Financial Planning Glossary
The financial planning glossary is an extensive range of terms and definitions related to financial planning - with references and examples.
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- Actuary:
- A person highly trained in mathematics and statistics who calculates rates and dividends, and provides other statistical information for an insurance company.
- References:
- Ref-1
- ADF:
- An abbreviation for approved deposit fund.
- References:
- Ref-1
- Administrator:
- A person appointed by a court as a fiduciary to settle the financial affairs and the estate of a deceased person.
- Aggressive Portfolio:
- A portfolio which is offers average returns by taking average risks. This type of a portfolio generally has a higher exposure to equity investments.
- References:
- Ref-1
- All Ordinaries Index:
- This is an index that follows the price of share movements in the major listed companies on the Australian Stock Exchange.
- References:
- Ref-1
- Allocated Pension:
- A retirement income arranged through a funds manager where an individual draws a pension from a lump sum investment that is earning a return, and therefore growing.
- References:
- Ref-1
- Amortization:
- The process of fully paying off indebtedness by installments of principal and earned interest over a period of time.
- Analyst:
- An expert who examines all the facts concerning a security or industry and concludes its merits.
- Annuity:
- A contract that guarantees a series of payments in exchange for a lump sum investment. This agreement is generally used to provide retirement income.
- ASFA:
- Association of Superannuation Funds of Australia.
- References:
- Ref-1
- ASIC:
- Australian Securities and Investments Commission.
- References:
- Ref-1
- Asset Allocation:
- The process of dividing investments among different kinds of assets, such as stocks, bonds, real estate and cash.
- References:
- Ref-1
- Assets:
- Resources held by a company.
- ASX:
- Australian Stock Exchange.
- References:
- Ref-1
- Benchmark Portfolio:
- A portfolio which is developed to provide a standard for measuring the manager's risk or return performance, and to reflect the investor's preferred level of risk over a complete market cycle.
- References:
- Ref-1
- Blue Chip Stock/Companies:
- The common stock of nationally known companies that have a long record of profit, growth, and dividend payment and a reputation for quality management, products, and services.
- References:
- Ref-1
- Bonuses:
- Annual tax paid income made by insurance companies and friendly societies.
- Capital Guarantee:
- An investment where the company offering the product guarantees that it will return at least the original amount invested, plus any income that has been accrued.
- Capital Stable:
- An investment product with a fixed interest and cash asset allocation, thereby creating a relatively stable unit price, but no guarantee of capital return to the investor.
- Cash Equivalents:
- Investments that are easily turned into cash and are so safe that they are virtually as good as cash.
- Cash Management Trusts:
- A group investment, investing in highly liquid cash equivalents. This type of investment generally produces higher returns than bank accounts.
- References:
- Ref-1
- Collateral:
- Securities or property offered by a borrower to secure payment of a loan.
- Cooling-off Period:
- A period allowed in certain circumstances during which a person, who has entered into a contract, may cancel it without incurring any penalty.
- Current Assets:
- Assets that are expected to be converted to cash within 12 months.
- Deferred Annuity:
- An annuity whose benefits begin at some designated future date.
- References:
- Ref-1
- Defined Benefit Fund:
- A fund that calculates the retirement benefit based on average salary and years of service or membership in the fund.
- References:
- Ref-1
- Diversification:
- The distribution of funds amongst different asset classes to control and distribute any risk.
- Due Date:
- The date when a bond becomes payable.
- Due Diligence:
- Background check and research conducted to assess validity of a prospective factoring client and that client's customers.
- Eligible Termination Payment (ETP):
- Any lump sum payment from a superannuation fund, an employer on termination of employment, or a rollover fund.
- References:
- Ref-1
- Entry Fee:
- A charge paid by the investor upon buying purchasing units in a trust or managed fund.
- Equity:
- To be permitted to a share in a company, and to receive dividends.
- Excluded Funds:
- A fund with four or fewer members. Under legal requirements, there are very few rules which such funds need to adhere to.
- Fixed Interest:
- Income which does not fluctuate.
- Franked Dividends:
- Dividends on shares with imputation credits. This may lower the investor's income tax liability on the dividends received.
- References:
- Ref-1
- Gilt Edged:
- Generally low risk investments with high security.
- References:
- Ref-1
- Growth Fund:
- A fund designed to provide capital appreciation by investing in stocks with growth potential.
- Investment:
- An asset acquired for the purpose of producing income and/or capital gains for its owner.
- Investment Adviser:
- Investment counsel to a mutual fund. Also may be the manager of a mutual fund.
- Investment Analyst:
- An expert trained to analyze the future prospects and earnings of firms and securities for the purpose of investment.
- Investment Bond:
- Insurance style bond offered by a Friendly Society or Life Company.
- Investment Linked Policies:
- Policies where the worth of a venture depends on the performance of the market in which it is invested.
- References:
- Ref-1
- Lost Member Register:
- A register kept by the Tax Office to help people who have lost contact with their superannuation providers to trace their superannuation benefits.
- Managed Investment Scheme:
- An investment which groups together investor funds to make investments on their behalf.
- References:
- Ref-1
- Market Linked:
- The cost of the units of a fund is not definite, but depends on the market value of the assets in which the fund has invested.
- Master Trust:
- A grouping together of one sponsor's assets, which may include multiple managers and multiple plans, into a single trust entity.
- Maturity Date:
- The date upon which the issuer of a bond repays principal to the bond's holder.
- Money Market:
- The market for short term debt instruments maturing in one year or less.
- Principal:
- The capital sum upon which interest is paid.
- Property Trust:
- A collective investment which owns a portfolio of property, allowing a wide spread of ownership.
- Risk:
- The variability of returns.
- Roll-Over:
- Process in which the settlement of a deal is rolled forward to another value date. The cost of this process is based on the interest rate differential of the two currencies.
- Roll-Over Fund:
- Another name for Approved Deposit Fund (ADF).
- References:
- Ref-1
- Securities:
- General name for the types of investment offered by companies.
- Security:
- This has two definitions in finance. (1) It can be something nominated as surety for the payment of a debt, such as a loan over a house. (2) It can also be a document which contains a promise to repay money - an IOU.
- Semi-Government Securities:
- Bonds issued by semi-government bodies that guarantee investors the return of the original worth of the bond on a certain date and a specific rate of interest.
- Share:
- Entitlement to part ownership of a company.
- Share Capital:
- Money put into a business by its owners for use by the business in acquiring assets and retained profits.
- Simple Interest:
- The interest calculated on a principal sum, not compounded on earned interest.
- Stamp Duty:
- A State Government charge levied on certain property and securities transactions.
- Superannuation Contributions Surcharge:
- An extra tax of up to 15% on superannuation contributions for higher income earners, which is indexed annually to take into account inflation.
- References:
- Ref-1
- Term Deposit:
- Funds deposited in a savings account, the terms of which impose a financial penalty if funds are withdrawn before a specified date.
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