PortfolioCare Glossary
Accumulation Index a numerical index of movement in a financial market that takes account of both price movement (capital) and income (dividends). Rather than a price index, which measures movements in price only, excluding income.A r than a price index, which measures movements in price only, excluding income.
Active Management a style of investment management that seeks to attain returns above a set benchmark. This is the opposite of passive or index management.
Administrator an individual or company responsible for the day to day operation of a fund.
Allocated Pension an investment in which you can only invest a lump sum superannuation payment and which provides you with a regular and flexible income in retirement, together with an opportunity for capital growth.
Asset Allocation a representation of how a portfolio is invested across the various asset classes.
Asset Class a broadly defined category of financial assets. The most commonly referred to asset classes are cash, fixed interest, shares and property.
ASX Australian Stock Exchange Limited. The ASX operates Australia's primary national stock exchange for equities, derivatives and fixed-interest securities.
Balanced Fund a type of diversified managed investment whose investment strategy is to have some proportion of its investments in all major asset classes with a higher exposure to growth assets.
Benchmark an index or other market measurement that is used by an investment manager as a standard against which to assess the risk and performance of a portfolio.
Beneficiary the person(s) or organisation who receives payment from a superannuation fund in the event of death of a member.
Binding Death Benefit Nomination an option available for Super/ Pension Accounts where the nomination to a benefit in the event of death is binding on the trustee, subject to conditions.
Blue Chip Shares shares in large well established companies that have historically shown ability to pay dividends in uncertain markets.
Bond a debt security with which the investor loans money to an entity (company or government) that borrows the funds for a defined period of time at a specified interest rate.
Broker an agent who executes an investor's orders to buy or sell securities.
Brokerage a fee charged by a broker to execute a transaction, usually for shares. It can be a percentage or flat dollar amount.
Buy/ Sell Spread the percentage difference between the entry and exit price of a managed investment. This cost is only incurred when a managed investment is bought and sold and reflects the brokerage and other transactional costs incurred by the investment manager.
Capital financial assets or the financial value of assets such as cash.
Capital Gain the increase in value of an asset
Capital Gains Tax The tax paid on the profit after the sale of an asset. CGT applies to assets acquired after 19 September 1985. CGT is a tax payable on profits made at the time of sale. If an asset has been held for a period of at least 12 months before being sold, 50% of the profit will be tax exempt for individuals.
Cash short-term investments that can be readily accessed such as bank deposits and bank bills.
Child Allocated Pension nomination of a child to receive a pension payment in the event of death. The child will not have any control the pension until they reach 18 years of age. Until this time a nominated guardian will have power over the frequency and amount of pension payments and the investment profile of the Account. A guardian is unable to make lump sum withdrawals from the account.
Custodian an organisation that safeguards and maintains assets on behalf of other people.
Discretionary Nomination an option available for Super/ Pension Accounts where the nomination to pay a death benefit is not binding on the trustee. However, the trustee will consider each case individually to ensure death benefits are paid appropriately and will endeavour to abide by a client’s wishes.
Distribution income payments from managed investments. The income received by the managed investment typically includes dividends from shares, realised capital gains from assets the manager has bought and sold during the period, rental income and interest income.
Diversification Spreading investment funds across a number of different asset classes and within asset classes.
Diversified Funds a type of managed investment whose strategy is to invest some proportion of its funds across all major asset classes. This creates a risk/return balance between different types of investments.
Dividend The payment of part of the after-tax earnings of a company to its shareholders.
Dividend Imputation or Imputation Credit a dividend paid out of profits on which Australian company tax has been paid is known as a franked dividend. These carry imputation credits under the dividend imputation system. Imputation credits represent the tax already paid by the company and can be used by investors to offset tax payable on other income.
Dollar Cost Averaging Investing a set amount regularly means you will buy more units when prices are low, and less units when prices are high. As a result, the actual dollar cost of the total investment will average out over time
Entry Price the price per unit in which applications are made for a managed investment.
Exit Price the price at which an investor can withdraw their units from a managed investment.
Financial Plan Financial planning helps you take control of your financial future. A financial plan is developed by a financial planner in accordance with your requirements. It sets out your current financial situation and your financial goals, taking into account your priorities and attitude to risk. It then sets out investment, wealth preservation and protection strategies that can help you meet your goals. It may also include estate planning strategies. A financial plan should be reviewed regularly and updated to take account of your changing circumstances.
Fixed Interest Securities Normally for terms of one year or more, fixed interest investments (sometimes referred to as 'securities') include government and semi-government bonds, debentures, mortgage trusts and fixed terms deposits. They generally provide a regular fixed income with capital repaid at the end of a fixed term.
