Glossary of terms

Glossary of terms

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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).

Glossary: investment
A way to use your money to make it grow.
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).
Glossary: asset
An asset is a useful or valuable person or thing. In financial terms it's an item that can be converted into cash such as bank deposits, shares or property.
Refinance

Changing the terms of your loan, or replacing your existing loan with a new one. Refinancing is often associated with going to a different provider. You may choose to do this because:

* You would benefit from choosing another mortgage repayment option ie moving from a fixed to a floating rate or vice versa.
* You wish to change the amount you pay each month on your loan.
* There may be a cost charged by the lender if you choose to refinance within the term of your loan.

Glossary: provider
A company such as a bank, finance or insurance company that creates and provides insurance, mortgage, banking, savings or investment products.
Glossary: floating rate
The rate of interest paid on a loan may be either a fixed rate or a floating rate. For a floating rate loan, the interest varies from time to time. If interest rates fall, then so does the amount you have to repay. Or you can choose to continue with the same level of repayment and reduce the term of your loan. However, if interest rates rise, then the opposite effect happens, either your repayments need to be increased or the term of your loan is extended.
Glossary: refinance
Changing the terms of your loan, or replacing your existing loan with a new one. Refinancing is often associated with going to a different provider. You may choose to do this because: * You would benefit from choosing another mortgage repayment option ie moving from a fixed to a floating rate or vice versa. * You wish to change the amount you pay each month on your loan. * There may be a cost charged by the lender if you choose to refinance within the term of your loan.
Retail Super Scheme

A superannuation scheme into which individual investors save money. These are generally offered by financial organisations.

Glossary: superannuation scheme
Funds specifically designed for people saving for their retirement. They are in the form of retail funds available to all savers, or employer funds available only to employees of the sponsoring employer.
Return on your savings

The change in the value of your investment over a period of time, including any distributions (eg dividends) made from the investment during that period. Returns can be both positive and negative.

Glossary: investment
A way to use your money to make it grow.
Risk

An investment is normally considered to be risky if there is a reasonable chance that its value will vary significantly in the future. For example, an investment in shares is more risky than an investment in a bank term deposit. The value of shares may fall below the price paid for them while the value of bank deposits generally do not. High risk investments should only be taken on with long term intentions. You would expect a high long-term return to compensate for high risk.

Glossary: investment
A way to use your money to make it grow.
Glossary: shares
Shares and equities refer to the same thing - a share in the ownership of a company and entitlement to any distributions (eg dividends).
Glossary: term deposit
Money deposited for a fixed term - usually between 30 days and five years. If you want your money back before the term is up you may have to forego a portion of your interest as a penalty.