Multi-Manager Funds
Also called ‘manager of managers’, these are a relatively new type of collective fund. Basically it’s when a fund manager running one fund gives chunks of the money from this fund to other external fund managers to manage. He divides the cash into several chunks, giving each chunk to a different fund manager but the money is ‘segregated’ so ultimately all the dosh is still safely housed under his one fund. The good news is that with this type of investment you only pay one annual management fee. The idea behind it is that the person running the ‘multi-manager’ fund can cherry pick from the vast array of fund managers out there so he can choose those that he thinks will deliver peak performance for investors. Also, if he is dissatisfied with one manager’s performance he has the flexibility to withdraw the money pronto and hand it over to someone who he feels will do a better job (see Active Management, Diversification, Fund of Funds, Managed Funds).
Multiple
Multiple is an abbreviated City expression commonly used for things like price/earnings ratio, also called p/e multiple, and price/cash flow ratio, ie, price/cash flow multiple (see Price/Cash Flow Ratio, Price/Earnings Ratio, Price/EBITDA Ratio).
Mutual Funds
The American jargon for collective funds such as our unit trusts. These funds do just the same thing, pooling the money of many individual investors, so that it can be invested across a very wide range of assets, thus reducing the risk that something might go horribly wrong (see Collective Funds, Diversification, Managed Funds, Unit Trust).
Naked Option
It would be safer to run down a crowded street in broad daylight wearing no clothes than to indulge in this practice. It’s one of those lovely financial phrases, along with ‘butterfly strangle’ and ‘long straddle’, that’s lifted from the world of derivatives (red alert, red alert!). When an options writer goes ‘naked’ they are taking a massive risk; by giving someone else the right to buy shares from them or sell the shares to them, when they don’t own the underlying shares or have enough money to take delivery of them from the person to whom he has sold the option (see Writer). In the belief that he is on to a winner, the writer has not bothered to protect himself by hedging (see Hedging). Should, by chance, their unswerving conviction that they are right turn out to be unswervingly wrong and the trade goes against them, they are stuffed.
This qualifies as out-and-out gambling. What makes it even scarier is that, as with futures, losses can be unlimited. I think it is best reserved for the professional traders who can afford to lose their firm’s money and who generally understand the high risks involved (see Derivatives – Futures and Options).
Nap
These are ‘hot’ share tips recommended in the financial press or in investment newsletters sent to eager subscribers. Of course, you have to remember that by the time you get hold of these hot tips they are more like tepid, and cooling fast, because a few million others have simultaneously got hold of them. It’s the same old story, ‘Buyer beware – caveat emptor’.
Please don’t whinge if a financial journalist offers share ideas that don’t make a stellar trajectory. It really isn’t their fault. Journalists have to produce good ideas regularly under pressure, and the truth is that there isn’t a bottomless pit of good share tips. Finding sexy share performers is bloody hard work, and takes a lot of research and digging! That’s why the professional fund managers charge you for their efforts. But oh, what joy when you read a small snippet of information about a company and a light bulb goes off in your head, and you discover that you’ve got just as much acumen at spotting a winner as the professionals! (See Newsletter.)
NASDAQ
Stands for National Association of Dealers Automated Quotation System. This is the second largest stock market in the world after the New York Stock Exchange and it, too, is American. Shares traded on NASDAQ are all bought and sold electronically over-the-counter (see Over-the-Counter – OTC). It is predominantly populated with US shares, with many of the US technology companies traded on it, but foreign shares are increasingly appearing as well. Along with Microsoft, there are at least 5,500 shares on the system.
National Insurance
Also called National Insurance Contributions or NICs. It’s a little tax we pay to the government on top of our income tax. It goes into a huge government pot of money that pays for our faithful, creaking National Health Service and stuff like welfare and social security. Oh, and the paltry pension the state is offering us. If you are fully employed, NICs are lopped straight off your pay packet. If you’re self-employed, you are supposed to cough up for these of your own volition (see Pension).
National Savings Certificates
In their unbounded generosity the UK government offers some of its National Savings products tax-free. Savings Certificates are in this category. What are they? Well, you hand over your money to National Savings who give you an account (pretty much like a deposit account) and a bit of paper called a certificate that tells you how much of your money is safely lodged there, and it then earns tax-free interest. If you go for these, be aware that the most popular are the index-linked variety, because they provide a safe route to beat inflation. These fall into the unadventurous, dull but very safe investment category.
If you are of a nervous disposition and really cannot stand the excitement of putting any of your money into the stock market, then find out more about these products from www.nationalsavings.co.uk.
National Savings Stock Register
For those of you who feel the irresistible urge to buy UK government bonds, or gilts, as they are more popularly known, this is the easiest and cheapest way to buy the ones that are already trading on the gilt market. Any post office will have the application forms. There’s no minimum amount. The cost of buying gilts in this way is much cheaper than buying them through a stockbroker. The glitch with dealing so cheaply is that no one is going to hold your hand and tell you which ones are the best ones to go for. Another snag is that the buying and selling isn’t instantaneous. There will be a lag time between filling out your application form to buy or sell the gilt and the deal actually being done.
Negative Equity
When your assets are worth less than your borrowings. The early 1990s are a fading memory of this phenomenon, a truly terrible time in the UK property market.
Net Asset Value – NAV
This is accounting-speak, the purpose of which is to work out the value of things owned by a company once you strip out all the money it owes. It’s an easy-peasy mathematical calculation, so don’t get fazed. Using the famous Bloggins plc as an example:
(Money Owed To Bloggins + Its Other Assets) – (Bloggins’ Debts) = Net Asset Value
The next logical step, once you’ve got net asset value, is to convert it into net asset value per share (see below).
Net Asset Value per Share – NAVPS
This number gives financial whiz-kids an idea as to the value of the assets or things that back each share in a company. Most companies are valued for their earnings per share. City analysts get all hot under the collar about net asset value per share (NAV or NAVPS) when they are looking at companies that have juicy assets like land or property, or other tangible things worth money. Some specialists really relish crunching the numbers for investment trusts (ITs). These are companies listed on the Stock Exchange that just buy shares in other companies. For some reason, ITs often trade at a hefty discount to NAV. It means that the value of the assets in the company is more than the market is acknowledging. ITs can be worth buying because of this discount, but it depends on the type of assets (see Investment Trust). The maths sum that tells you net asset value per share is pretty straightforward:
Net Asset Value , . , . „
tt-, „ ,.-^-:—z-= Net Asset Value per Share
No of Ordinary Shares in Issue r
