The return that an asset achieves measured simply by looking at the appreciation or depreciation of the value (expressed as a percentage) of the asset over a period of time.

This is different from relative return which compares the return of the asset to a measure such as a benchmark.

For example: A UK equity fund generates a return of 8% over 1 year. It’s benchmark, the FTSE All Share Index returns 5% for the same period. The funds’ absolute return is 8%, whereas its relative return is 3%.

An accumulation unit is most often found in a unit trust. Holders of these units do not receive a dividend from their investment. Instead of paying out any income received, it reinvested it back into the accumulation unit, thereby boosting the unit price.

Under current UK tax laws, holders of accumulation may be liable for tax on the value of that reinvested income, even though it is not received. The exact position depends on the asset class and their individual circumstances.

The Base Rate is the interest rate set by the Bank of England’s Monetary Policy Committee to help encourage or discourage people from spending their money. The Base Rate is used by British banks as the basis on which they price loans and pay interest on savings.

Put very simply, the higher the base rate, the more likely we are to save (as the return we receive on our savings goes up). The lower the base rate, the more likely we are to borrow (as the interest we pay on loans goes down).

A basis point is one hundredth of one percent, i.e. 0.01%. 100 basis points makes 1%. This term is most commonly used in connection with Base Rate movements, eg: ‘the Bank of England raised rates by 25 basis points’ (or 0.25%).

This is the amount of money flowing through an organisation in a specified period.

A closed end fund has a fixed number of shares in issue and a close date on which the value of the fund will be distributed amongst shareholders. The best example of these in the UK is Investment Trusts. Closed end funds have their shares listed on a stock exchange and they can be traded like those of any other company.

With regards to corporate bonds, this is when the issuer of a bond fails to repay the loan according to the terms of the contract.