fund
A collective investment that issues new shares as investors join and redeems shares when they exit, such as OEICs or unit trusts.
Options
Derivatives giving the buyer the right, but not the obligation, to buy or sell an asset at a specified price within a set period.
Overweight
A portfolio allocation strategy where a particular asset or sector has a higher proportion than the benchmark or market average.
Operating Cash Flow
The cash generated from normal business operations, excluding investment and financing activities; a key indicator of financial health.
Occupational Pension Scheme
A pension scheme set up by an employer to provide retirement benefits to employees, often including employer contributions.
Offshore Bond
An investment wrapper based outside the UK offering tax deferral benefits and access to a broad range of funds.
Over-the-Counter (OTC)
Financial instruments traded directly between parties rather than on a formal exchange, often used for derivatives or foreign exchange.
Offer Price
The price at which an investor can purchase a unit in an investment fund or share in the market.
Opportunity Cost
The potential benefits missed when choosing one alternative over another; a core concept in financial decision-making.
Offshore Investment
Investing in international markets or jurisdictions to diversify holdings, access new opportunities, and optimise tax planning.
Portfolio
A collection of financial investments like stocks, bonds, cash, and alternatives, managed to meet specific financial goals.
Pension Drawdown
A method of accessing pension funds by taking income while leaving the rest invested, offering flexibility in retirement planning.
Private Equity
Investments in private companies not listed on stock exchanges, often through venture capital or buyouts.
Passive Investing
An investment strategy that aims to replicate market performance through low-cost index tracking, avoiding frequent trading.
Pound-Cost Averaging
Investing a fixed amount at regular intervals, reducing the impact of market volatility by purchasing more units when prices are low.
Personal Allowance
The amount of income an individual in the UK can earn each year without paying income tax.
Premium Bond
A UK government savings product where instead of interest, bondholders are entered into a monthly prize draw.
Principal
The original amount of money invested or loaned, excluding interest or profits.
Portfolio Rebalancing
The process of realigning a portfolio’s asset allocation to maintain the desired risk profile and investment strategy.
Property Management
The oversight and administration of residential, commercial, or rental properties on behalf of owners, including maintenance, tenant relations, rent collection, and legal compliance.
The purchase of real estate to generate rental income or capital growth, often forming part of a diversified wealth-building or retirement planning strategy.
P/E Ratio (Price-to-Earnings)
A valuation metric showing a company’s share price relative to its earnings per share; used to assess stock attractiveness.
Philanthropy Planning
Structuring charitable giving in a tax-efficient and legacy-conscious manner, often through donor-advised funds or foundations.
Protection Planning
Ensuring financial security for you and your family through insurance and risk management solutions, including life cover and critical illness policies.
Quantitative Easing (QE)
A central bank policy involving large-scale asset purchases to inject money into the economy and lower interest rates.
Qualified Investor
An individual or institution with sufficient wealth, experience, or certification to access more complex or higher-risk investment products.
Quarterly Report
A financial statement published every three months, detailing a company’s performance, profits, and key metrics for investors.
Quoted Company
A company whose shares are listed and traded on a recognised stock exchange such as the London Stock Exchange (LSE).
Quantitative Analyst
A specialist who uses mathematical and statistical methods to analyse financial markets and investment risks.
Quick Ratio
A measure of a company’s short-term liquidity, showing its ability to meet immediate obligations without selling inventory.
Qualified Trust
A trust that meets specific legal or tax criteria, such as for inheritance tax planning or charitable giving.
Quiet Period
A Quiet Period is a period of time, typically before an earnings report or an IPO, during which a company must refrain from making public statements.
Quoted Price
The current price at which a security is being bought or sold on an exchange or over-the-counter.
Qualifying Recognised Overseas Pension Scheme (QROPS)
A type of overseas pension scheme eligible to receive UK pension transfers without tax penalties, used by British expatriates.
Risk Tolerance
An individual’s willingness and ability to endure investment losses in pursuit of higher returns.
Retirement Planning
The process of determining income goals and investment strategies to ensure financial security after stopping work.
