Independent investment funds analysts Micropal continually monitor all of the UK's investment trusts and unit trusts, measuring the balance between each fund's performance over three years against the up or down movements in its unit price (i.e. the volatility). They then award stars on a scale from 0 to 5, with the highest number going to those funds with the lowest volatility - and therefore risk - in relation to their overall performance. Five stars is the top award.
Mortgage backed securities are bonds in which collateral is provided by a mortgage or portfolio of mortgages, usually insured to cover any defaults.
Modified duration is a measure of the average life of a bond, weighting each repayment by the time until it will be made and reflecting the fact that money flows in the near future are more valuable than the same money flows at a later date. Modified duration indicates how changes in interest rates will affect the price of a bond (or bond portfolio). The longer the duration of a bond, the greater the extent to which its price is affected by interest rate changes. As such modified duration is used as a measure of risk for bond portfolios.
Companies that have a net worth of less than US$100m market capital.
This is the value of a portfolio of investments held by an investment trust. It is divided by the number of shares in issues to produce the NAV per share.
Investment trust shares are bought at the 'offer' price, sold at the 'bid' and for convenience, a 'mid' market price (mid way between the offer and the bid price) is often used for indicative or simple valuations. These processes are determined by the market forces and in no way are influenced by JPMorgan Flemings.
An agreement to buy or sell at a specific price at a specific date in the future. There are basically two kinds of option: a call option gives its buyer the right to buy a specified number of shares at a particular price before a specified date. The opposite of a call option is a put option, which gives the buyer the right to sell a specific number of shares at a particular price within a specified time period. In practice, call and put options are rarely exercised; instead, investors buy and sell options before their expiration, trading on the rise and fall of premium prices.
Calculated by dividing the market price of a company's ordinary shares by its earnings per share figure.
Most funds are grouped into specific sectors as defined by datas vendors like Morningstar, with each sector being divided into four quarters or quartiles. The midway point is known as the median; all funds want to see their performance stay above the median but the real target is to be consistently in the top quartile (i.e. the top 25% of all funds in that particular sector). To use a soccer analogy, The top quartile is like being in the premiership and is the place to be.