GLOSSARY OF TERMS

GLOSSARY OF TERMS

(or all the things you want to know but were too shy to ask.)

We said we would break down the jargon so here it is. A glossary of financial terms.

Asset — all shares, bonds, cash etc owned by the scheme.

Aggressive portfolio — are you someone that likes to take risks? An aggressive portfolio is a type of investment that involves taking on a higher level of risk in order to potentially earn higher returns.

Balanced funds — a type of fund that aims to provide a balance between stability and growth.

Bond — lending money to a company or government. It is a way to invest your money that is considered less risky. Think of it as loaning a friend money with a promise they will give it back with some extra cash.

Budget — an estimate of income and expenditure for a set period of time.

Capital — the money you initially put into an investment. (For example, if you invest $100 in a bank term deposit this is your capital amount on which you get paid interest.)

Commodity — a commodity is any raw material, such as oil, gold and cattle, traded on an exchange or in the cash market.

Compounding interest — it’s interest on interest. It’s the magic of superannuation.

Conservative fund — is a type of investment that aims to make you money without taking on too much risk.

Dividend — a payment from a company's profits to its shareholders in proportion to the number of shares the shareholder owns (typically a payment of cash).

Dollar Cost Averaging — putting a set amount of money into your investment portfolio on a regular basis, regardless of the share price.

Emergency Fund — a stash of cash that you put aside and tell no-one about and if you need to leave a toxic relationship or workplace you can do this without having to rely on anyone else's money.

Equity — the sum of your assets, for example the value of your house, once your debts have been subtracted from it.

ETF — Exchange Traded Funds. An ETF is a collection of hundreds or thousands of stocks or bonds, managed by experts, in a single fund that trades on major stock exchanges, like the New Zealand Stock Exchange.

Gender pay gap — the difference between the median hourly earnings of women and men in full and part-time work.

Inflation — the rate at which the prices of goods and services increase over time, often equated with loss of purchasing power.

Interest rates — the interest rate is an additional amount paid by a borrower to a lender for using the financial asset.

Investment Horizon — the length of time you’re aiming to invest for. Often described as either short- term, mid-term or long-term investment horizon.

Investing — when you put money into shares, funds, property etc, with the expectation of growing the money you initially put in.

Managed funds — a managed fund is an investment that pools your money together with other investors. The managed fund then buys shares, bonds and/or other securities; what they hold is known as an ‘investment portfolio’.

Motherhood gap — the motherhood pay gap measures the pay gap between mothers and non- mothers, the latter defined in most econometric studies as women without dependent children. It also measures the pay gap between mothers and fathers.

Mortgage — a mortgage is a loan for the purpose of buying a home.

Net worth — net worth is a measure of wealth; it is the sum of all assets owned by you or your company, minus any obligations or liabilities.

Portfolio — the selection of investments you hold.

Return — the amount an investment has increased or decreased, represented as a percentage or dollar amount.

Risk — the level of exposure your investments have to the potential of loss.

Securities — a security is a tradable financial asset used to raise capital in public and private markets. There are primarily three types of securities: equity—which provides ownership rights to holders; debt—essentially loans repaid with periodic payments; and hybrids—which combine aspects of debt and equity.

Share — the ownership of a company can be broken into smaller pieces and sold, this is called a ‘share’.

Shareholder — someone who owns shares in a specific company.

Share Market — a market where shares are bought and sold. Like a farmers market, but instead of fruit and veggies — it’s shares!

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