Independent investment advisers building asset class investment portfolios that are low cost, sophisticated, and widely diversified across bonds, property and shares.
Finance Glossary of Terms
Where an investor or fund manager makes various and ongoing decisions to (try to) pick the right investments
Selecting and weighting assets in an investment portfolio
A method which improves considerably on the passive index investing model
“Bears” are investors who generally expect share prices to fall. “Bulls” expect prices to rise. When most prices rise over months or years, this is called a “bull market” (and vice versa).
Medium to long-term debt securities that pay a regular coupon and are redeemed at face value at a fixed maturity date.
The fee investors pay an NZX Firm for buying or selling shares as instructed.
Part of a company’s profits paid to shareholders as a reward for their investment in the company.
The practice of spreading investment across a range of products, securities, companies, business types and locations to reduce risk. Diversification is a core principle in successful investing.
The degree to which the knowledge and expectations of all investors about companies are factored into the market prices of shares. The market is said to be efficient when prices reflect all the information available to investors.
Another word for shares, which represent part ownership in a company (or a share in a company’s “equity”).
An exchange traded fund (ETF) is a fund that trades like a single security. It is a basket of securities that reflect the composition of a stockmarket index. The ETF’s value is based on the net asset value of the underlying stocks that it represents.
A core principle for everyone in the market, most notably companies which must treat investors fairly on information disclosure and all other matters. A share price is said to be “fair” when both buyers and sellers make rational decisions on the basis of the same information.
FASTER Identification Number. You need to quote this number to your broker when placing an order to sell securities.
The process of publicly offering shares to investors and listing on the stockmarket. A float may involve the issue of new shares to raise more capital for the company or the sale of shares previously owned by other shareholders. Float and “IPO” are terms often used interchangeably.
Bonds (debt securities) issued by the New Zealand Government.
A statistical construction that measures relative or absolute price changes and/or returns for a given group of securities. The purpose of an index calculation is usually to provide a single number which represents the movements of a variety of prices or rates and is indicative of the behaviour in a market.
A relatively passive investment strategy that attempts to replicate the return of a benchmark index in a fund.
A fund designed to track the performance of a market index.
The first sale (or issue) of shares to investors publicly, when a company is raising capital to fund the growth of its business. “IPO” and float are terms often used interchangeably.
The ability to easily sell an investment. In a “liquid market” there are many buyers and sellers willing to trade
A means of investing and having your money managed via a professional fund manager, sometimes known as active investing. Managed funds are sometimes called “mutual funds” (US terminology).
The value placed on a company by the market. It is the number of shares on issue multiplied by market share price.
Market risk is risk inherent in the whole market, often called systemic risk or non-diversifiable risk.
The date at which a bond, or other security matures.
The total assets (securities, cash, and accrued earnings) of a company or fund minus any liabilities, divided by the number of units outstanding.
A ratio showing the value of company assets attributable to each share on issue – the relevant assets are usually tangible assets or equipment, buildings etc that could be readily sold. NTA is a theoretical measure of what shareholders would receive if their company had to be broken up.
The price a seller is willing to accept for a security.
Investing in a fund or other pooled investment vehicle that attempts to match the risk/return pattern of a market index.
A bond with no fixed maturity date.
A collection of all your investments
A ratio showing the fundamental relationship between a company’s share price and profits. P:Es are calculated by dividing market price by earnings per share – future or “prospective” earnings are of most interest.
Periodic revisions to a portfolio. These are necessary because a portfolio often combines bonds and shares, and the different investment values can change markedly over time. Rebalancing ensures that the appropriate proportions in bonds and shares are maintained
A broad term for shares and other investments that are essentially a legal claim to part ownership of a company and/or to financial entitlements (eg interest payments).
The return on an investment compared to either the original investment amount or, more commonly, the current market value of the investment. Yield is always quoted on an annualised basis.
