Knowledge...
Investing Fundamentals
What is a managed investment?
4 Asset classes
Choosing the right investment
Risk & return
Diversification
Distributions
Tips for investing
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Learn the secret to wealth
Define investment goals
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Glossary
Common questions
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Calculators

Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Application : to apply for an investment in a unit trust or managed fund.
Application price : the price per unit or share of an investment for which applications are made.
Appreciation : the increase in the value of an asset.
Asset allocation : a representation of how a portfolio is invested among the various available asset classes e.g a balanced fund may have an asset allocation of New Zealand shares, international shares, property, New Zealand fixed interest, international fixed interest, and cash.
Asset classes : the range of financial securities, such as shares, bonds, property, and cash.

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Balanced fund : a type of managed fund whose investment strategy is to have, at all times, some proportion of its investments in all asset classes, creating a risk/return balance between the asset classes.
Bear market : a market that is decreasing in value over time. The opposite to a bull market.
Blue chip shares : shares in well established companies that have shown ability to pay dividends in uncertain markets.
Bonds : Bonds, also known as fixed interest securities, are agreements to repay a fixed amount of money at a pre-determined date in the future (maturity date). Bonds are generally issued by governments, banks or companies to finance investment projects. Want to know more about bonds?
Broker : an agent who executes an investor's orders to buy or sell securities.
Brokerage : a fee charged by a financial adviser or sharebroker for a transaction. Sometimes also referred to as commission.
Bull market : a market that is increasing in value over time. The opposite to a bear market.

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Capital gains/growth : occur when the market value of an investment increases.
Cash :one of the asset classes. Coin and note currency in circulation and in deposit accounts and money market securities.
Cash Management Trust (CMT) : a form of managed investment in which the primary investment is cash securities. While offering security, they can also offer the potential for a higher return than an ordinary bank savings account. Want to know more about cash management trusts?
Commission : a fee paid to a financial adviser or sharebroker for a financial transaction or advice. Sometimes also referred to as brokerage.
Compound interest : interest calculated on the principal and interest already accrued.
Constitution : formerly known as a Trust Deed, a document setting out the methods of application, investment and withdrawal of funds within an Australian managed investment scheme or unit trust.
Consumer Price Index (CPI) : an index measuring the prices of items of goods and services. Allows comparison of the relative cost of living over time, typically know as inflation.
Contributions : amounts of money placed into a fund.
Currency gains : that part of a security's capital gain attributed to movements in the currency in which the asset was denominated.

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Derivatives : securities that derive their value from another physical asset. Also known as synthetics. Examples of derivatives include futures and options.
Distributions : income payments from managed investments. Such payments comprise a share of any net income and realised capital gains earned by an investment over a financial year. The components which generally make up a distribution are profits from the sale of assets, income and currency gains.
Diversification : spreading an investment over a range of asset classes, sectors and regions with the aim of reducing risk.
Dividend : payment to shareholders from a company's after-tax earnings.
Dividend imputation : tax already paid by a company is credited to individual shareholders when a dividend is paid.
Dollar cost averaging : One of the benefits of investing a set amount of money, at regular intervals, over a long period of time. This means an investor could gain an advantage from rises and falls in the investment price, buying more when the price is low and less when the price is high. Want to know more about Dollar cost averaging? Want to know more about the BT Regular Savings Plan?

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Equity : (1) a share investment or (2) the part of an asset owned by an individual over and above any debt against the asset.

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Financial adviser : an individual who provides investment advice to others, for a fee. Need a financial adviser?
Fixed interest securities : see Bonds.
Fund : see managed investment.
Futures : a derivative investment, an obligation to buy or sell a specified quantity of an underlying asset at some time in the future, at a price which is agreed when the contract is executed.

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Gearing : (1) a measure of the debt ratio, which is the amount of borrowing compared with the equity in an asset (2) borrowing to invest, such as when purchasing a house using a mortgage.
Growth assets : a term given to assets such as shares and property that are expected to provide strong capital gains over the long term.
Growth fund : an investment fund that is predominantly invested in growth assets.

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Hedge funds : an investment fund where the fund manager is authorised to use derivatives to provide a higher return.
Hedging : undertaking one investment to protect against the potential loss in another investment. Options and futures are often used to hedge an investment.

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Imputation credit : taxation credits that are passed on to shareholders who have received imputed dividends from holding shares or managed share investments.
Income : regular payments from an investment derived from interest on cash or bonds, dividends on shares, or rent from properties and realised gains on the sale of assets.
Inflation : see Consumer Price Index.
Interest : the return earned on money which has been invested or loaned; the price paid for its use.
Investment : an asset purchased with the intention of producing capital growth or income, or both, for the owner.
Investment statement : the marketing and offer document issued to prospective and existing investors to enable them to make an investment.

