Investment Terms

The Standard & Poor’s 500 Index, an index of US 500 stocks ranked by capitalisation (or -total market value).

A portion of an employee’s pre-tax salary kept by the employer in return for additional superannuation contributions by the employer on the employee’s behalf.

A group of securities that share common characteristics, e.g. mining sector, technology sector.

(a) an asset traded on a financial market (e.g. shares); (b) an asset pledged as collateral for a loan (e.g. mortgage).

An instrument providing part ownership of a company and the right to participate in any profits.

The sale of a security that is not yet owned, in the expectation that its price will fall so that it can be bought back later at a profit.

A euphemism for when an economy does not achieve its potential or long run growth rate, but is still experiencing growth.

A levy imposed by state governments on certain transactions.

Another term for shares.

The composition of an asset mix within a portfolio, constructed with the objective of meeting the long-term liabilities of a fund, rather than being based on short-term views of relative performance of the various asset classes.

A tax effective vehicle for saving money for retirement.

Legislation that requires employers to provide a minimum level of superannuation contributions for most employees. (For an individual on a full-time, part –time or casual basis who is paid at least $450 per month and is under age 70). The required minimum level of SG is currently 9%.

A tax levied on superannuation contributions over and above the standard 15% contributions tax.

When investments are switched from one fund to another, the units are redeemed from the existing fund at the Exit Price, and usually invested in the new fund at the Switch Price.

Tactical Asset Allocation

The process by which the asset allocation policy of a managed fund is changed to take advantage of market opportunities.

An expense or charge that can be offset against assessable income.

Thematic managers use macro economic research and expertise to develop themes for asset allocation decisions. The aim of thematic managers is to identify those factors in the market that will have a strong influence on business profitability and on market values.

A top-down manager assesses the investment market by taking a broad economic view. They consider the economic, social and political environments to determine the relative attractiveness and likely direction of the various asset classes. Once the appropriate asset allocation has been determined for each asset class the top down manager will then assess the differing assets or stocks within those asset classes.

The aggregate increase or decrease in the value of a portfolio resulting from the net appreciation (or depreciation) of the principal of the fund, plus or minus the net income (or loss) experience by that fund during the period.

A measure of how close the portfolio follows a representative market index -(such as the All Ordinaries), which indicates, based on historical data, how the returns of the portfolio may differ from index returns.

Money in a superannuation fund is defined as unclaimed when a person has reached the age where he/she would be eligible for an age pension, but the person has not applied to have the funds released and the Trustee has been unable to locate the person. Unclaimed monies must ultimately be transferred to the Victorian Government Unclaimed Monies Register if the person cannot be located within a time frame of 7 years.

A Component of an eligible termination payment comprising superannuation contributions (usually by employees) after 30 June 1983 for which no tax deduction was claimed.

Achieving an investment return lower than an accepted benchmark.

Having a lesser exposure to a particular investment sector or security compared with an established benchmark. 

A single share in underlying assets of a managed fund.

An investor in a managed fund.

A pooled investment fund established under a trust deed that sells units to new investors and buys-back existing units from owners when they wish to sell.

The increase in value of an asset not yet sold.

Superannuation benefits to which no payment restrictions apply. These benefits can be paid out to member at any time on demand irrespective of age, employment situation or financial position.

A Value Managers believe that securities often trade above and below their assessed “fair value”. A Value Manager aims to exploit market conditions by purchasing securities when the represent good value (ie “cheap”; trading below their assessed value) and selling them when they become overpriced (ie “expensive”’ trading above their assessed value).

Investment capital invested in investment vehicles carrying higher than normal risk, usually associated with financing new businesses or technology projects.

The level of fluctuation in a given market.

The relative proportion of individual securities or assets, or groups of securities or assets within an investment portfolio.

Investment funds structured for professional investors and other large investors (such as superannuation funds).

The tax payable on payments to foreign entities, such as dividends or interest repayments.

There are no definitions for X

The return generated by an investment expressed as a percentage of the total value of the investment.

A visual representation of the term structure of interest rates. It shows the relationship between bond yields and maturity lengths. A normal or positive yield curve signifies higher interest rates for long-term investment, while a negative or downward curve indicates higher short-term rates.

Discounted bonds which are issued with no coupon; ie; there is no periodic income payment, and the yield to the bondholder is derived from the capital value of the bond at its maturity.