Robo-Adviser
An online platform providing automated, algorithm-driven financial planning services with minimal human supervision.
Real Estate Investment Trust (REIT)
A company that owns or finances income-producing property and distributes earnings to shareholders, offering property exposure without direct ownership.
Rebalancing
Rebalancing involves adjusting asset allocations within a portfolio to realign with an investor’s risk profile and financial objectives.
Return on Investment (ROI)
A performance metric calculating the efficiency or profitability of an investment, expressed as a percentage of original capital.
Regular Savings Plan
A structured investment strategy involving consistent contributions into a fund or account to build wealth over time.
Redemption Yield
The total return an investor receives from a bond held until maturity, including interest and capital repayment.
Risk Premium
The additional return expected by investors for taking on higher-risk investments over risk-free alternatives.
Retail Investor
An individual investor who buys and sells securities for personal accounts rather than on behalf of institutions.
Retirement Planning
The process of determining retirement income goals and building a strategy to achieve them through savings, investments, and pensions.
Stocks and Shares ISA
A UK investment account that allows tax-free gains and income on stocks, funds, and bonds.
Succession Planning
Preparing for the smooth transfer of wealth and responsibilities to the next generation or beneficiaries.
Structured Product
A pre-packaged investment strategy based on derivatives, offering tailored risk-return profiles linked to indices or assets.
SIPP (Self-Invested Personal Pension)
A UK pension scheme offering flexibility to choose and manage your own retirement investments.
Stamp Duty
A tax paid on the purchase of shares or property above certain thresholds, applicable in the UK.
Sharpe Ratio
A measure that evaluates investment performance by adjusting returns for risk, used to compare asset efficiency.
Securities
Tradable financial instruments including stocks, bonds, and derivatives, representing ownership or creditor relationships.
Short Selling
An investment strategy that profits from falling prices by selling borrowed securities and buying them back at a lower price.
Smart Beta
A hybrid investment strategy blending passive index tracking with rules-based factor selection, aiming for better risk-adjusted returns.
Settlement Date
The date on which a trade is finalised, and ownership of the asset is transferred between buyer and seller.
Trust Fund
A legal structure holding assets on behalf of beneficiaries, often used for tax planning and inheritance purposes.
Tax Wrapper
A financial product, such as an ISA or pension, designed to shelter investments from certain taxes.
Target-Date Fund
This is an investment fund that automatically adjusts its asset allocation as the investor nears a specific retirement date.
Term Assurance
A life insurance policy providing cover for a set period, paying out only if death occurs within the term.
Tax-Efficient Investing
Strategies designed to maximise returns by minimising the impact of income, capital gains, and inheritance taxes.
Total Expense Ratio (TER)
The overall cost of managing and operating an investment fund, expressed as a percentage of assets under management.
Tangible Asset
A physical asset with intrinsic value, such as property, gold, or art, often used in diversification.
Tiered Interest Rate
A savings interest structure where the rate increases with the amount deposited, incentivising higher balances.
Trustee
An individual or institution legally responsible for managing trust assets in the best interests of beneficiaries.
Tracking Error
A measure of how closely a portfolio follows its benchmark index, important in assessing passive fund performance.
Unit Trust
A pooled investment fund structured as a trust, dividing ownership into units sold to investors.
Umbrella Fund
A fund that holds multiple sub-funds under a single legal structure, allowing diversified investment strategies and easier management.
Uncrystallised Pension Fund
A pension pot that has not yet been accessed or used to provide retirement income, offering full flexibility under UK pension rules.
Undervalued Asset
An asset believed to be trading below its intrinsic value, often presenting a buying opportunity for investors.
Unsecured Loan
A loan not backed by collateral, typically with higher interest rates due to increased lender risk.
Unit Price
The value of one unit in a unit trust or OEIC, reflecting the underlying asset value and market conditions.
Unlisted Investment
An investment in a company or security that is not listed on a public stock exchange, often less liquid but potentially higher growth.
