Glossary Financial Terms
A - C Absolute return funds
Absolute Return Funds (including Hedge
Funds) aim to deliver returns in both rising and falling
markets. The investment techniques adopted may be different to
methods employed by traditional fund managers as the funds have
greater scope to use derivatives, short positions, and exotic
securities.
Accredited derivatives advisers
Persons who have been accredited by ASX to
advise or make a recommendation (including a recommendation in a
research report) to clients in relation to ASX derivative
products other than Futures and Futures Options (ie; Warrants
and all DTP Products other than Futures or Futures Options).
Actively managed
Where the fund manager has the discretion to
select the securities in a fund and looks for opportunities to
buy and sell to increase its performance.
All Ordinaries (All Ords)
The index is made up of the weighted share
prices of about 500 of the largest Australian companies.
Established by ASX at 500 points in January 1980, it is the
predominant measure of the overall performance of the Australian
share market. The companies are weighted according to their size
in terms of market capitalization (total market value of a
company’s shares).
Annualised return
The return or profit, expressed on an annual
basis, the writer of the option contract receives for buying the
shares and writing that particular contract. See buy and write.
Asset
Item of value, such as cash, investments or
property.
ASX (Australian Securities Exchange)
The main Australian market place for trading
equities, government bonds and other fixed interest securities.
Australian Securities and Investments Commission (ASIC)
The Australian Government regulating body
that enforces and regulates company and financial services laws
to protect consumers, investors and creditors.
Australian Taxation Office (ATO)
The ATO is the Government’s principal
revenue collection agency, and is part of the Treasurer’s
portfolio. Our role is to manage and shape tax, excise and
superannuation systems that fund services for Australians.
B Bankruptcy
The legal process in which the assets and
liabilities of a person deeply in debt are placed with a
receiver. The receiver takes control of their finances and helps
them clear their outstanding debts. The process may restrict the
person’s financial dealings in the future.
Bear market
When share prices are falling and experts
expect further falls.
Blue chip
Shares, usually highly valued, in a major
company known for its ability to make profits in good times or
in bad, and with reduced risk or default.
Bond
An investment instrument issued by
governments and companies which pays a regular and fixed
interest amount for the term of the investment. The invested
funds (principal) are repaid at the end of the term (maturity).
Brokerage
Fee paid to stockbroking firm for buying or
selling of shares.
Budget
A plan for spending and saving money based
on an individual’s goals over a certain period of time.
Bull market
When share prices generally are rising.
Business cycle
Also known as the economic cycle. The rise
and fall of the economy, from a peak, or boom, to a trough
(sometimes called a depression) and back to a peak. The length
and duration of each phase is not predictable.
C Capital
Funding for investment in capital assets or
to operate a business. Also refers to the value of an investment
in a business, or in assets such as property or shares.
Capital gain
The difference between the purchase price
and the selling price of an investment.
Capital gains tax
Tax on the profit from the sale of capital
assets such as shares or property.
Capital growth
An increase in the value in an asset such as
an investment in shares. Capital growth is realised as a capital
gain when the asset is sold for more than its purchase price.
Capital loss
The difference between the proceeds from the
sale of a security and the initial cost of the investment. If
the cost exceeds the proceeds then this is said to be a capital
loss.
Cash
Currency, coins, cheques, and balances in
bank accounts - a current asset.
Cash flow
A measure of the money a person receives and
spends.
Cash management
How a person manages money (cash) coming in
and going out.
CHESS
ASX's Clearing House Electronic Sub-Register
System which provides the central register for electronic
transfer of share ownership.
Commission
The fee that an advisor or a fund manager
may receive for the buying or selling of securities.
Compounding
Earning interest on interest previously
earned.
Conservative
A modest style of investing by a fund
manager that wishes to achieve stable returns over a short to
medium horizon.
Cooling-off period
A period during which purchasers of a good
or service have the opportunity of deciding not to proceed with
a transaction. If this occurs then any money paid out for the
transaction should be refunded.
Credit
An amount of money lent from one person or
entity (such as a financial institution) to another, based on
the expectation and/or agreement that the money will be repaid
with interest.
Credit rating
A measure of a person’s ability to repay
debt or credit.
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