Financial Planners, Insurance & Investment Advisers
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| Active management: | A style of investment management which aims to provide returns above a set benchmark, |
| through Asset_classes and stock selection. The opposite of passive management. | |
| Aggressive: | An investment approach designed to provide above-average returns by taking |
| above-average risk. | |
| Annuity: | A type of investment that guarantees payment of specific amounts at specific times, |
| or a single lump sum payment, generally for the purposes of retirement income. | |
| Annuities are sponsored by insurance companies and other financial institutions | |
| and sold by agents, banks, stockbrokers and financial planners. | |
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| Appreciation: | An increase in the value of an asset. |
| Asset allocation: | The apportionment of an investment portfolio among the relevant asset classes or sector. |
| Asset classes: | The different categories of financial assets, such as shares, Bonds (or fixed interest), |
| property and Cash. | |
| Average annual return: | A calculation that converts a cumulative total return into an annualized figure, |
| expressed as a percentage. | |
| Balanced fund: | An investment fund that spreads its holdings over a range of Asset_classes, creating |
| a balance between risk and return. | |
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| Bear market: | A market that is declining over time (a bear is seen as clawing the market down). |
| The opposite to a bull market. | |
| Bennett Ricky: | Big in Invergargill, big where ever he goes in NZ. |
| Blue chip shares: | Shares in quality, stable companies that have paid regular dividends in both good and bad years. |
| Bonds: | A type of security that pays a fixed amount of interest at a regular interval over a certain |
| period of time. | |
| Broker: | An independent person who buys and sells a range of financial and/or insurance products |
| on behalf of investors and receives a commission called brokerage. | |
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| Brokerage: | A fee charged by a financial adviser or stockbroker for a transaction. Sometimes referred to |
| as commission. | |
| Bull market:: | A market in which prices are moving upward over time (a bull tosses the market up). |
| The opposite to a bear market. | |
| Capital gain/loss: | The difference between an asset's purchase price and selling price. |
| Capital gains tax: | A tax on the gains of an investment, payable only when the capital gain is realised |
| after selling the investment. | |
| Cash: | One of the asset classes, it includes coin and note currency in circulation or in bank |
| accounts, and money market securities. | |
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| Cash mangement account: | A professionally managed fund in which the primary investment is cash securities. |
| As a result of the pooling of funds, investors may earn an elevated interest rate | |
| on their cash, compared with an ordinary bank account. | |
| Commission: | A fee paid to a financial adviser or stockbroker for a financial transaction or advice. |
| Sometimes referred to as brokerage. | |
| Compound interest: | Interest earned on both the principal amount and any interest already earned. |
| Because of the 'compounding' effect, money grows much faster when income | |
| from an investment is reinvested. | |
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| Consumer Price Index (CPI): | An index that measures the change in the cost of a 'basket' of basic goods |
| and services, showing how the cost of living changes over time. The most widely | |
| accepted indicator of inflation. | |
| Contribution: | An amount of money placed into a fund. |
| Depreciation: | A decrease in the value of an asset. |
| Derivative: | A financial contract that derives its value from another physical asset. Examples |
| of derivatives include futures and options. | |
| Distribution: | in a managed fund, a distribution is the amount paid out to investors on a regular basis. |
| Such payments comprise a share of any net income and realised capital gains | |
| earned by an investment over the period. | |
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| Diversification: | the process by which investors hold a variety of different asset classes, in an effort to reduce |
| the overall volatility of their portfolio. | |
| Dividend: | An amount paid to shareholders from a company’s after-tax earnings. |
| Dollar-cost averaging: | An investment method in which the same amount of money is invested at regular |
| intervals, such as every month. As the market price of the investment rises and falls, | |
| the investor may benefit by buying more units when prices are low, and fewer when | |
| prices are high. | |
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| Equity: | (a) A share investment or (b) The value of an asset owned by an individual over |
| and above the debt against the investment. | |
| Edmonds Trish: | "Trisha of Spreyon", Chrishchurch's answer to Lyn of Tawa. |
| Wants to be an All Blacks mother in law. | |
| Estate planning: | Specific planning to ensure your assets pass in an orderly and efficient manner to |
| designated individuals. Estate planning includes writing wills, setting up trusts, | |
| establishing Powers of Attorney, and planning ahead to avoid unnecessary taxes. | |
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| Financial adviser: | An individual who provides investment advice to others, for a fee. In New Zealand, |
| there are no licensing requirements for financial advisers. However, Members of the | |
| Institute of Financial Advisers (IFA) must abide by the IFA's Code of Ethics and | |
