Investment Glossary

Investment Glossary (An Extract from the Business Best Seller Mastering Your Money)

A

Accrued Credit Charge - Unpaid interest charges accumulated on an outstanding loan or credit facility.

Accrued Interest - Interest accumulated on an investment that has not yet been paid or credited to the investor.

Accumulation Fund - A superannuation fund where the benefits are defined as the accumulation of member and/or employer contributions and earnings.

Actuary - A qualified professional specialising in the technical aspects associated with life insurance and superannuation and investment.

Allocated Pension - A form of retirement investment that supplies a regular and ongoing income from the investment of a lump sum.

All Ordinaries Index - An index of approximately 250 Australian companies that is used by equity investors to measure movements in the equities market.

Allowable Deductions - Those costs, losses or expenses approved by the Australian Taxation Office that can be used to reduce taxable income.

Annuity - A defined series of regular payments received by an individual in return for a lump sum amount paid to an institution.

Approved Deposit Fund (ADF) - A specific managed investment fund that can only accept superannuation payout moneys.

Arbitrage - An investment technique that takes advantage of different prices in different markets or investment maturity dates; usually associated with the commodity market.

Assessable Income - A broad definition referring to all forms and sources of income that are defined as income under the Australian Income Tax Assessment Act, including business income and capital gains. (Also see Taxable Income.)

Asset Backing - Share market terminology associated with the calculation of dividing the net assets of the company by the number of issued shares, indicating the asset backing per share.

Assets - Items of value owned by an individual or company.

Authorised Representative - A financial planner who is an employee or an agent who has a proper authority from an individual or company that holds a Dealer's or Adviser's Licence issued by the Australian Securities Commission.

Automatic Reinvestment - Income derived from investment that is automatically reinvested in that investment.

B

Balanced Fund - Terminology used to describe a managed trust investment where the fund manager will invest in a range of different investment categories, such as fixed interest, equities and property.

Balance of Payments - An accounting record of a country's financial transactions with the rest of the world which indicates the value of goods and services imported into a country compared to the value of goods and services exported from that country.

Balance Sheet - a detailed financial statement providing details of the assets and liabilities of a company or individual.

Bankruptcy - A legal process where the financial affairs of individuals who cannot pay their outstanding bills or creditors have their finances placed with a trustee who manages their funds on behalf of the creditors.

Basis Point - Measurement terminology utilised particularly in fixed-interest markets with 100 basis points equalling one per cent.

Bear - An individual who anticipates that prices, particularly in the share market, will fall. The opposite of a bull.

Bear Market - A depressed market usually identified by falling prices and pessimistic economic forecasts. The opposite of a bull market.

Below Par - Terminology used when shares or fixed-interest investments are valued less than their face value.

Beneficiary - An individual or a legal identity who receives financial benefit, usually in the event of the investor's death.

Beta - A technical measurement assessing the price volatility of equity investments.

Blue Chip - Share market terminology describing shares of major companies with a stable record of profit and dividend.

Bond - A fixed-interest security detailing a debt issued by a borrower for specific periods at a specific interest payment rate.

Bonus Shares - An issue of additional shares to existing company shareholders at no charge.

Bridging Finance - A Short-term loan utilised as an interim arrangement in purchases while long-term finance is obtained.

Broker - An individual who buys and sells security, such as shares, on behalf of his clients for a commission. Brokers can also specialise in other areas such as insurance and finance.

Brokerage - The actual fee that brokers charge clients for transferring securities on their behalf.

Budget - A proposed plan of action expressed financially by detailing income and expenditures for a specific period.

Bull - An individual who is optimistic about the potential for increases for share market investments. The opposite of a bear.

Bull Market - A stock market that is identified by rising share prices and general market optimism over a period of time. The opposite of a bear market.

C

Call - In an option contract a call provides the right, but not necessarily the obligation, to buy a specified number of shares at a particular price and time.

Capital Gain/Capital Appreciation - An increase in the value of a capital asset above its original purchase price, ,which is realised on the sale of that asset. The opposite is a capital loss.

Capital Gains Tax - A tax payable on the sale or transfer of an investment that has produced capital gain.

Capital Guaranteed - An investment fund managed by a financial management company which guarantees the return of the original capital investment regardless of loss incurred by the particular investment fund.

Capital Stable Fund - A fund that invests in more conservative investment categories with a view to minimising the potential for loss of the capital value of the investment, but does not include a capital guarantee.

Cash Flow - The income received from an investment by way of dividends, interest or profits in general.

Cash Management Trust - A managed investment trust specialising in cash, interest bearing or negotiable securities which provides access for smaller investors into markets generally accessible only by professional investors and institutions.

Cash Value - The investment component associated with certain types of life insurance policies.

