active fund management
A style of investment management where the fund manger seeks to improve returns or reduce costs by using their expertise to choose which stocks or bonds to buy and sell. The opposite of passive management, where the manager aims to match the performance of a market or index by replicating the composition of that market or index in their fund.

asset allocation
The process of dividing investments among different kinds of securities, such as stocks, bonds, property and cash. The choices made reflect investment aims and attitude to risk.

bear
An investor who expects share prices to fall or, more generally, has a pessimistic outlook about the market. A bear market is a period of falling share prices. See also bull.

benchmark
Typically a stock market index (for example, the FTSE 100 index) against which an investment fund compares its performance and mix of assets.

blue chip
A description applied to the biggest and most highly regarded companies quoted on the stock market. Shares in such companies are usually considered a reliable and profitable investment.

bottom up
An investment strategy in which companies are considered on their own merit, without regard for industry trends or economic conditions. This approach entails examination of a company's management, business model, growth prospects, history and other characteristics. Bottom-up investors believe that some companies will outperform their peer group regardless of industry and economic circumstances. Opposite of top down.

bull
An investor who expects share prices to rise or, more generally, has an optimistic outlook. A bull market is a period of rising share prices. The opposite of bear.

capital growth
Increase in the value of an investment reflected in the higher selling price.

currency risk
When funds are invested in overseas currencies or stock markets, the value of the investment can go up and down in line with movements in currency exchange rates. This risk is an extra factor for investors to consider.

derivatives
Financial instruments that gives the investor the option to buy or sell an asset. Derivatives include futures and options contracts. Futures contracts require delivery of a commodity or currency at a specified date. Options entitle the holder to buy or sell shares or commodities at a fixed price within a given period of time.

dividend
An amount based on a company's profits paid out to shareholders for each share they hold. Usually paid as cash, but they can also take the form of stock or other property. UK dividends are usually paid twice a year: interim dividends based on half-year results and final dividends based on full-year results. US dividends are paid quarterly.

earnings per share (EPS)
Earnings per share - net profit attributable to shareholders holding ordinary shares divided by the number of shares issued - is a guide to how well a company is performing. Companies often use a weighted average of shares outstanding over the reporting term.

fund
A pool of financial assets into which premiums are invested to produce an investment return. Examples include property funds, managed funds and with-profit funds. Strictly speaking, these are "investment funds" rather than just "funds". Fund management is the act of actively looking after such investments on behalf of individual and institutional customers.

growth fund
An investment fund whose aim is to achieve capital gains, rather than income, by investing in growth stocks. Typically it will focus on companies that demonstrate significant earnings or revenue growth, rather than companies paying high dividends. Growth funds can be more volatile than other types, rising more in bull markets and falling further in bear markets.