Financial terms you should know

Pull-back: A pull-back generally refers to a decline in equity prices from their most recent peak — in technical terms that means anywhere between 5 percent to 9,9 percent. Pull-backs are common as investors who have bought into an asset sell to turn a quick profit.

Correction: When stocks drop more than 10 percent from their recent peak, Wall Street considers it a correction. An individual stock, index, commodity or currency can fall into a correction. Like pull-backs, corrections are relatively common occurrences and tend to be short-lived.

Bear market: A step up from a correction, investors generally consider stocks to be in a bear market when prices fall 20 percent from their most recent highs. A bear market can also refer to any, or all three, of the major indexes. A bear market is the opposite of a bull market — where investors are optimistic and more likely to shrug off disappointing data or news. The most recent bull market has been one of the longest in history.

Inverted yield curve: Yield curve inversion has typically been considered an indication of recession because it means the interest rate on long-term bonds is lower than the rate on shortterm bonds. A flattening yield curve generally indicates weak economic growth while a steep curve indicates strong growth.

Recession: While there is no standard definition for a recession, “it typically refers to a significant decline in economic activity spread across the economy, lasting more than a few months,” according to the National Bureau of Economic Research ( NBER) as cited by the Federal Reserve Bank of San Francisco. That decline in activity is visible in gross domestic product, real income, employment, industrial production and wholesale-retail sales.

Taper Relief: The purpose of taper relief is to reduce the amount of tax you have to pay to account for the effect of inflation.

Taper relief applies to inheritance tax ( IHT) if the donor dies between three and seven years after making a potentially exempt transfer (or transfers) of more than the nil rate band. It applies both to business and non-business assets, although different rules apply for each. Taper relief is calculated on the basis of how long you have held the asset for .

Taper relief also used to apply to capital gains tax ( CGT) to reduce the amount of tax paid through the sale of shares, property or other capital assets, but this was abolished in the UK’s 2008 budget.

Tax Credit: A state benefit paid to employees through the tax system, which has the effect of increasing net income.

Tax Relief: The UK and other governments encourage you to save for your retirement by giving you tax relief on pension contributions. Tax relief works by reducing your tax bill or increasing your pension fund.