Defensive investments: a glossary

Corporate bond unit trusts

Funds that invest in fixed-interest securities, including those issued by companies. Best suited to income rather than capital growth investors.

Escalator unit trusts

A type of protected unit trust offering a higher-than-usual level of protection. The selling price floor is set at a higher level, perhaps 98 or even 100 per cent of the prevailing bid price.

Fixed-interest funds

Funds investing in stocks that pay a set return each year, including corporate bonds and government bonds such as UK gilts.

Guaranteed equity bonds

Type of bond that runs for a fixed term, and offers a return linked to the performance of one or more stock market indices.

High-income bonds

Money is invested for a fixed term, and a predetermined level of income is paid monthly or annually. Original capital is returned at the end of the term, provided a certain stock market index or combination has not fallen over that term.

National Savings products

Offer maximum safety as they are backed by the Government. Some products are tax-free up to certain levels, including Index-linked Savings Certificates and Premium Bonds.

Property funds

Funds invested in commercial or residential property, either directly or by investing in the shares of companies in the property sector.

Protected unit trusts

Investment funds that offer a protected selling price, usually fixed for a certain period. They give investors security in case of a market crash.

Stepped preference shares

A class of share offered as part of a split capital investment trust. They pay a regular return, with the level fixed in advance. When the trust is wound up, a further gain may be made.

Tessas - Tax-Exempt Special Savings Accounts

Five-year savings plans in which interest accumulates tax free if capital stays invested for the full term. Each investor can put a maximum of pounds 9,000 into the plan. Follow-on plans are available. Be quick: Tessas will cease being sold after April 1999 in favour of the Government's new Individual Savings Account.

Unit trusts

A fund of various investments, which can include shares and bonds. Investors buy units of the fund at the current market price, giving them a relatively small amount of money to spread their risk across many holdings.

With-profits investments

Life companies offer this type of investment structure on bonds and endowment policies. Investment volatility is smoothed out by distributing the company's profits relatively evenly in the form of an annual bonus and a terminal bonus when the investment matures.

Zero-dividend preference shares

Low-risk class of share offered as part of a split capital investment trust. The shares pay no income but get a fixed pay-out when the trust is wound up.