An active fund is run by a professional investment manager. They monitor the fund’s performance, research potential opportunities, and make the subsequent investment decisions about which assets to buy, hold and sell. The opposite of passive funds management.

The yearly audited report of the managed investment scheme fund’s performance, which is distributed to shareholders.

The amount by which an asset or investment has increased in value

The manner in which the portfolio is structured. Usually a mix of shares, bonds, property and /or other investments from various markets and sectors, in keeping with the investor’s risk profile.

The type of investment or investment category. The four main asset classes are shares, commercial property, bonds (fixed interest investments), and cash.

Typically for investors with a moderate risk profile.Investments are chosen to offer a mix of growth and income, usually from a variety of industries and geographical areas.

A stock market where there is a general feeling of a lack of confidence, share prices are falling, and investors are selling. The opposite of a bull market.

The difference between the price at which the buyer wishes to purchase a share and the price at which the seller wishes to sell a share. Also known as bid-ask spread.

A type of investment, usually issued by corporations or governments to raise capital for major ventures. The investor buys the bond for a fixed period of time, earning a set interest rate, at the end of which they should receive the face value back. An exception could be made if, for example, a company goes out of business in which case the investor would potentially lose their capital.

A stock market where there is a general feeling of confidence, share prices are increasing, and investors are buying. The opposite of a bear market.

The money (cash) invested at the start of the investment.

The profit made when a capital asset (such as a share or property) increases in value. This profit is not realised until the asset is sold for a price higher than the original purchase price.

The loss incurred when a capital asset decreases in value. This loss is not realised until the asset is sold for a price that is lower than the original purchase price.

Raw materials and agricultural products, (such as gold, natural gas, coffee and corn) that can be bought and sold. Investors may choose to focus on the commodities market.

Interest is earned not just on the initial investment but also on the interest itself.

Used by companies to raise capital. See also bonds.
A financial institution that manages a client’s assets on a bare trust basis, meaning that the client is the beneficial owner to those assets plus any income they generate, and gives instructions to the custodian of any changes.

A financial contract between two or more parties. Its value is based on the performance of the relevant assets (such as bonds, shares or commodities.)

When a security is sold for less than its face value, the discount is the difference between the face value and the sale price.

The spread of investments held. It is generally accepted that a mix of assets (such as shares, bonds, property and commodities) mitigates some risk, as the investor is not exposed to just one asset class.

Regular payments to shareholders out of a company’s earnings. The amount paid depends upon the number of shares held and the organisation’s profits.

Countries with developing economies. The “big five” are the BRICS countries: Brazil, Russia, India, China and South Africa.

Another word for stocks or shares.

An ETF is typically a passive investment that aims to provide returns matching a market index.

The nominal value or dollar value of a security stated by the issuer, or the original cost of a share. For bonds, it is the amount paid to the holder at maturity, generally $1,000. Also known as par valueor simply par.

A lower risk investment (usually bonds) purchased to provide payments of interest income on a regular basis, usually quarterly or semi-annually. However, no absolute guarantees can be made as to the interest payments or repayment of capital at maturity.

Commonly pronounced footsy, the Financial Times Stock Exchange. The FTSE 100 is a share index of the 100 largest companies listed on the London Stock Exchange.

A type of bond, issued by the UK government, generally considered a lower-risk investment.

The money from a number of investors used by the investment manager to collectively purchase securities. Each investor owns a proportion of the fund.

The plan and portfolio devised by the investment manager and the investor to suit the investor’s goals.

A closed-ended investment fund with a fixed number of shares. The fund manager can buy or sell the underlying securities when they feel the time is right, rather than when investors join or leave the fund. This also means that the underlying capital investment base is relatively stable. UK investment trusts are listed on the London Stock Exchange (aka FTSE).

The cost for having your assets professionally managed. The fee compensates professional money managers to select securities for a fund’s portfolio and manage it, based on the fund’s investment strategy.

Combined investment vehicles of two types: managed funds and other managed investment schemes, such as superannuation funds.

A unit of measurement to track the performance and value of stocks. Also known as stock market index.

The professional adviser who works with the client to make and review investment decisions, based on the client’s goals and the portfolio’s performance.

The amount for which a share or bond sells above its face value.

Required before you can invest in a portfolio investment entity (PIE) such as a KiwiSaver. The investor must provide their IRD number and PIR, which is then used to calculate the tax on income produced by the PIE.

Provides the client with essential information to assist with investment decision-making. The PDS should be written in plain English to explain the product, and replaces older forms of financial product disclosure information, such as investment statements and prospectuses.

An overseas pension or superannuation scheme that has been recognised by Her Majesty’s Revenue & Customs as suitable to receive transferred pension funds (for example: from the UK to New Zealand).

Regular reviews in order to keep the portfolio in line with the client’s goals and risk profile.

A method preferred by some investors for purchasing real estate. REITs trade as though they are equities, and receive special tax treatment. There are different types of REITs to suit different types of real estate.

A simple tool to demonstrate the historical volatility of returns from the fund. Designed to help investors’ decision-making by enabling them to compare the volatility of various managed investment scheme (MIS) products.

An evaluation of the investor’s willingness to take risks, as well as ability to accept volatility. A risk profile is essential for determining an appropriate investment asset allocation for the portfolio. Also known as risk attitude.

A general term for the most common types of investments, such as shares, bonds and commodities.

A unit of ownership, such as one item of stock or a share of a managed investment scheme (MIS).

A special type of personal pension where individuals are free to choose where their pension fund is invested, rather than entrusting their money to one insurance company or fund manager. SIPPs are good for those investors with larger pension funds who are confident making investment decisions.

Where shares are bought and sold, such as the FTSE in London and the NASDAQ in New York.

The gross amount earned on the investments – both income and capital gains – before tax, fees, and any other expenses are deducted, over a specific period of time.

A managed investment scheme (MIS) that allows funds to hold assets and pay profits back to the individual investors, rather than automatically reinvesting them.

How much the price (of an investment) fluctuates over a period of time. If it rises and falls rapidly over a short period of time, this would be high volatility.

The amount received in dividends or interest from an investment. Usually expressed as a percentage of the current market value.

A measure used to illustrate the yield an investor would receive if they held the investment (such as a bond or gilt) until the maturity date.


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