Caveat - A legal notice or warning to indicate that another individual has an interest or right over an asset.

Certificate - A piece of paper verifying ownership of certain investments, such as shares or units in a managed investment trust.

Cheque - A bill of exchange drawn on a bank by an account holder which is used instead of cash funds.

Commission - A fee paid to a financial planner for acting as an agent on behalf of a funds management company.

Compound Interest - An interest payment method where interest is paid on both the principal and on previously accrued interest payments.

Compulsory Preservation - A component of a superannuation benefit that must remain in a superannuation scheme or rollover fund until death, permanent disablement, retirement after age 55, age 60 or emigration.

Concessional Contribution - a contribution to a superannuation fund which is generally sourced from untaxed monies or monies for which the contributor is entitled to claim a tax deduction. Taxed superannuation funds are required to deduct 15% contributions tax upon receipt of concessional contributions. Contribution types which are classified as concessional contributions include salary sacrifice; superannuation guarantee employer contributions and personal contributions for which a tax deduction has been claimed.

Consolidated Loan - One loan contract usually established for improved financial control which replaces several smaller loans.

Consumer Credit Insurance - An insurance contract that provides income to make credit repayments should the insured be unable to do so due to illness or loss of employment.

Consumer Price Index (CPI) -An index used as a measurement of the change in the prices for certain goods and services.

Contract Note - Documentation issued by a stockbroker confirming the purchase or sale of shares, which includes the quantity, price, brokerage and date of the transaction.

Contribution Tax - A tax deducted from superannuation fund contributions which have been claimed as a tax deduction

Convertible Note - A fixed-interest security that provides the purchaser with the right to convert that security into cash or another type of security issued by the same company.

Convertible Preference Shares - Preference shares that convert to ordinary shares in a given ratio on a particular date.

Conveyance - The legal transfer of ownership of an asset, usually property, from one individual to another.

Coupon - An agreement to pay interest on certain fixed-interest securities which takes the form of coupons or vouchers attached to the security.

Credit - A general term for a loan arrangement where individuals have access to a specific amount of borrowed funds at a specific rate.

Credit Bureau - An organisation that records information on an individual's personal credit history or credit rating and supplies these details to authorised interested parties.

Credit Card - A form of prearranged credit that utilises a coded plastic card to record discretionary purchases.

Credit Limit - The maximum amount of credit available to an individual from an established credit source, such as a cheque account, credit card or overdraft facility.

Credit Rating - An evaluation of an individual's capacity to make the repayments necessary on a credit facility or loan.

Credit Union - A financial cooperative organisation established by a group of individuals who pool their cash funds in order to lend these funds to members of the organisation.

Cum Dividend - Terminology for shares which are entitled to receive a dividend and are sold on the basis that the purchaser will receive that dividend.

Cumulative Preference Shares - Preference shares which, should a company dividend not be paid for one year, will accumulate until a dividend is paid and will be paid before any other company dividends.

D

Debenture - Fixed-interest security issued by a company or corporation secured by the assets of that institution.

Debit Card - A coded plastic card that can be used similarly to a credit card but which accesses an individual's savings account to pay for goods and services rather than using a credit facility.

Declaration of Dividends - Formal advice detailing the forthcoming income payments which a company is intending to pay shareholders. These are usually paid twice a year.

Default - Failure to meet an agreed obligation, such as non-payment of loan repayments.

Deferred Annuity - A type of annuity whereby the series of payments is deferred for a period of time.

Deferred Dividend Shares - A type of share which has its dividend income deferred for a specific period of time, usually several years.

Deferred Income - The deferral of the receipt of assessable income to a later tax year with a view to reducing a current taxation liability.

Defined Benefit Fund - A superannuation fund where the final payout to the member is a calculation based on salary and the number of years of fund membership or service.

Defined Contribution - A type of superannuation fund where the contributions of the members are set at a pre-agreed level, usually expressed as a percentage of salary. Also known as an accumulation fund.

Deposit - Funds placed usually in a fixed-interest investment for a specific period at a specific return.

Depreciation - The estimated decrease in the capital value of an asset due to use, age or obsolescence over time. The opposite of appreciation.

Depression - An extended recession identified by a decrease in economic activity including lower production and higher unemployment.

Discretionary Expenditure - That expenditure which is not considered essential or is not committed to other financial obligations and is available to be saved, or spent on lifestyle assets.

Diversification - A risk-reduction procedure in investment portfolio management achieved by spreading investment funds across a number of different types of investments and investment categories, and the use of different fund managers for investment purposes.

Dividend - A payment declared by a company and paid from company profits to shareholders.

Dividend Imputation - See Imputation.

Dividend Yield - The value of dividends paid by a company in relation to the current price of the shares expressed as a percentage.

