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You are Here : Home > Investor Education > Glossary

Glossary to investment terminology : I

 
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Imbalance of Orders
This is when the buy orders for a particular stock greatly outnumber the sell orders or vice versa. This may result in a temporary trading halt for that stock if trading has already commenced for the day. If trading for the day has not commenced, it may be delayed. A surge in buy orders may result from unexpected good news and likewise, a surge in sell orders may result from unexpected bad news about the stock.

Immobilization
This is the process by which movement of paper certificates ceases as all the details previously on paper certificates have been entered into one computerized system, the Central Depository System managed by the Central Depository and Settlement Corporation.

Inactive Stock
An inactive stock is one that is traded relatively infrequently, either at the stock exchange or over the counter.

Income Stock
This is a stock with a solid record of paying consistently high dividends. The dividend yield is normally higher than the overall stock market.

Indenture
This is a contract between the issuer of a bond and the bond holders specifying interest rates, maturity date, rights, responsibilities and terms of both parties.

Index
A stock market index is a statistical measure of the state of the stock market, based on the performance of a number of representative stocks. Each index (from different stock markets across the world) has its own calculation methodology and is usually expressed in terms of a change from a base value. Thus, a percentage change of the index is more important than its numeric value. The index is usually considered to be reasonably representative of the performance of the stock market as a whole.

The NSE 20 share index is therefore a measure of the stock market based on the performance of selected 20 listed companies drawn from different industries.
(See Appendix 1)

The NSE All Share Index (Nasi) on the other hand is a measure of the stock market based on the performance of all the listed companies at the Nairobi Stock Exchange.
(See Appendix 2)

Similarly, the AIG 27 Index measures the stock market based on the performance of 27 listed companies at the Nairobi Stock Exchange.

Indexing
Indexing is an investment strategy in which a portfolio is designed to mirror the performance of a stock index.

Indicated Dividend
The total amounts of dividends that would be paid on a share throughout the next year if each dividend is the same amount as the previous payment.

Initial Public Offering (IPO)
This is the first sale of stock by a private company to the public. It is done via the stock exchange and is also referred to as going public, or flotation. An IPO allows the issuing company to tap a wide pool of investors to provide it with large volumes of capital for future growth.

Inside Information
Inside information is crucial and valuable information about a company which is known by the company's board of directors, management and/or employees but not by the public. Such information could affect the company's share price should it be made public.

Insider
An insider is any person who has access to crucial and valuable facts about a company which the public do not yet know (inside information). Information like expansion plans, financial results, contracts won, takeover bids etc., Insiders include owners, executives and consultants of a firm. A shareholder who owns more than 10% of a company is also considered an insider. It is illegal for an insider to engage in speculative trading in the company's shares based on such information.

Insider Trading
There are two types of insider trading. The first type occurs when someone trades shares at the stock exchange based on crucial information about the company which the public do not yet know. This is illegal regardless of whether you are a director, broker, friend or family member of an insider. The second is legal and occurs when an insider buys such shares but after the crucial information has been made public at which time there is no direct advantage over other investors.

Institutional Investor
This is an organization that invests sufficiently large amounts of money in shares and bonds. Examples of institutional investors include mutual funds, unit trusts, insurance companies and pension funds.

Interest
This is the fee charged by a lender to a borrower for the use of borrowed money, usually expressed as an annual percentage of the principal.

Interest
The amount of ownership a shareholder has in a company usually expressed as a percentage.

Interested Shareholder
This is a shareholder who owns or controls enough shares in a company as to affect company decisions and policies.

Interim Dividend
This is a dividend that is declared and distributed before a company's annual general meeting and final financial statements.

Intraday
This means within the day. It is often used to refer to the price movements of a stock within a single trading session. Example; when a stock reaches a new intraday high, it means that it is trading at a new high price, relative of all other prices it has traded at during the day.

Investment Advisor
A person or organization employed by an individual, institution or mutual fund to provide investment advice or manage assets.

Investment Bank
An investment bank is an institution that deals with the creation of capital for other companies. They act as advisors and agents for a company on matters related to the issue and placement of a stock. Example; during an IPO, it is common to find the issuer engaging the services of an investment bank as the lead advisor on the entire transaction. They also provide stockbrokerage services and can trade in shares at the stock exchange in their own accounts.

Investment Climate
This generally refers to the prevailing outlook and mood of the investing public and institutions. It depends largely on the current and anticipated economic situation but is also influenced by political and social factors. Example; political instability creates a negative investment climate where investors shy away from investing in the capital market.

Investment Club
This is a voluntary association of individuals who pool their money together to build an investment portfolio which would have otherwise not been possible with the small sums at each one's disposal. A key advantage of an investment club is that more than one mind is engaged in making buy or sell decisions and that each member carries a relatively low risk. They help to build up investment consciousness among small investors.

Investment Company
This is a company that invests the pooled funds of a large number of retail investors to buy and sell shares. It gives individual investors access to a wider range of securities than the investors themselves would have been able to access. An open-ended investment company is one which keeps accepting new investors and redeems the funds of those who wish to opt out, whereas a close-ended investment company has a fixed number of investors.

Investment Horizon
When an investor buys shares, he/she normally does so with a future date in mind when they would like to cash in on their investment. The total length of time from the date of purchase of a share to the date when it is sold is the investment horizon, provided that it is planned. An investment horizon can be years, months, weeks or even days.

Investor
An investor is an individual or institution that commits money to buy securities with an expectation of a financial return. The primary objective of an investor is to minimize risk while maximizing returns.

Investor Compensation Fund
This is a special fund that is set aside to compensate investors at the stock exchange who may incur loss due to the inability of a licensed stockbroker to meet his contractual obligations towards them. A certain fraction of all equity transactions at the stock exchange is set aside for this fund.

Issue
An issue is a stock or bond which has been offered for sale to the public by a corporation or government entity. This is done for purposes of raising funds.

Issue Price
This is the price at which new shares are issued to the public. The price is decided in consultation with the lead transaction advisor, normally an investment bank.

Issued Shares
This is the total number of a company's shares that have been sold and are held by shareholders regardless of whether they are individuals, institutions or insiders. It is not mandatory for a company to issue the total number of its authorized shares.

Issuer
This is the company or government that is offering (or has already offered) stocks or bonds for sale to investors for the purpose of financing its operations.