What is a 'collective investment scheme'? Definition & meaning

Learn what's a collective investment scheme

A collective investment scheme is a fancy legal name for any investment fund that involves multiple people pooling their money together and investing in assets.

In the UK, this could include mutual funds, investment trusts or an open-ended investment company.

Collective investment schemes benefit from economies of scale. A larger pool of money invested has the potential to provide greater returns. It can also mean that transactions and other pieces of bureaucracy incur lower costs.

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More terms

Net Income (NI)

The money a firm is left with from sales after subtracting taxes and different business costs.

Conventional gilts

Gilts where the dividends and principal repayments are fixed in nominal terms. This is as opposed to an index-linked gilt where the dividends and principal repayments are related to movements in the Retail Prices Index (RPI).

Accounting standards

The rules a company follows when preparing financial statements.

UK Treasury bill

A debt instrument issued by the UK government with a maturity of less than one year.

Nominal amount

The face value of a gilt. It represents the amount that will be repaid to the holder at maturity and is also used to calculate the dividend or coupon payment.

Clean price

The quoted price of a gilt, which excludes accrued interest

Diversification

An investment strategy in which money is put into a variety assets.

Zero coupon bonds

What is a zero coupon bond?

Profit and Loss Statement (P&L)

A statement that summarises firm's expenses, costs, and revenues incurred during a time period. AKA income statement.

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What’s a collective investment scheme?