Compounding – When your money grows on its own growth—earning interest on top of the interest you’ve already earned.
Risk – How much an investment could rise or fall, and the likelihood of that happening. It's influenced by factors like investment quality, market conditions, and economic outlook.
Risk Exposure – An exposure to a certain risk. For example, if you have a risk exposure to rental property, you have a rental property that is subject to the ups and downs of the rental property market.
Volatility – The amount and frequency of movement (up or down) in the value of an investment. Higher volatility means bigger and more frequent price swings, which can feel like a bumpy ride.
Growth Assets – Shares in companies, investments in property, infrastructure, and other assets that have the potential to increase in value over time. They tend to be more volatile.
Income Assets – Investments like cash and bonds that provide regular returns (but usually smaller returns) than growth assets. They tend to be more stable.
Asset Allocation – How your money is spread across different types of assets (like shares, bonds, or cash) to balance risk and reward.
Diversification – Spreading your investments across different assets, industries, or regions so that if one area isn’t performing well, the others can help balance things out. Think of it as not putting all your eggs in one basket.
Inflation (CPI) – When the cost of goods and services rises together, making your money buy less than before.
Managed Funds – A pool of money from different investors that’s managed by professionals to buy a mix of investments.
KiwiSaver – A retirement savings scheme in New Zealand designed to help people save for their future. It has incentives like employer contributions and government contributions.
Superannuation – A way to save for retirement, where you and/or your employer set aside money to provide for income after you stop working.
Active Manager – An investment manager who uses a strategy to maximise the probability of achieving returns within a given risk exposure or to achieve a greater average return than that of an investment market or index.
Passive Fund – A fund that aims to match the performance of a specific market index rather than trying to outperform it. Usually involves lower fees since there’s less active management.
Index Fund – A type of passive fund that tracks a specific index like the NZX50 or the S&P 500, giving investors a simple way to invest in a wide range of companies.
ETF (Exchange Traded Fund) – A fund that can be traded on an exchange, like a share. It’s a collection of investments (e.g., shares, bonds) that track a specific market or industry.
Shares – Buying shares gives you partial ownership of a company, which means you could get a slice of the profits (dividends) or sell them later for a profit if their value rises. Shares are considered growth assets and are sometimes referred to as equities or stock.
Property – Property refers to residential or commercial real estate like shops and offices. In an investment portfolio, these are typically owned through property trusts or companies that focus on owning or developing real estate. As growth assets, they can be listed on an exchange or stay unlisted or be held within a fund.
Bonds – Think of a bond as a loan you give to a company or government. They promise to pay you back in full on a set date, and in the meantime, you receive regular interest at an agreed rate. Bonds are known as income assets and may also be called "fixed interest" or "debt securities." Because they can be traded on a secondary market, their value can fluctuate.
Junk Bonds – High-risk, potentially higher-reward bonds issued by companies or entities with lower credit ratings. They usually offer much higher interest rates to attract investors willing to take on more risk.
Yield – The income return you get from an investment, shown as a percentage of its cost. For example, a share with a $2 dividend on a $40 share price has a yield of 5%.
Interest – The cost of borrowing money, or the return you get when lending money or investing in certain assets like bonds or cash.
Cash – Cash is a type of investment that usually pays you interest. It typically includes things like term deposits and short-term savings accounts. Since it’s often a loan to a bank, cash is considered an income asset.
Estate Planning – Your way of making legal arrangements for what happens to your assets if you pass away, to ensure the people you care about are looked after.
Behavioural Finance – The study of how people behave in financial situations, especially the psychological factors that influence investment decisions and market outcomes.
Financial Literacy – Understanding how money works so you can make confident choices about earning, saving, investing, and spending.
Fractional Shares – Owning a smaller piece of a share, rather than buying a full one. It lets you invest in companies you want without needing the full share price.
Capital Gain – The profit you make when you sell an asset (like shares or property) for more than you paid for it.
Dividend – A portion of a company’s profits paid out to its shareholders, usually on a regular basis (like quarterly or annually).
Dollar Cost Averaging – A strategy where you invest a set amount of money at regular intervals, no matter what the market is doing. It helps smooth out the ups and downs of the market over time.
PIE (Portfolio Investment Entity) – A type of managed fund in New Zealand with different tax rules designed to make investing more tax-efficient for investors.
PDS (Product Disclosure Statement) – A document that provides detailed information about a financial product, including fees, risks, and how the product works, to help investors make informed decisions.
FMA (Financial Markets Authority) – The regulatory body in New Zealand that oversees financial markets, ensuring they operate fairly, efficiently, and transparently.