The Australian Competition and Consumer Commission (ACCC)—An independent statutory authority that administers the Trade Practices Act 1974.
Allocated annuity—An investment offered by a life insurance company using superannuation money to provide a flexible, regular income that allows access to capital.
Allocated pension—An investment, offered by a superannuation fund, that provides a flexible, regular income that allows access to capital.
Asset—A possession having a monetary value.
At call accounts—Accounts that give you access to your money within 24 hours.
The Australian Securities & Investments Commission (ASIC)—An independent government body that enforces financial services and company laws.
Bank bills (discount securities)—Short-term fixed interest investments offered by banks, companies and other institutions. Terms usually range from seven to 180 days.
Beneficiary/beneficiaries—People who will become legally entitled to the benefit of goods or property on the death of the original owner.
Blue chip—Shares of a company known for its ability to make profits in good times or in bad. Yield is often proportionately low. They usually set the market level.
Bonds—Fixed interest investments, usually for the medium to longer term. They are issued by governments, companies or other entities (the borrowers) who pay the investor interest throughout the life of the bond. The level of security varies with the offering institution.
Brokerage—A commission or fee charged by a planner or stockbroker for buying or selling investments.
Capital—The value of an investment, representing the total assets less total liabilities.
Capital gain (or loss)—Increased (or decreased) value of an asset.
Capital Gains Tax—A tax levied on profits from the sale of certain assets that were acquired usually after 19 September 1985.
Capital growth—An increase in value of an asset.
Capital guarantee—Guarantees the return of your capital and may also guarantee interest once credited to your account. The guarantee is only as good as the organisation making it. There is usually no guarantee of future earnings.
Capital secure or capital stable—A fund where the underlying investments are usually low risk. However, their value can still decrease as well as increase.
CHESS—The Australian Stock Exchange Clearing House Subregister System, which provides a central book entry register using electronic transfer of share ownership.
Commission—Money paid by an organisation to a planner for placing investments with that particular organisation. The commission is paid out of fees deducted from your investment. See also brokerage.
Compound interest—Interest is paid on the initial investment (principal) when it falls due and interest earned on the combined amount.
Debenture—A loan made to a company for a fixed period of time and at a fixed rate of interest usually secured by the company’s assets and a trust deed.
Deeming—See Chapter 12 for an explanation.
Discount brokers—A financial intermediary or broker who offers access to shares or other securities at lower than normal market commission rates. Discount brokers generally provide limited advice or research services compared to a conventional full-service brokerage firm.
Diversification—Spreading funds between various sectors of investment markets and/or fund managers to minimise risk.
Dividends—The portion of a company’s after-tax profits that is paid to its shareholders, usually six-monthly.
Dividend imputation—The system by which individual shareholders who receive dividends paid out of a company’s after-tax profits are entitled to a tax credit for the tax already paid by the company on its income. These tax credits can be used to offset the individual’s personal tax liabilities.
Endowment policies—A contract made by a life insurance company to pay the insured a sum of money at the end of a fixed period or death, whichever is earlier.
Entry fees—Fees charged to set up an investment. Usually charged as a percentage of the money being deposited, and deducted from the investment.
Exit fees—Fees charged to withdraw money (or redeem units) from an investment. Usually charged as a percentage of the amount being withdrawn and deducted from it or the balance remaining.
Exposure—The susceptibility of an investment to changes in value on account of market movements.
Fixed interest—Interest income that remains constant, for example, income derived from bonds, debentures or term deposits.
Franked dividends—Dividends paid to shareholders where all or part of the tax has been paid by the company and gives rise to tax credit to the investor.
Gearing—Borrowing money to invest, usually in residential property, shares or other income producing investments.
Imputation credit—A tax credit for shareholders who receive dividends when company tax has already been paid. Dividends which have full company tax paid are known as fully franked.
Interest—Money paid for the use of borrowed money, usually expressed as a percentage return on the money invested.
Investor Directed Portfolio Services (IDPS)—Typically marketed as master funds and wrap accounts although they are formally called Investor Directed Portfolio Services (IDPS) under Australian Securities & Investments Commission (ASIC) policy. An important feature of an IDPS is that the investor makes all the investment decisions.
Life expectancy—The average number of years that is expected to be lived in the future. This varies depending on your age. (See also relevant number) Or the average number of additional years a person of a given age and sex would live if current mortality trends were to continue.
Listed property trusts (LPT)—Collective investment trusts that own a portfolio of real property. LPTs are listed on the stock exchange and their prices fluctuate with supply and demand.
Managed investments—Professionally managed funds that pool money of numerous investors (for example, unit trusts and insurance bonds). Also referred to as managed funds.
Management fees—Fees charged on the total value of the investments for administration services etc.; normally deducted before earnings are added to your account.
Market-linked—Pooled investment schemes in which the value of the investment depends on current movements in markets.
Master trusts—Provide a service for acquiring and retaining investments where an investor can buy, hold and sell investments within a single administration arrangement that provides consolidated means of reporting on the investments held. See also Investor Directed Portfolio Services (IDPS).
Maturity date—A fixed date when an investment can be cashed in without penalty, or reinvested.
Mortgage—A contractual arrangement whereby property is provided as security for a loan.
Mortgage trusts—Trusts that allow you to pool your money for lending to individuals and companies who purchase or develop residential or commercial properties.
Non-commutable – Money held in investments that cannot be cashed out (withdrawn) as a lump sum.
Portfolio—A group of investments or investment products held.
Preservation age—The age when preserved superannuation money can be accessed subject to the owner being retired. This is presently age 55 years but is increasing to age 60 years.
Property securities trusts—Unlisted trusts where money is pooled for investment in listed property related securities.
Prospectus or product disclosure statement—Printed document describing the features of an investment.
Risk—Chance or possibility of loss, or not getting the return you expected.
Security—The safety of an investment.
Speculative shares—Shares purchased in anticipation of selling them shortly afterwards for a profit.
Superannuation fund—A trust fund, established primarily to provide benefits for members on their retirement, or on their resignation, death, disablement or other specified events. Superannuation funds are usually governed by a trust deed and administered by trustees.
Switching—The ability to transfer units between two funds or between components of a unit trust, for example, between a Growth Fund and Protected Growth Fund.
Tax offset—amount deducted from the tax payable.
Trustee fees—Fees charged annually for the professional services of a trustee; usually quoted as a percentage of the funds being managed.
Unit price—The value of each equal share of a trust, determined by the net value of the assets held by the trust, less an allowance for fees and charges and provisions for costs of purchase and sale of assets.
Unit trust—A pooled investment fund or collective investment where the investor purchases units in the trust. The value of the units may rise or fall over time. Unit trusts are established under a trust deed that continually offers new units and redeems existing units from the owners.
Unlisted property trusts—Trusts that directly own and manage real estate. They are not listed on the stock exchange.
Unsecured notes—A loan by the issuer that is not secured by any assets of the issuer. They are similar to debentures but offer a higher rate of return, but with less security than a debenture.
Withdrawal fees—A fee charged in relation to some pooled investments for redemption of units (withdrawals) by unit-holders; or a fee charged for the redemption (cashing in) of units in a unit trust. See also exit fees.
Whole of life policies—Policies where insurance is payable on death whenever this may occur.
Wrap account—See Master trusts.