Glossary - R | Skandia UK

Rally

A brisk rise following a decline in the general price level of the market or an individual share.

Range

The difference between the highest and lowest prices recorded during a given trading period: week, month, year etc.

Rate of return

The yield earned in relation to a capital amount invested.

Real estate

Property in land, building or housing, as distinct from personal property (eg cars); also known as physical property to distinguish itself from property trusts.

Real interest rate

The nominal interest rate less the prevailing rate of inflation.

Real return

An inflation-adjusted return.

Realise

To sell an asset (usually when it appears to have appreciated to the maximum extent that can be reasonably expected).

Rebate

The return of a proportion of a payment which effectively reduces the total outlay or obligation.

Redemption fee

A fee charged for the redemption (ie withdrawal/cashing in) of units in a unit trust. Also known as back-end load.

Redemption penalties

A penalty that has to be paid when a customer decides to move lender. Usually they apply within the term of a fixed rate, capped or discounted mortgage.

Redemption yield

The redemption yield shows what the total return on a bond would be if held to its maturity date. It reflects not only the interest payments a bondholder will receive, but also the gain/loss he will make when it matures.

Reduced allocation

Method of recouping initial expenses when setting up a unit-linked policy, whereby only a proportion of the investment is allocated to the policy for the first few years.

Reduction in yield

The amount by which an insurance company‘s charges can be expected to reduce the investment return on a policy.

Reflation

Restoration of deflated prices to a desirable level. When Governments reflate, additional money is printed, adding to the supply of money in circulation.

Reserves

The proportion of a company’s profit not distributed to shareholders as dividends, or an account kept aside by the trustees of a pension fund to cover declines in asset values or investment returns.

Retail Price Index (known as RPI)

A monthly indication of the average price changes to a particular ‘basket’ of consumer goods, and used as a general indicator of price inflation.

Retained benefits

Pension benefits earned in previous employment that are taken into account when determining HM Revenue & Customs limits for a member of an occupational pension scheme.

Retirement annuity

An annuity contract offered by insurance companies for individuals not in pensionable employment or the self employed approved under Chapter II part XIV of ICTA 88.

Retirement date

This is the date that you choose to retire at.

Return

The amount of money, in income and capital growth, received annually from an investment, usually expressed as a percentage.

Risk

In its simplest sense, risk is the variability of returns. Investments with greater inherent risk must provide higher expected yields if investors are to be attracted to them. Risk can take many forms, but a major one is valuation risk – paying too much for an asset. See also currency risk, exchange rate risk, market risk, political risk, volatility.

Risk Evaluator

The Risk Evaluator is a tool provided by Skandia which compares the volatility of fund sectors. The sectors have been arranged in ascending order according to their volatility numbers which have been calculated over 5 years and the entire range has been divided into ten segments, each representing 10% of the range with 1 being least volatile and 10 being most volatile. The sectors have been placed into the relevant segment, depending on where their volatility numbers fall. Each segment has been colour coded to represent the risk associated with each sector.

Risk management

The monitoring and controlling of various risk factors in an investment portfolio with the aim of minimising volatility of investment returns.

Risk premium

The extra yield over the risk free rate demanded by investors to compensate them for holding a riskier asset. This is an extremely important concept in relation to setting a long-term asset mix. See equity risk premium.

Risk return

Risk is a measure of the variability of return. Return, in financial terms, represents the profit - in the form of income and capital appreciation on an investment. The Risk / Return trade off is how much an investor is willing to accept greater risk in order to pursue greater returns. The optimum position is the top left hand corner of the matrix, which represents the highest return and the lowest risk.

Risk-free asset

An investment with no chance of default, and a known or certain rate of return.

Roll-over relief

A tax concession, which allows investors and businesses to defer the payment of Capital Gains Tax. For example, if proceeds from the sale of a fixed asset are reinvested, Capital Gains Tax is not payable until the new asset is sold.

Roll-up funds

An offshore investment fund that does not distribute its dividends.

Running yield

Equal to the annual income payable on a bond as a percentage of its current market price.