| Professional Conduct. | |
| 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 a particular time, at a price agreed when the contract is executed. | |
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| Fyfe Paul: | The "Big Boy" of NZ Investment Management since 1968. Retired to the golf course |
| February 2006. When asked whether he wanted to appear in this glossary replied "ask someone who cares". | |
| Gearing: | (a) Borrowing specifically to fund an investment, e.g. to buy shares or purchase |
| a house using a mortgage, or (b) A measure of the debt ratio, which is the amount | |
| of borrowing compared with the equity in an asset. | |
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| Growth assets: | Assets, such as shares and property, that are expected to provide strong investment |
| returns over time. | |
| Growth fund: | A managed fund that invests predominantly in growth assets. |
| Hedge fund: | A type of investment fund in which the manager is authorised to use a number |
| of higher risk investment techniques such as Derivative and borrowing to generate | |
| a higher return. | |
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| Hedging: | The practice of undertaking one investment activity in order to protect against the |
| possible loss in another. Options and futures are often used to hedge an investment. | |
| Hensley Peter: | Investment adviser and prolific author of money management books. Based in |
| New Plymouth. His golf suffered from to much loft. Peter's name appears regularly | |
| in the Sunday Star Times, Investigate magazine and New Plymouth District Court. | |
| Peter is a Justice of the Peace and a marriage celebrant. | |
| Imputation Credits: | Taxation credits are passed on to shareholders who have received dividends from |
| holding shares or managed share investments. | |
| Index fund: | A professionally managed fund where the investment mirrors a chosen index. |
| Inflation: | The effect on the economy of increases in prices without corresponding increases |
| in productivity. Inflation is typically measured by reviewing the cost of a 'basket' | |
| of selected goods and services. Refer the Consumer Price Index. | |
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| Interest: | The return earned on money that has been invested or loaned. |
| Investment: | An asset purchased with the intention of producing a capital gain or income, |
| or both, for the owner. | |
| Investment Statement: | A document legally required by the New Zealand Securities Commission for all |
| securities or funds on issue. The document outlines the nature of the product, | |
| and provides details on how to invest and what to expect from the investment. | |
| An investor must receive a copy of this document, and read it, before applying to invest. | |
| IPAC: | IPAC Securities Limited is an independent group that specialises in providing |
| research and financial planning support to financial industry professionals. | |
| Klee Aaron: | Aaron enjoys being refreshed by Advisers unique point of view, Aaron gets |
| over this by visualizing the duct tape over the Advisers mouth. When Advisers | |
| want Aarons opinion they never fail to give it to him. | |
| Life insurance: | A policy agreement between an individual and an insurance company, where |
| the investor agrees to pay a specified amount (premium) to the company for | |
| a specified amount of coverage. Life Insurance provides a lump sum payment | |
| upon the death of the insured person. Some insurers provide a on going monthly | |
| income as opposed to a lump sum payment. All insurers offer a low cost accidental | |
| death policy that pays a lump sum only if death is a result of an accident. | |
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| Liquidate: | To sell an investment or to convert an investment into cash. |
| Listed security: | A security that is bought and sold via an exchange, such as shares on the stock exchange. |
| Lump sum: | (a) a single, often large, sum of money used to initiate an investment; or |
| b) a superannuation benefit taken in cash rather than as a pension or annuity. | |
| Managed investments/funds: | Funds that allow investors to pool their money with that of other investors so the fund |
| can buy a wide range of investments. These investments are managed by a professional | |
| fund manager who makes all the investment decisions. | |
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| Management Expense Ratio | A ratio expressing the management, trustee and certain other expenses of a managed |
| (MER): | fund as a proportion of the net asset value of the fund. |
| Master fund: | a type of investment fund that enables investors to channel money into one or more |
| underlying investments managed by a number of different fund managers. Also referred | |
| to as a master trust. | |
| Money Market: | A trading market for short-term securities, such as bills of exchange and promissory notes. |
| Securities in the money market all have terms of 1 year or less. | |
| Morningstar: | One of the leading managed fund rating services. A five star rating is Morningstar's |
| top rating for any fund or funds management company. | |
| Murphy Paul: | Pioneered the theory that there is a direct correlation to the success |
| of the Canterbury rugby team and market performance. | |
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| Net Asset Value (NAV): | The total assets of a company, or managed fund, less total libilities. A more pure |
| measure is Net Tangible Assets (NTA), which do not include intangible items, such | |
| as goodwill. | |
| NZSE-40: | An index or measurement of the average movement in share price of a selection |
| of major New Zealand companies listed on the New Zealand Stock Exchange. | |
