Unit 2 Topic 2 Key Terms Flashcards
What is an Oyster card?
A card that is loaded with money and is used to travel by tapping a device in London.
What is a credit card?
A form of borrowing offered by banks, building societies
and some specialist firms. It allows the cardholder to borrow money by paying for things using the credit card, but is generally the most expensive way to borrow, unless the balance is paid in full every month.
What is an emergency fund?
A pot of money that can be used to cover
emergencies, such as unexpected spending, loss of income or other unexpected financial problems.
What is a unit trust?
The most common form (in the UK) of collective fund,
allowing many investors to pool their money together.
How much is suggested as an emergency fund?
Between 3 & 6 months essential expenditure.
What is a deposit?
Putting money into bank and/or building society accounts. No risk.
What is a GILT?
Gilts are investments where the investor lends money to the government for a set term, usually between 5 and 30 years, in return for a fixed rate of interest paid each year and a return of the investment at the end. Low risk.
What is a corporate bond?
Corporate bonds work in the same way as gilts, but are loans to large companies. Low risk.
What are collective property funds?
Most people are unable to invest directly in property
because of the cost of purchase, so the most popular
investment is through collective property funds, whereby many people’s invested funds are pooled together. Lower risk due to shared liability.
What are UK shares?
Companies offer shares (sometimes called ‘equities’) to investors to raise money to invest in the business. The name ‘shares’ is used because the investor actually buys a share (portion) of the company. Less risk than Overseas Shares but depends on success of company.
What are Overseas Shares?
Major economies with an established stock market, such as the USA and Germany, are seen in the UK as slightly higher risk than UK shares, because the UK has no control over how their markets operate and they use a different currency. Shares in some major countries, such as China, India and Russia, are seen as higher risk..
What are Specialist Investments?
Specialist investments, such as futures and options, are very complicated, because they involve gambling on the future price of shares or commodities such as oil, gold and other natural resources, and carry a high level of risk.
If all goes well, they could produce spectacular results, but if all goes badly, then the investor could lose all their money. Many experts see certain specialist investments as little more than gambling.
What is Diversification of Shares?
Buying shares in one company, or a couple of companies, is risky because of the effect that any losses from one share would have on the investment. Investing in 20 to 30 companies would spread the risk and reduce the impact that one share could have on the
investment. This is known as ‘diversifying the investment’ (or‘diversification’).