Upfront Fee
A one-time charge paid at the beginning of an investment or financial service, typically for arrangement or advisory purposes.
Underlying Asset
The asset on which a derivative or structured product is based, such as a share, index, or commodity.
Universal Life Insurance
A flexible life insurance policy combining death benefit protection with a cash value component that earns interest.
Volatility
A statistical measure of an asset’s price movement over time; higher volatility implies higher risk and potential reward.
Value Investing
A strategy of selecting undervalued stocks with strong fundamentals and holding them for long-term appreciation.
Venture Capital
Investment in early-stage businesses with high growth potential, often involving equity stakes and strategic support.
Variable Rate
An interest rate that fluctuates over time based on market conditions, impacting loan repayments and investment returns.
Valuation
The process of determining an asset’s current worth, based on fundamentals, market trends, or income potential.
Vested Rights
Rights granted to an employee or investor that cannot be revoked, such as pension benefits after a qualifying period.
VIX (Volatility Index)
A measure of expected stock market volatility derived from options pricing, often referred to as the “fear gauge.”
Value at Risk (VaR)
A risk measure estimating the maximum potential loss in a portfolio over a specific time frame and confidence level.
Venture Debt
A form of debt financing provided to start-ups or scale-ups alongside equity investment, often convertible or with warrants.
Voting Rights
Rights attached to shares, allowing shareholders to vote on corporate matters such as board appointments or mergers.
Wealth Management
A comprehensive service combining financial planning, investment management, tax strategy, and estate planning tailored to high-net-worth individuals.
Will
A legal document outlining how a person’s estate should be distributed after death, including guardianship of minors.
With-Profits Fund
An insurance-based investment fund that shares profits with policyholders through bonuses, commonly used in pensions and endowments.
Whole of Life Insurance
A policy providing lifetime cover, paying a guaranteed sum on death, often used in estate and inheritance tax planning.
Wrap Account
An all-inclusive investment platform offering consolidated reporting and management across multiple accounts and asset classes.
Wealth Transfer
The strategic passing of assets from one generation to the next, often involving trusts, gifts, and tax planning.
Withdrawal Rate
The percentage of a retirement portfolio withdrawn annually to provide sustainable income without depleting capital too quickly.
Windfall Tax
A one-off tax levied by governments on companies or sectors that earn unexpectedly high profits.
Warrant
A financial instrument that gives the holder the right to buy shares at a set price before a specified date.
Weighted Average Cost of Capital (WACC)
The average rate of return a company must pay to finance assets, reflecting the cost of equity and debt.
X-Dividend Date
The cut-off date to qualify for a dividend payment; investors purchasing shares after this date are not entitled to the dividend.
Yield
The income generated from an investment, typically expressed as a percentage of its cost or current market value.
Yield Curve
A graph showing the relationship between interest rates and bond maturities, used to forecast economic conditions.
Year-End Statement
An annual summary of account activity, performance, and income for investors or account holders.
Zero-Coupon Bond
A bond sold at a discount that pays no periodic interest but is redeemed at face value upon maturity.
Zakat
A form of obligatory charitable giving in Islamic finance, often calculated as a percentage of wealth, applicable in Sharia-compliant portfolios.
Zombie Fund
A closed investment or insurance fund with no new contributions, typically underperforming and costly to exit.
Zero-Based Budgeting
A budgeting method where every expense must be justified for each new period, starting from zero rather than the previous budget.
Conclusion
Financial literacy is the foundation of long-term wealth creation and security. As financial strategies and markets continue to evolve, it becomes increasingly important to understand the terminology that underpins them.
Our financial terms glossary is designed to simplify the complex and give you access to accurate, plain-English explanations of both basic financial terms and advanced financial services terms.
Whether you’re exploring financial terms in business, reviewing your portfolio, or preparing for a conversation with your adviser, this glossary will serve as a practical reference point.
At MHG, we are committed to equipping you with the tools and knowledge to make confident and informed decisions. Keep this guide close as you navigate the world of wealth management and investment because understanding financial terms and definitions isn’t just helpful, it’s empowering.
