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

Retail Prices Index (RPI)

An index published each month by the Office for National Statistics, which measures the level of retail prices in the UK. Cash flows on all index-linked gilts are linked to the RPI.

Zero coupon bonds

What is a zero coupon bond?

Equity

The amount of money a company would be left with by subtracting its liabilities from the value of its assets.

Wall Street

A street in New York that became a figure of speech for the financial markets of the US.

index-linked gilts

Gilts where the dividends and principal repayments are related to movements in the Retail Prices Index (RPI). This is as opposed to a conventional gilt, where the dividends and principal repayments are fixed in nominal terms.

Coupon

Also called a dividend, this is the fixed annual interest paid to gilt holders. It’s usually paid in two equal, semi-annual instalments and expressed as a percentage of the nominal value of the gilt.

Earnings per share

We look at what earnings per share mean and how to calculate it

Inflation

The increase in the prices of goods and services over time, and the process by which money loses its value.

Net Asset Value (NAV)

The value of a company's assets relative to the number of shares it has.

What’s a collective investment scheme?