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Glossary

Absolute Return Funds
Funds, which aim to generate positive returns regardless of market condition. They attempt to accomplish this by using derivatives, options, futures and other unconventional assets. As such, they are different to traditional funds.
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Active Investment Managers
Seeking short-term profits, these fund managers typically engage in more frequent buying and selling transactions, hence they are more likely to incur higher transaction costs compared to Passive Investments.
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Administrator
A person empowered to act on behalf of your financial affairs. Appointed by the Guardianship and Administration Board in each state.
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Allocated Pension
Provides periodic payment that can vary within minimum and maximum levels set by legislation. As payments include part of the principal purchase amount, the principal will eventually run out.
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Annuity
A financial product, which will generally make regular fixed payments to you, the annuitant, over a defined period.
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ANZ Financial Planners
Salaried employees and authorised representatives of ANZ, the holder of a Securities Dealers License issued by the Australian Securities and Investments Commission.
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Asset
Resources or investments you own, which has an economic value. Examples include shares, property and cash.
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Asset Allocation
Also known as Investment Mix, it refers to the various classes and weighting of assets that makes up your investment portfolio.
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Attorney
A person legally appointed to act on behalf of another person. Appointment can be made by an Enduring Power, of Attorney, a Specific Power of Attorney or a General Power of Attorney.
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Australian Stock Exchange (ASX)
Commonly referred to as the ASX, it is an organised market place for trading Australian securities.
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Beneficiary
A class of person(s) who may be entitled to receive income or assets of a trust or from a deceased estate.
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Binding Death Benefit Nominations
An election in accordance with superannuation law and the terms of the Superannuation fund's trust deed. The nomination will bind the trustee to pay the member's death benefits in accordance with the terms of the binding death benefit nomination.
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Bonds
Bonds are debt asset issued by governments and companies (the borrower) in return for your cash. The borrower then pays you fixed interest throughout the life of the bond. Also referred to as fixed-income securities.
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Budgeting
A projection of your future revenue and expenses over a specified period.
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Capital Growth
The positive difference you receive, between the realised sale price and the purchase price of an asset.
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Capital Loss
The negative difference you face, between the realised sale price and the purchase price of an asset.
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Capital Protected
An investment where you the investor cannot lose more than the initial amount you have invested.
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Car Insurance
Insurance people can purchase which helps provide protection against loss or damage incurred as a result of traffic accidents or theft.
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Cash
Notes and coins, which are used in exchange for goods, debt, or services.
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Charitable Foundation
A trust you can set up specifically to provide funds to charitable organisations or for a specific charitable purpose.
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Collectables
Investments such as paintings, artefacts, coins and antiques, which are expected to increase in value.
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Complying Super Fund
This is a superannuation fund that meets the government's legislative requirements for concessional tax treatment.
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Compounds Returns
Compounding Returns refers to the effect of earnings being continually reinvested to generate further earnings.
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Consumer Price Index (CPI)
An index, which measures changes to our living expenses. The CPI monitors changes in the weighted average price of a basket of consumer goods including food, medical care and transport.
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Contributions
Money paid either by yourself, your spouse or your employer to a superannuation fund.
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Credit Card Insurance
A type of insurance that may help you make repayments on your credit card, if you are unable to.
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Deceased Estate
Includes all assets and liabilities owned personally or as tenant in common at the time of a person's death. This may include real estate, shares, managed funds, cash and bank accounts, household furniture and effects, wearing apparel and personal effects. Superannuation and Life Insurance may also form part of a person's deceased estate.
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Defensive Assets
Assets that provide an income that does not depend on the performance of the overall market. When markets are down, they generally offer relatively attractive returns. When markets are on the rise, returns are generally unattractive. Examples include cash and bonds.
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Derivatives
Financial instruments whose values are dependent on underlying assets. These assets may be shares, share price indices, commodities, currencies or fixed interest securities. Warrant futures and exchange-traded options are types of derivatives.
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Direct Property
Real estate investments that you hold directly.
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Disability benefit
Payments made to an eligible insurance policy holder who is unable to work due to illness, accident or injury.
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Diversification
Where you spread investments over a number of individual assets, classes of assets, countries or investment managers in order to reduce your total investment risk.
