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,
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
Broker : an agent who executes an investor's orders to buy
or sell securities.
Brokerage : a fee charged by a financial adviser
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.
Capital gains/growth :
occur when the market value of an
Cash :one of the asset classes. Coin and
note currency in circulation and in deposit accounts and money
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
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
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
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
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
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?
(1) a share investment or (2) the part of an asset
owned by an individual over and above any debt against the asset.
Financial adviser :
an individual who provides investment
advice to others, for a fee. Need a financial
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.
(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.
funds : an investment fund where the fund manager is authorised
to use derivatives to provide a higher
Hedging : undertaking one investment to protect against the
potential loss in another investment. Options and
futures are often used to hedge an investment.
credit : taxation credits that are passed on to shareholders
who have received imputed dividends from holding shares or managed
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
to sell an investment or to convert an investment
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.
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.
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.
: 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
PDS : Product Disclosure Statement
Portfolio : the full range of an investor's, or managed fund's,
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
: 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?
Savings Plan : a BT term describing regular periodic investments
whereby the investor makes use of the principle of Dollar
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
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.
: 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.
deductible : an expense that can be offset against tax assessable
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.
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
Unrealised capital gain : occurs when an investment increases
in value but is not sold or realised.
: the dividend, or interest rate, on an investment expressed
as a percentage of the market value of the bond under current trading