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Income

The return on your investment that arises from dividends, interest or rental earned by assets you own, or by the assets of a fund.

These funds aim to produce a regular income, which may be paid out to the unit-holders or invested back in the fund. Most are bond funds; but it includes equity funds that invest in shares that are expected to deliver strong dividend payouts.

Income funds

Funds that aim to produce a regular income, which may be paid out to the investor or invested back into the fund.

These funds aim to produce a regular income, which may be paid out to the unit-holders or invested back in the fund. Most are bond funds; but it includes equity funds that invest in shares that are expected to deliver strong dividend payouts.

Income units or shares

Units or shares where the income due to be distributed to holders is paid out to unit or share holders (though this may be reinvested, see below) rather than notionally distributed and then accumulated in the value of the share of unit (see ‘Accumulation unit/share’).

Indicated by the letters ‘inc’ (as opposed to ‘acc’) in pricing lists.

Index Tracker

Funds which track or replicate a given index, e.g. the FTSE100, usually by holding the shares of companies in the same proportions as they are in the index.

A tracker fund may get its exposure to an index through derivatives as well as shares.

Index-tracker funds

A fund that mirrors the performance of a specific index by holding the components of that index.

It aims to “track” the progress of an index, eg. the FTSE 100, by buying and selling shares in the same proportions as represented on the index or by partially replicating the index.

These are also called tracker or passively managed funds.

Index/indices

A mathematical compilation of the prices or rates of securities, currencies or commodities which gives an indication of the price movements of a whole market or sector.

For example, the FTSE 100 index represents the largest 100 UK companies listed on the London Stock Exchange (LSE) by market capitalisation. 

Individual Savings Account (ISA)

Types of ISA: Cash, Stocks and Shares, Junior, Help-to-buy, Innovative and Lifetime.

There are limits on how much you can put in an ISA each year.

A Junior ISA (JISA) is available for children under the age of 18.

Inflation

A general rise in the level of prices on the high street. This is measured by the retail price index (RPI). 

Inflation risk
The risk that the purchasing power of your money will fall over time, ie. prices of things you need to buy go up. If inflation rises fast than the returns on your savings and investments, this will reduce your purchasing power.  
Initial charge

A charge that may be taken from your money before it is invested.

See 'entry charge'.

Instrument of incorporation

The founding legal document of an investment company with variable capital (OEIC). 

Interest

Generally, the money that someone pays you regularly in return for you lending money to them for a certain period.

It is usually expressed as a percentage of the amount of money lent.

Institutions which take deposits, such as banks, pay interest, as do bonds.

See also 'interest distributions'.

Interest distributions

Income distributed to fund investors by funds that invest predominantly in bonds or deposits. The income derives from interest received by the fund from fund assets. 

Interim financial report
A financial report that contains either a complete or condensed set of financial statements for a period shorter than an entity’s full financial year.
Interim report

See ‘Half yearly report’.

Intermediary
A firm or an individual who gives investment advice or arranges the buying and selling of units or shares in an investment fund for investors.
Investment adviser
The investment firm that manages the investments held by an investment fund.
Investment and borrowing powers

A technical term used to mean the nature of, and limits on, investments and borrowing permitted to a particular fund both by regulation and by the prospectus and founding legal documents of the fund.

All authorised investment funds are subject to limits set by regulation on the asset classes in which they may invest, the maximum amount of the value of a fund that can be invested in any one issuer of securities (eg shares and bonds), and the maximum percentage of shares that may be owned in any one issuer.

These limits are designed to ensure diversification.

The prospectus of a fund may establish tighter definitions of what it may invest in and what it may borrow than those established by regulation.

Investment Company with Variable Capital (ICVC)

The technically correct name of an open-ended investment company authorised by the UK financial services regulator, but the name OEIC is more commonly used.

See also Open Ended Investment Company.  

Investment fund

A product that allows you to pool your money with others and invest it in different assets such as shares, cash, bonds, property.

Each fund follows a specified investment objective.

Usually in the UK this term refers to unit trusts or open-ended investment companies (OEICs).

Investment grade

A credit rating which means that a government or corporate bond has a relatively low risk of default.

Ratings are issued by credit ratings agencies and represent the agency’s evaluation of qualitative and quantitative information for a company or government. Ratings are used to rank companies and governments on the probability of them defaulting on their obligations (i.e. to repay their debts).  

The lower the credit rating, the higher the probability or risk of default. Investment grade bonds are those awarded a certain rating or above. For example, S&P rates borrowers on a scale from AAA to D – those rated between AAA and BBB are deemed to be investment grade and those rated from BB to D are known as non-investment grade (or high yield). See also credit risk

Investment manager

The company or individual to whom the fund provider company delegates responsibility for deciding how to invest the money in the fund assets.

Investment objective

The aim of a fund will generally be to generate income, capital growth or a combination of the two, and/or to provide capital protection.

ISA Transfer

The fund manager may, or may not be able to invest money from an existing ISA into its fund.   If not, you may be able to make the transfer through a platform.

Islamic fund
A fund whose investments are compliant with Sharia law and therefore suitable for a devout Muslim investor.