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Dividend Income
See "Dividends"
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Dividends
Cash you may receive, once or sometimes twice a year, for being a shareholder of a company. Payment represents distribution of profit.
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Eligibility criteria
A set of criteria that must be met in order for a person to be eligible. For example, in insurance, some benefits and/or policies may have eligibility criteria including minimum age restrictions or require certain levels of employment.
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Eligible Termination Payment (ETP)
A payment that may be made by an employer, superannuation fund, rollover fund or retirement savings account when you leave that employer. In some cases, you may be able to cash some of your superannuation ETP, however you will forfeit the tax concessions that would apply if you rolled it over into a superannuation fund.
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Emerging Markets
Countries outside the more established global economies, which are rapidly industrialising. Their earnings may be volatile and are typically higher risk. Examples include Latin America and South East Asia.
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Employer Super
A corporate superfund, which allows individuals and their employers to make contributions into selected funds. As distinct from retail superfund provided by a fund manager or a retirement savings account provided by most financial institutions.
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Estate
See "Deceased Estate"
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Equity
See "Shares"
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Estate Administration
See "Deceased Estate"
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Excess
The amount you may be required to pay when you make a claim on your insurance policy.
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Exchange Traded Funds
These work like a share. However, instead of owning part of a company, you are purchasing a diversified portfolio of companies or assets. Examples include Australian shares, international shares and property trusts.
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Executor
A person appointed by a testator in his/her Will to carry out the provisions of the Will, which may include the distribution of assets and creation of trusts.
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Fiduciary Duty
A duty to act in good faith and for the benefit of another.
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Fixed Interest
Interest received from your investment, at a predetermined and unchanging rate for a specified period.
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Fixed Term Pension & Annuities
Provides fixed income over a fixed term during your retirement. May be increased annually in line with CPI or at a fixed percentage. Can be purchased with a lump sum payment from a superannuation fund or money from other sources.
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Franking Credits
Franking credits represent the underlying tax paid by a company on pre-tax profits from which any dividends were paid, and may reduce the amount of tax you the investor pays on dividend income. The franking concept was introduced to prevent double taxation.
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Fund Manager
Companies or individuals with expertise in managing investments.
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Gearing
Gearing is when you borrow money to invest. Examples include equity loan, personal loan and margin loan.
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Government Securities
Debt securities such as Treasury Bonds (medium to long-term debt) and Treasury Notes (short-term debt) issued to the public by the government.
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Growth Assets
Financial assets that are expected to increase in capital value over time, rather than provide you an immediate high dividend return.
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Guardian - adult
Is a person appointed to care for his or her rights, interests or lifestyle needs.
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Guardian minor children
A person appointed to care for rights and interests of children under the age of 18.
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Hedge Funds
Hedge Funds aim to generate high returns by using sophisticated and aggressive investment strategies. As an investor you are typically required to leave large sums of money in these privately managed funds for at least a year, it is a fairly illiquid investment.
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Hedging
Hedging is when you enter into a transaction to reduce or offset risk to which you are currently exposed.
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Home Insurance
Insurance that can help protect your home (building) and/or contents against various events as described in the insurance policy.
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Income Protection Insurance
Insurance that can help your income to continue (by paying you a percentage of your normal earnings) should you become unable to work as a result of a particular event covered in the insurance policy, for example accident or ill health.
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Infrastructure Funds
Managed funds that invest in public infrastructure assets such as transportation, telecommunications and/or utilities facilities.
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Instalments
When investors purchase shares, listed property trusts and exchange traded funds by making a part payment upfront and a final payment (or second instalment) at a later date.
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Insurance
A contract or insurance policy between an insurance company and a person under which the insurance company agrees to pay the person for specified loss (as defined in the policy) in return for a fee (referred to as a premium).
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Intestate
A person who dies without leaving a valid Will.
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Investment Time Horizon
The span of time you are locked into an investment. If you are an active trader, your time horizon may range from seconds to days. For passive investors, it could be months or even years. There is no ideal horizon. It is highly dependent on your individual financial objectives.
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Investor Risk Profile
Refers to the level of investment risk you are comfortable with as an investor. Some investors may have a strong appetite for high-risk, high-return investments, while other investors may be much more risk adverse.