Franked Dividend a dividend that carries an imputation credit. Imputation credits are taxation credits earned as a result of the company having already paid tax at the corporate rate. A dividend may be either partly or fully franked.
Gearing borrowing to invest to purchase managed investments or shares.
Growth Assets a term given to assets which are expected to increase in value over the long term. Shares and property are commonly known growth assets.
Growth Fund a managed investment which is predominantly invested in growth assets such as shares and property.
Growth Investor an investor who seeks capital gain from expected further growth.
Growth Return is the increase in the price of units of a managed investment over time.
Income regular payments derived from an investment. This can be interest from cash, dividends from shares or rent from property.
Income Return is the amount of income generated from dividends, interest or realised capital gains paid to investors.
Instalment Gearing is the borrowing of funds through a margin loan on a regular basis to invest into managed funds and shares.
Investment an asset purchased for capital appreciation or income.
Investment Risk the variability of returns from an asset. Generally, the higher the potential return over time, the higher the level of risk involved.
Investment Manager an organisation that specialises in the investment of a portfolio of securities on behalf of individuals or organisations.
Liquidity The ability of an investment to be quickly converted into cash.
Listed Security a security which is bought and sold via an exchange. An example is shares on the stock exchange.
Managed Investment A managed investment, also known as managed funds or unit trusts, pools together the funds from individual investors to purchase assets. Small amounts pooled are able to be diversified across a range of the same asset class or various asset classes to reduce overall risk of market fluctuations. By purchasing units in a managed investment, you harness the buying power of pooled funds and take advantage of professional investment expertise.
Management Expense Ratio (MER) a percentage expressing the fees and expenses of a managed investment as a proportion of the average fund size for the period under review.
Margin Loan a line of credit established for the purpose of investing in managed investments or shares.
Partnership a business organisation in which two or more individuals manage and operate a business. All owners are personally liable for the debts from the business.
Passive Management a style of investment management that seeks to achieve performance equal to the market or index returns.
PAYG – Abbrev. Pay as you go. A single, integrated system for reporting and withholding amounts of tax on business and investment income.
Portfolio a group of investments or investment products held.
Price Earnings Ratio – P/E Ratio. A valuation of a companies current share price compared to it per-share earnings. Calculated as Market Value per share/ Earnings Per Share.
Product Disclosure Statement (PDS) an offer document that sets out information on a product, including its features, fees, the benefits and risks of investing and other information.
Property Securities units or interests in property trusts listed on the stock exchange.
Redemption withdrawing from or selling an investment
Regular Savings Plan a facility whereby investors take advantage of the principle of dollar cost averaging by purchasing managed investments on a monthly or quarterly basis.
Reinvest where income received from an investment is used to purcahse additional units in that investment.
Responsible Entity the entity that operates a managed investment scheme.
Reversionary beneficiary a person who will continue to receive the pension payments in the event of death of the original purchaser
Return The total earned from an investment including capital growth, or loss, and income.
Risk the variability of returns associated with an investment. Generally, the higher the level of risk, the higher the potential level of return.
Sector a group of shares with common characteristics
Shares also known as stocks, equities and securities. A share represents part- ownership of a company. The owner of a share becomes entitled to a pro-rata portion of the company's net assets and income at certain times.
Stockbroker a person who buys and sells shares on behalf of others in return for brokerage or commission.
Superannuation a tax effective environment for accumulating funds for your retirement
Superannuation Fund a concessionally-taxed fund for superannuation monies. A superannuation fund can accept rollovers from other funds known as Eligible Termination Payments (ETPs) and contributions, money deposited into superannuation for the first time. Generally, funds can not be withdrawn until retirement.
Switching involves selling the units in one managed investment and using the proceeds to buy units in another. A sale of an investment may trigger a capital gain/loss.
Term Allocated Pension (TAP) an investment in which you can only invest a lump sum superannuation payment and which provides you with a regular pension income for the rest of your life expectancy. They attract a 50% assets test exemption under Social Security law.
Trustee a person or company to which assets have been entrusted to use for the benefit of another party.
Trust a relationship in which one person, known as a “trustee” holds title to assets for the benefit of another person, the beneficiary.
Unit Price the price for each unit of a managed investment. A unit price is calculated by dividing the value of the assets of the managed investment by the number of units on issue to investors. Generally, this is done on a daily basis but some investments are priced less frequently.
Units a share of a managed investment. Units may fluctuate in value depending on the market performance of the underlying assets of the fund.
Value Investor an investor who seeks to buy shares when they are underpriced and to take profits when they appear overvalued. The price-earnings ratio is a key valuation measure.
Volatility A measure of the variability of returns - their ups and downs. It is often used in the context of investment risk.
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