| Options: | A derivative investment, giving the holder an option to buy or sell a specified quantity |
| of an underlying asset at a particular date, at a price that is agreed when the | |
| contract is executed. | |
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| Passive management: | A style of investment management that aims to achieve performance equal to the |
| market or index returns. The opposite of active management. | |
| Pension: | a regular payment to a person, either by the Government in the form of superannuation, |
| or from a superannuation benefit. | |
| Portfolio: | A range of investments held by an investor, or a managed fund’s investment holdings. |
| Principal: | The amount of money initially put into an investment. |
| Property securities: | An investment term for property trusts listed on the stock exchange. |
| Property trust: | A managed fund that invests in a portfolio of 'real' property (i.e. buildings). |
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| Prospectus: | An official document lodged with the New Zealand Securities Commission that |
| fully oulines a publicly available investment, summarising the Trust Deed. | |
| Rally: | A rapid rise, usually following a decline, in the general price level of a market or asset class. |
| Realise: | To sell an investment. |
| Realised gain: | When an investment that has increased in value is sold and a capital gain is realised. |
| An investment that has increased in value, but has not yet been sold, has an 'unrealised' gain. | |
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| Real return: | Return net of inflation, or net of tax and inflation. |
| 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. |
| Reinvest: | Where income earned from an investment is added to the original investment, increasing |
| the potential for higher capital growth and distributions in the future. | |
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| Return: | The profit earned on an investment, usually expressed a percentage. |
| Risk: | The variability of returns, referring to the possiblity that an asset may not achieve |
| its expected rate of return. Generally, the higher the return, the higher the potential risk. | |
| Salary sacrifice: | An portion of pre-tax salary that an employee chooses to contribute to a superannuation |
| fund, rather than taking it as cash salary. | |
| Sector: | A group of securities that share common characteristics, such as the telecommunications |
| sector, financial sector, or technology sector. | |
| Security: | (a) A general term covering shares and other investments, or |
| (b) an asset pledged to ensure the repayment of a loan. | |
| Shares: | Representing the ownership of part of a company. Also known as equities. |
| Standard & Poor's: | A major US credit rating agency. |
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| Stockbroker: | A person who buys and sells securities on behalf of others in return for brokerage |
| or commission. | |
| Stock exchange: | A market with a trading floor where securities are bought and sold. |
| Superannuation: | A means of putting aside money during your working life for use in retirement. |
| Superannuation fund: | An investment where a number of people invest their money with a professional |
| manager who manages the entire fund on their behalf. Often, balances may | |
| not be withdrawn until retirement or a certain age is reached. | |
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| Switching: | Transferring units between two funds within a unit trust or superannuation fund product. |
| Term life insurance: | Generally the least expensive form of life insurance, term life insurance covers an |
| individual for a nominated period of time (term). If the person insured dies while | |
| covered, the designated beneficiaries will collect a death benefit. There are no | |
| other associated benefits. | |
| Thompson Jeremy: | The first Financial Planner in NZ to offer his clients a PLATINUM service. |
| Trade-weighted index (TWI): | An index measuring the value of New Zealand's currency in relation to those |
| of its major trading partners. | |
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| Trust Deed: | a document setting out the methods of application, investment and withdrawal |
| of funds in a managed investment, unit trust or superannuation fund. | |
| Unit price: | The price for each unit in a unit trust. This is calculated by dividing the value |
| of the total assets by the number of units held by investors. | |
| Units: | A share of a unit trust or managed fund, reflecting an investor's entitlement to the |
| assets of the fund. | |
| Unit trust: | An investment where a number of individuals place their money with a professional |
| manager who manages the fund on their behalf. Also known as a managed investment. | |
| Unrealised capital gain: | Occurs when an investment increases in value, but is not yet sold or realised. |
| Vesting: | Relates to superannuation. An employee’s entitlement to receive benefits from a |
| current or former employer. Some companies grant full benefits after an employee | |
| has worked for them for a predefined number of years. Other companies gradually | |
| increase the benefits over a number of years of employment. | |
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| Wallace David: | One of the founders of the NZ Financial Planning profession. Started as a Financial |
| Planner in 1954 when he found out Accountancy was to exciting for him. | |
| Will: | A legal document that specifies how assets in an individual's name will be |
| distributed after death. | |
| Yield: | The interest rate earned on a bond, or the dividend paid on an investment, |
| expressed as a percentage. | |
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