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Involuntary Unemployment benefit
Pays your debt repayments for a defined period of time for covered instances of involuntary unemployment.
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Landlord Insurance
Insurance that can help protect landlords from damage to their building and/or contents for specified loss (as defined in the policy), and may include theft or damage by tenants and rent default.
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Letters of Administration
Appointment by the Court of a person to distribute the assets of an intestate person.
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Life Insurance
An insurance policy that provides for payment of a sum of money upon the death of the insured. If the insured passes away, beneficiaries listed in the policy may be protected from a financial perspective.
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Lifetime Pensions And Annuities
Provides fixed income during your retirement. Amount received may be increased in line with CPI or at a fixed percentage. Generally, income is provided until death.
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Listed Investment Companies
An investment company, which has agreed to abide by ASX Listing Rules so that its shares can be bought and sold on ASX.
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Listed Managed Investments (LMIs)
Broadly, LMIs are managed funds, which you may purchase from an exchange.
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Living Expense Insurance
Generally, this is an insurance policy that helps cover the additional expenses homeowners and renters may face if they were temporarily displaced from the place of residence.
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Loan Protection Insurance
A type of consumer credit insurance that can help a debtor meet their repayments on a loan if they are unable to.
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Managed Funds
Managed funds enable you to invest in professionally managed portfolios, which are typically well diversified. It provides exposure to various assets such as shares, real estate and bonds. A share in a managed fund is called a unit.
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Member (Superannuation)
You are a member of a superannuation fund if you have joined the fund and will, in the future, receive a benefit from that fund.
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Mortgage Protection Insurance
A type of consumer credit insurance that can help a debtor meet their repayments on a mortgage if they are unable to.
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Non-Binding Death Nomination
A nomination of a beneficiary by a member of a superannuation fund. This nomination is not binding on the trustee of the super fund. On the death of the member, the trustee will exercise its discretion taking into consideration the member's nomination but the trustee will ultimately decide who will receive the superannuation death benefits.
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Non-Estate Assets
All assets that do not form part of a person's deceased estate. These are all assets that are not personally owned, which may include assets of a discretionary trust, assets of a company, assets owned jointly with another or others. Note: life insurance and superannuation death benefits may also be classified a non-estate asset if paid directly to nominated beneficiaries.
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Non-Preserved Benefits
This is the portion of your super that can be taken as cash at any time.
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Passive Investment Managers
Fund managers who engage in occasional buying and selling transactions typically trying to track certain indices such as the ASX 200. Lower transaction costs compared to Active Investments.
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Personal Super
A retail superfund, which allows individuals and their employers to make contributions into selected funds. As distinct from a corporate superfund provided by an employer, or a public sector fund provided by the government.
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Policy term
The period of time for which your insurance policy is valid.
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Pooled Development Funds (PDF)
PDFs are a variation of managed funds. The key difference is, PDFs invest only in listed and unlisted shares of small to medium Australian companies.
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Portfolio
Your collection of investments, which may contain a variety of assets including real estates, managed funds, shares held directly or in superannuation.
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Power of Attorney
The legal instrument or document that authorises one or more persons to act on behalf of another person.
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Precious Metals
Rare metals with high economic value. Examples include gold, silver, platinum, iridium, palladium and rhodium.
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Prescribed Private Fund
A charitable trust approved as such by the Australian Tax Office.
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Preservation Age
The age before which you cannot generally gain access to the preserved benefits of a superannuation fund.
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Preserved Benefits
The part of your superannuation benefits that must be maintained either in a superannuation or rollover fund until retirement after your preservation age.
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Principal
Principal is the original amount a lender provides to the borrower.
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Private Equity
Equity capital, which private markets make available to companies or investors seeking to expand or restructure their finances. They are not publicly traded on exchanges.
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Probate
Approval of the last Will and appointment of the executor by a court.
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Property
Typically refers to real estate assets. Examples include commercial property, industrial property and residential property.
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Property Trusts
A type of unit trusts which pools your funds and other investors' funds into real estate investments.
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Protective Trust
A statutory trust for the benefit of a vulnerable beneficiary.
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Returns
The yield your investment generates, be it positive or negative.
