Glossary Of Terms

Passive fund :Passive funds generally rely on the market to dictate performance. A passive fund is likely to be a lower risk investment than an active fund, but also has less potential for higher returns.

Passive fund manager :Passive fund managers don't move the money instead they manage between different assets as much as active fund managers. Passive fund managers generally rely on the market to dictate the performance of their fund.

Pension :An income paid at regular intervals to a retired person, by a government or through an employer superannuation scheme.

Policy :The written contract between you and your insurer.

Premium :The amount you pay to buy insurance.

Principal: :The amount you borrow when you take out a loan or mortgage.

Rate of return :What you earn on your investment as a percentage of the amount you invested.

Refinance :Changing the terms of your loan, or replacing your existing loan with a new one.

Retur :The change in the value of your investment over a period of time plus the value of any income received from it. Returns can be both positive and negative.

Risk :Risk is the chance that an investment will not be as good as you expected or were promised. It means that you might not get some or all of your money back and you might not get any additional returns.

Secured loan :A secured loan is secured against some or all of a borrower's assets, minimizing the lender's risk on the loan. If the borrower defaults on the loan (fails to make repayments), the lender may get some/all of these assets in order to cover the outstanding loan amount.

Securities :A security is the piece of paper that proves possession of stocks, bonds and other investments.

Shares :Shares and equities refer to the same thing - a share in the ownership of a company and entitlement to any distributions.

Stocks :Any security traded on a public exchange including fixed interest or equity securities.

Superannuation scheme :Funds specifically designed for people saving for their retirement.

Table mortgage :A loan that is paid back by making regular payments of fixed amounts. Each payment pays back part of both the interest and the capital.

Term deposit :Money deposited for a fixed term - usually between 30 days and five years. If you want your money back before the term is up you may have to forego a portion of your interest as a penalty.

Trustee company :Trustee companies were originally established to manage a deceased person's property and trust funds. These companies now actively manage money on behalf of clients through will preparation, estate planning, as well as trust and estate administration.

Unit trusts :A type of managed fund. Managed funds work by pooling money from a number of investors and then using this money to buy a variety of investments. In a unit trust, each investor owns a share of the total fund.

Unsecured loan :A loan which is not secured against any of the borrower's assets and so is more risky for a lender than a secured loan. To recompense for this, the lender charges a higher interest rate.