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Liquidate : to sell an investment or to convert an investment into cash.
Listed security : a security which is bought and sold via an exchange, such as shares on the stock exchange.
Loss : occurs where the sale price of an asset is less than the initial cost.

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Managed investment or fund : a vehicle that allows investors to pool their money with that of other investors so that the fund can buy a wide range of investments. These investments are managed by a professional fund manager who makes the investment decisions.
Management Expense Ratio (MER) : a measure of the fees and certain expenses payable from a fund, expressed as a percentage of the average fund size.
Money market : a market where short-term securities, such as promissory notes and bills of exchange, are traded. Securities in the money market all have maturity terms of 1 year or less.

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Negative gearing : purchasing an investment with borrowed funds where the interest on the borrowing exceeds the income from the investment.
Net asset value : the value of a company, or managed fund; which is the assets less liabilities.
NZSE 40 : a measurement of the average movements in share price of the largest 40 companies by market capitalisation listed on the NZ stock exchange.

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Options : a derivative investment, giving the holder an option to buy or sell a specified quantity of an underlying asset at some time in the future, at a price which is agreed when the contract is executed. On the other side, the writer of the option has the obligation to sell or buy the specified quantity of the underlying asset at the future time and at the price agreed when the contract is executed.

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PDS : Product Disclosure Statement
Portfolio :
the full range of an investor's, or managed fund's, investment holdings.
Profit (realised) : occurs when an investment appreciates in value and is sold, or realised. Also known as a realised gain.
Property funds : in a managed investment the term property generally refers to investments in property securities - property trusts listed on the stock exchange. Funds that invest in property securities allow diversification by investing across a range of different property sectors such as commercial, office, industrial, hotel and retail properties. A property securities fund generally invests in property trusts that are listed on the share market, or in property-related companies.
Prospectus : a legal document lodged with the New Zealand Securities Commission that details how the funds operate, outlining the nature of the funds, how to invest and what to expect from the investment.

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Realise : to sell an investment.
Realised capital gain : when an investment is sold for more than it cost.
Redemption/redeem : to withdraw, or sell, an investment.
Redemption price : the price at which an investor can withdraw their units from a fund or trust.
Regular Payment Plan : a BT term for an investment arrangement that allows the investor to specify the regular amount of money they are to receive each quarter. Want to know more about the BT Regular Payment Plan?
Regular Savings Plan : a BT term describing regular periodic investments whereby the investor makes use of the principle of Dollar cost averaging.
Reinvest : where income from an investment is used to make an additional investment, generally at no fee, increasing the potential to receive higher capital growth and distributions in the future.
Repurchase : A transaction conducted by the manager who buys back the units from the investor and redeems them with the unit trust.
Responsible Entity : An entity licensed by the Australian Securities and Investments Commission, responsible for all aspects of managing a unit trust.
Return : the amount of money received from an investment each year. Can be comprised of income and/or capital growth and is expressed as a percentage.
Risk : the variability of returns. Generally, the higher the level of risk an investor is prepared to accept, the higher the potential return over time may be.

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Sector : a group of securities with common characteristics, such as resource sector companies or financial companies.
Security : (1) an asset traded on a financial market, such as shares or bonds or (2) an asset pledged to ensure the repayment of a loan.
Shares : represents ownership in part of a company. When you buy a share in a company you become a joint owner of the business and share in the future of that business. Also known as an equity. Want to know more about shares?
Sharebroker : a person who buys and sells securities on behalf of others in return for brokerage or commission.
Superannuation : a means of putting aside money during your working life for use in retirement.
Switching : selling units in one fund and buying them in another, in a managed investment.

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Tax deductible : an expense that can be offset against tax assessable income.
Trust deed : A document which sets out the rules that govern the operation of a unit trust or superannuation plan and the rights of investors in those products.

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Unit price : the price for each unit of a unit trust. This is calculated by dividing the value of the assets of the trust by the number of units on issue to investors.
Units : a share of a unit trust or managed fund that represents an entitlement to the value of the assets within the fund.
Unit trust : an investment where a number of individuals place their money with a professional manager who manages the total fund on their behalf. Also known as a pooled investment or managed investment.
Unrealised capital gain : occurs when an investment increases in value but is not sold or realised.

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Yield : the dividend, or interest rate, on an investment expressed as a percentage of the market value of the bond under current trading conditions.

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