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Risk
In investment, risk relates to the variability of returns. Investments with greater risks are generally expected to have higher returns.
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Salary Sacrifice (Superannuation)
Contributions you make into your complying superannuation fund from your pre-tax salary. Salary sacrifice is an effective way to reduce the amount of tax you have to pay
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Self-Managed Super Funds
Self-managed super funds (SMSF), like other funds, invests your contributions and makes them available to you upon your retirement. You will also typically be the trustee of your SMSF. As the name suggests, you also will generally control the investments of your contributions as well as the payments of your benefits.
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Shares
Units of ownership in a company.
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Short-Term Money Market
The sector of the financial market that caters for the borrowing and lending of money for short periods, usually less than six months and nearly always less than twelve months, and trading in short-dated securities. Examples may include the cash market and 90-180 day bills of exchange.
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Special Disability Trusts
A trust created by parents (or immediate family members) for the benefit of a person who has a severe disability.
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Special Protective Trust
A trust created for the benefit of a vulnerable beneficiary. The trust will typically protect the capital of the trust and apply the income generated by the assets of the trust for the benefit of the vulnerable beneficiary; firstly considering their accommodation needs then their lifestyle needs.
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Stocks
See "Shares".
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Super Choice
Legislation was implemented in July 2005, enabling employees to choose the superannuation fund that their employer superannuation contributions are paid into. Some employees covered by certain awards or agreements may not be eligible.
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Superannuation
Refers to investment contributions employees and employers accumulate for the sole purpose of retirement income
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Superannuation Death Benefits
Proceeds paid from a person's superannuation or pension fund upon his or her death.
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Superannuation Guarantee Contributions
Refers to the compulsory superannuation contributing that your employer has to make on your behalf. As at 2007, this amount is 9% of your salary.
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Switch
An investment strategy that involves moving assets from one investment to another. An example is moving from a fixed interest fund to an equity fund or vice versa.
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Tax Efficient Investments
Investments, which are focused on reducing your tax liability. These investments generally purchase tax-free investments, keep low turnover and avoid or limit income-generating assets.
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Tax Offset
Tax offsets directly reduce the amount of tax you must pay. They differ from deductions, which are taken off your income before your tax is calculated.
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Testamentary Trusts
A testamentary trust is a trust, which is established by the terms of a Will or at law and which comes into effect after the death of the will maker. See also "Trust".
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Testator
Is the person who makes a Will. Also known as Will maker.
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Total and Permanent Disability Insurance
An insurance policy that provides for payment of a sum of money in the event a policy holder becomes totally and permanently disabled.
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Transfer (Superannuation)
Where a member wishes to transfer existing assets from one complying superannuation fund to another.
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Trauma and Critical Illness Insurance
An insurance policy that provides for payment of a sum of money in the event a policy holder is diagnosed with specified traumatic medical conditions.
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Trust
A trust is an obligation binding a person (trustee) to hold or deal with property placed within their control for the benefit of others (beneficiaries).
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Trustee
One who holds or deals with property for another under a trust. The trustee owes a fiduciary duty to the beneficiary or beneficiaries of the trust.
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Trustee Company
A company authorised by statute to act as a trustee, executor or administrator.
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Undeducted Contributions
Contributions you make into your complying superannuation fund from your post-tax salary.
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Unit
A unit represents part-ownership of a managed fund.
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Unit Price
A unit price is the price of one unit ownership of a managed fund.
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Unrestricted And Non-Preserved Benefit
An unrestricted non-preserved benefit is the component of your Super benefit that can be withdrawn in cash at any time. It generally does not require the fulfilment of a condition of release and may be paid upon demand by the member.
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Unsecured Loan
A loan issued to a borrower or investor based solely on that person's creditworthiness. No securities are held against these loans.
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Venture Capital
Start-up capital provided to small businesses by investors. Whilst these businesses are generally perceived to be risky, investors are often compensated by the potential to provide above-average returns and long-term growth.
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Volatility
Fluctuation (both the frequency and magnitude) of an investment.
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Will
A Will is a legal document that details how you would like your accumulated wealth to be distributed after your death.
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Will Maker
See "testator"
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Will Trusts
See testamentary trusts
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