Glossary of terms

Glossary of terms

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Net worth

Your overall financial position - the value of your assets minus your debts. Or the difference between what you own and what you owe.

Nominal return

The money you make on your investment without taking into account inflation. Your real return on an investment is where allowance is made for inflation. For example if your investment has achieved a nominal return of 10% and inflation was 2% then your real rate of return is 10% less 2% giving a return of 8%.

Glossary: investment
A way to use your money to make it grow.
Glossary: inflation
Inflation - is the rate at which the prices of goods and services increase over time. The effect of this is to reduce the purchasing power of money. For example, if you could buy something with $1000 now, in one years time, you would need $1020 to buy that same thing (assuming 2% inflation).
Glossary: nominal return
The money you make on your investment without taking into account inflation. Your real return on an investment is where allowance is made for inflation. For example if your investment has achieved a nominal return of 10% and inflation was 2% then your real rate of return is 10% less 2% giving a return of 8%.
Glossary: rate of return
What you earn on your investment as a percentage of the amount you invested. For example, if you by a house for $300,000, and it makes you $15,000 from rent each year (after all the running costs have been paid), the rate of return on your asset (the house) is 5% ($15,000 is 5% of $300,000).