Dollar Cost-Averaging - A technique in which an investor purchases a specific number of shares in a company on a regular basis (regardless of the purchase price of the shares) with the intent to obtain a lower average purchase price over time than that which would result from one large purchase.

E

Earnings Rate - The annualised percentage return from money invested, usually declared net of tax.

Employment Termination Payment (ETP) - A sum paid by an employer when employment is teminated on or after 1 July 2007. The amount does not include a tax-free bona fide redundancy payment, approved early retirement scheme payment or unused annual or long-service leave payments.

Endowment Policy - A personal life insurance policy that is payable on death or at the end of a fixed term. It includes an investment component.

Equities - A general term referring to a shareholding and, therefore, part ownership of a listed company.

Equity Trust - A unit trust where pooled funds are invested into the share market on behalf of investors.

Estate - The value of all assets and associated liabilities applicable to an individual.

Ex Dividend - The period of time when shares are sold where the new purchaser would not receive share dividends which were due to be paid in the short term.

F

Face Value - The value that the issuing company or institution will pay on maturity. It does not necessarily indicate actual market value.

Financial Adviser - A professional who has the qualifications and experience to assist people in obtaining their financial goals.

Fixed-Interest Investments - Investments that pay a fixed rate of return for a specific period of time and would include investments such as debentures, bonds or unsecured notes. May also include money on deposit in a fixed-interest account with a bank, building society or credit union.

Float - Terminology usually used to describe a share market activity where a company offers a quantity of its shares for sale to the public for the first time.

Franked Dividends - A dividend from an Australian company that has had part or all of the associated tax paid by that company.

Friendly Society - Financial institutions originally started by groups of workers who regularly contributed to a fund that was used by members in times of economic need, such as sickness, or to use for funeral expenses. Many friendly societies have now expanded into substantial financial institutions.

Fringe Benefits Tax (FBT) - A tax usually payable by the employer when employees receive a non-taxable benefit as part of their salary packages.

Front End Fee - A fee payable by an investor who places funds into an investment such as a unit trust. The front end fee is usually split between the investment fund manager and the investment consultant recommending the fund.

Fully Paid Shares - Shares that have no additional liability outstanding on the shares.

Fund Assets - A general term representing the total value of funds in an investment trust.

Funds -Terminology often used to describe money.

Futures - A highly speculative investment sector that involves buying and selling contracts in various commodities at a current and a future delivery time. Contracts as well as the actual commodities are traded.

G

Gearing - A general term indicating the relationship between available funds and borrowings for an investment or company. A highly geared company could have capital borrowings substantially higher than the shareholders' funds.

Gross Income - Total income before any deductions, such as tax or expenses, are removed from the income stream.

Growth Fund - A pool investment trust that is managed by the fund manager to produce a higher capital growth component and little or no annual income component.

Guarantor - An individual who accepts the responsibility of guaranteeing another person's loan repayments.

H

Hedging - A form of risk reduction by entering into contracts that offset a potential loss from another investment. Hedging is usually associated with the futures market and international currency transactions.

Highest Average Salary (HAS) - A term used in superannuation benefit calculations referring to a member's highest average salary over three consecutive years during his or her entire employment period.

Hire Purchase - An arrangement whereby goods are hired to a borrower who becomes the owner only after the final payment has been made on the goods.

I

Imputation - The process through which a shareholder obtains a tax credit on the dividends received on Australian share investments which can be used to offset other taxable income.

Income Tax - Tax that is due on personal income.

Index - A mathematically calculated number that indicates the amount of change in the trends of various investment sectors.

Indexation - A procedure whereby payments or benefits are increased in accordance with the increases in a previously specified index such as the Consumer Price Index.

Inflation - An increase in the cost of goods and services with an accompanying decline in the purchasing power of cash.

Instalments - A regular and ongoing series of repayments usually made to offset outstanding credit.

Insurance - A formal contract where, for the payment of an annual premium, an insurance company will undertake to reimburse the insurer should certain specifically agreed-to-events occur.

Insurance and Superannuation Commission (ISC) - A government body that is responsible for the administration of the Occupational Superannuation Standards Act.

Insurance Bond - A type of investment issued by a life insurance office under insurance policy guidelines which has little or no life insurance cover. It is used as a vehicle for capital growth investment and has certain taxation advantages.

Interest - Periodic payments paid to a borrower by a lender for the use of their money.

Interim Dividend - Share market terminology referring to a dividend payment, usually for the first half of a financial year, which is usually followed by (final) dividend for the balance of the financial year.

Intestate - Term for dying without a current and legally enforceable will.

Investment Pools - A particular type of managed investment fund with specific characteristics which investors may choose to invest in, such as income, capital growth or a mixture of both.

Investment Sectors - Different categories or groups of investment, such as cash, share, fixed interest or property.

