Investment Terms

Group of Seven. The finance ministers from the seven major capitalist powers – United States, Canada, United Kingdom, Japan, France, Italy and Germany.

Growth at a Reasonable Price, a style which aims to identify undervalued companies compared to their future earnings growth potential. This type of style usually uses a ranking or scoring system to produce an absolute figure, which represents the stocks price to its growth potential.

(a) a measure of the level of debt against the value of an asset; (b) the process by which the investment capacity of an investor is increased through borrowings.

The total amount, before deductions or expenses are taken into account.

A measurement of the aggregate goods produced and services provided within a country’s economy over a single year, excluding income earned outside the country.

A generic term for assets that provide investment returns that outperform inflation.

An investment fund that primarily invests in growth assets.

Growth managers have less regard to price, concentrating on investments that will produce large amounts of capital growth over the long term. They focus on earnings growth and cashflow believing that the generated growth in earnings will force the stock price to rise. These companies usually have high P/E ratios.

when referring to a Hard Close Exit Price is the exit price (ie the price at which investors realise an entitlement in a unit trust scheme) that is calculated based on the close of market valuations of a particular day. The Hard Close Exit Price for a particular day is not the price used to process redemptions during the normal course of business on that day - this is the Soft Close Exit Price. The Hard Close Exit Price for a particular day is normally struck one or more days after that day once the close of market valuations have become available.

A euphemism for an economic recession; that is, a period of negative economic growth. A recession is said to occur when an economy experiences two consecutive quarters of negative GDP growth.

A type of investment portfolio under which the fund manager is authorized to use a number of higher risk investment techniques, including using derivatives, short selling and borrowing funds, in order to generate a higher return. Hedge funds have become particularly common in the United States but are not prominent in the Australian investment scene at present.

The process of protecting an existing investment by using another type of investment to cover potential adverse market movements.

Tax credits passed onto shareholders in the form of franked dividends.

Regular investment returns (e.g. dividends from shares, rent from rental properties etc.).

An index fund seeks to take most of the "judgement" out of portfolio building by just simply constructing a fund that very closely follows a chosen index. If the index rises, the Index Manager then adjusts the portfolio to reflect this move. The main idea here is that an Index Fund does not have the expense overhead of other funds (ie equity analysts, company visits, resident economist etc).

A group of investments managed on behalf of an individual or single organisation.

Companies that engage in the production of and or sale of goods and services, as opposed to resource companies who are engaged in mining activities.

An increase in the price of goods and services, generally measured by the Consumer Prices Index (CPI).

An organisation that manages investments in a portfolio on behalf of a group of individuals or organisations within the guidelines stipulated and directions given by those investors.

The formal process through which an investment portfolio selects which different asset classes (shares, bonds, property, cash and overseas investments) to invest in and how much to invest in each. Also known as diversification.

The guiding principles used by investors to govern their investment decisions. Not to be confused with "investment style", which is normally described in terms of the level of risk the investor is comfortable with.

A high risk, high yield, debt security rated below triple B.

A disclosure document that was required to be provided to all prospective members of a Public Offer superannuation fund.