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Index fund |
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Index fundInvestment fund designed to match the returns on a stock market index. Mutual fund whose portfolio matches that of a broad-based index such as the S&P 500 and whose performance therefore mirrors the market as represented by that index.Index fund Similar MatchesRisk indexesRisk indexesCategories of risk used to calculate fundamental beta, including (1) market variability, (2) earnings variability, (3) low valuation, (4) immaturity and smallness, (5) growth orientation, and (6) financial risk. Lehman Brothers Government or Corporate Bond IndexLehman Brothers Government or Corporate Bond IndexA benchmark index made up of the Lehman Brothers® Government and Corporate Bond indexes, including U.S. government Treasury and agency securities as well as corporate and Yankee bonds. FTSE MID 250 IndexFTSE MID 250 IndexAn index of the share prices of the 250 largest companies (by market capitalisation) immediately following the largest 100 (FTSE 100). See also FTSE Actuaries All-Share Index.Stock Exchange indices are designed to give investors an idea of the general movement of the stock markets and its overall value. By comparing the performance of their own portfolios with the performance of one of the Stock Exchange indices, investors can see how well they have done from a comparative point of view. In particular they can see whether they would have been better off putting their money in an index tracker fund.Stock Exchange indices are designed to give investors an idea of the general movement of the stock markets and its overall value. By comparing the performance of their own portfolios with the performance of one of the Stock Exchange indices, investors can see how well they have done from a comparative point of view. In particular they can see whether they would have been better off putting their money in an index tracker fund.The main sub-indices of the FTSE Actuaries All-Share Index are:FTSE 100: the 100 largest quoted companies in the UKFTSE MID 250: the next largest 250 companiesFTSE A 350: combination of FTSE 100 and FTSE 250FTSE Smallcap: the remaining companies listed in the FTSE Actuaries All-Share indexFTSE A Fledgling: companies too small to qualify for the FTSE All-Share FTSE AIM: companies trading on the Alternative Investment MarketTechMark: index of companies primarily involved in technologyThe companies in the FTSE Actuaries All-Share Index are also divided into 7 main industrial groupings:Mineral extractionGeneral industrialConsumer goodsServicesUtilitiesFinancialsInvestment trustsThese categories are divided further into 37 subcategories. Index modelIndex modelA model of stock returns using a market index such as the S&P 500 to represent common or systematic risk factors. IndexationIndexationIndexation is an allowance which reduces the taxable gain on an investment by increasing its base cost. It does this by applying a percentage uplift to the acquisition cost which increases according to the length of time that you have held the investment. The amount of the uplift is pegged to inflation rates in the years which you have held the investment. The tax saving arises because the higher the adjusted base cost of the investment, the lower the chargeable gain will be when you dispose of it. The indexation allowance varies according to when you bought the asset:Shares acquired before 31st March 1982The base cost can be taken either as their cost when acquired or their value on 31st March 1982. You can either:a) elect for all your holdings dating from before 31st March 1982 to beassessed on one or the other of these bases. You may already have donethis; if you have not but wish to, you must do it within 1 year of the 31stJanuary after the end of the tax year in which you made the first sale ofany such shares you hold; orb) treat each such holding individually, choosing which basis to use as andwhen you make a sale.Then calculate your indexation by looking up the applicable percentagefigure in tables, and applying it to your base cost. That gives you a figureto add to the base cost and thus reduce your gain.Shares acquired between 31 March 1982 and 5 April 1998 Calculate your indexation by looking up the applicable percentage figure in tables, and applying it to your base cost. That gives you a figure to add to the base cost and thus reduce your gain.Shares acquired after 5th April 1998 There is no indexation allowance, but you may be able to get taper relief instead.Example:In June 1990 you bought 1,000 Plastex plc shares in a transaction which cost £2,000 in total.You sold the shares in March 1998 for £5,000. Before indexation, your gain was £3,000.Looking at the indexation tables gives you a number 0.269.Multiply this by the base cost and you get an amount which can be added to base cost to decrease the amount of your gain.On the basis of these figures, the Indexation Allowance would apply as follows: Base cost - June 1990 £2,000Indexation - June 1990 to March 1998 0.269Uplift in base cost 0.269 x 2,000 = £538 Adjusted cost £2,538The adjusted base cost would therefore be £2,538 rather than £2,000, which reduces your gain from £3,000 to £2,462.There are four important points to note about indexation: It can only reduce a gain. It cannot create a loss. So if you sold your shares for £2,200, you would not be able to use the 'loss' of £338. Indexation would just reduce your gain to zero.It only applies to purchases made before 5th April 1998. For purchases after that date, you have to rely on taper relief.Indexation can be used in combination with taper relief in certain circumstances.Capital Gains Tax can be complex and if any doubt contact your tax adviser/accountant. Further SuggestionsMorgan Stanley REIT IndexArms index Stock index Capital International Indexes Index tracker mortgage Hang Seng Index index linked index linked term assurance Market value weighted index S&P 500 Composite Index Morgan Stanley Capital International World Index index options Grubel-Lloyd index Index swap Producer Price Index (PPI) Retail Price Index FTSE 100 Index Pure index fund International market index Import price index Trade intensity index Index method Export price index consumer price index Bond indexing |
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