Financial jargon as plain English

The Association of Financial Advisers (AFA) has released a useful list of financial jargon translated into plain English.

Among the many terms explained are amortisation (paying off an interest bearing liability by gradual reduction through a series of instalments comprising both principal and interest components); aggressive portfolio (a portfolio which is significantly different from the index or its benchmark and which is designed to provide above-average returns by taking above-average risk); and balanced fund (an investment portfolio which diversifies its holdings over a range of asset classes which typically include shares, fixed interest, property, overseas securities and cash).

Other terms explained include capital gains tax (a tax on the increase in the capital value of investments, payable when the capital gain is realised); capital growth (appreciation in the capital or market value of an investment, as opposed to income which may be received from the investment from time to time, such as dividends in the case of share investments) and compounding (the arithmetical process of determining the final value of an investment or series of investments when compound interest is applied).

The list can be downloaded from the AFA website.