Invoice - A bill for unpaid goods or services that details the purchase item, purchase date and cost.

L

Leverage - The process of borrowing funds to be added with available cash funds which, when jointly invested, have the potential to provide increased profit or, alternatively, increased losses.

Liability - Any borrowings or outstanding debt associated with an individual or company.

Licence Holder - An individual or company who has been issued a licence by the Australian Securities Commission to deal in and/or give advice on securities within the limits of the issued licence.

Limit - Share market terminology issued by a buyer or seller of shares from a broker indicating the maximum price a purchaser is prepared to pay for shares or the minimal price at which a seller will sell particular shares.

Liquidate - The process of selling assets to obtain cash funds.

Liquidity - The amount of funds currently available in cash or investments that can be quickly converted into cash.

Listed Company - A company whose shares can be bought and sold through the stock exchange by individuals or other companies.

Long-Term Investment - An investment held for an extended period which depends on investment type but usually refers to investments held for longer than three years.

Lump Sum Benefit - In relation to superannuation, a payment paid to the member or beneficiary in one amount.

M

Managed Investment Trust - See Unit Trust

Management Expense Ratio (MER) - A ratio of management fees as a proportion of the net asset value of the trust, expressed as a percentage for a particular period.

Management Fee - A fee paid to the managers of pooled investment funds for the administration and professional investment experts provided by that company.

Margin - A deposit or part payment made by the purchaser of a stock or commodity.

Marginal Tax Rate - The highest tax rate in each dollar payable on income that is earned.

Marketable Parcel - The actual quantity of shares that is regarded as the minimal or smallest number of shares that can be bought or sold through the stock exchange.

Market Cycles - The ongoing process of increases and decreases over time in a particular market sector. These cycles are affected by many local and international economic factors.

Market Linked Fund - A specific investment fund structured and managed by an investment manager so that the fund's performance reflects the performance of the larger market or sector in which the investments are placed.

Market Value - The value of an asset that would be obtained if sold, regardless of the asset's original purchase price.

Master Trust - A trust-based service where the investor's funds are spread across several fund managers, and where the client administration is conducted by one specialist administrator. This provides cost efficiencies and improved client service through investment selection flexibility and consolidated tax and investment reporting, for an additional fee to the investor.

Maturity - The specific date on which a specific investment or loan is due to be repaid or finalised.

Merchant Bank - A bank which, rather than lending funds obtained from individual depositors, specialises in providing financial services, often to other financial organisations.

Merger - The joining of two or more businesses or companies to form one larger business or company without hostility from either party.

Minor - A person who is less than 18 years of age.

Mission Statement - A statement describing the purpose and vision of an individual or group of individuals.

Money Market - A facility for buying and selling fixed-interest investments, such as Commonwealth Treasury notes, bank bills and certificates of deposits.

Mortgage - A legal entitlement or charge over a capital asset which is used as security when obtaining a loan.

N

Negative Gearing - A process of borrowing funds for the purchase of an investment where the level of income generated from the investment is less than the actual interest required to be paid on the borrowing.

Net Worth - The price or value remaining after the deduction of all outstanding expenses including tax.

No-Claim Bonus - A reduction in the normal annual insurance premium, particularly for general insurance, resulting from no insurance claims being made on an insurance policy during the previous policy period (usually one year).

Non-Concessional Contribution – A contribution to a superannuation fund which is generally sourced from after tax income. The superannuation fund does not deduct contributions tax from non-concessional contributions. Non-concessional contributions include spouse contributions, government co-contributions and personal contributions for which the member has not claimed a tax deduction.

O

Odd Lots - A number of shares that do not make up a marketable parcel, usually resulting in a decrease in their value.

Option - The right to buy or sell a contract for specific commodities or securities at an established price and at a specific time.

Ordinary Shares - Also known as fully paid shares, where no other liability or call is associated with the ownership of these shares.

Overdraft - An arrangement whereby a bank or financial organisation will allow funds to be drawn in excess of the amount currently held in a cheque account.

P

Participating Preference Shares - Preferences shares which receive a stated rate of dividend and an additional variable dividend subject to profitability.

Par Value - The nominal value given to shares at the time of issue. Par value does not reflect actual market value.

Payback Period - The period of time required to recoup, usually from income received, the original funds invested.

PAYE - An abbreviation for 'Pay As You Earn' tax which is a taxation collection procedure whereby employees have income tax deducted from their wages or salary by the employer.

Payout Figure - The final amount required to completely repay any outstanding principal and interest due on a loan contract.

Penny Stock - Any shares that are very inexpensive to purchase and are often very speculative.

Pension - A periodic payment made to an individual from accrued funds, such as a superannuation benefit.

Pooled Fund - General terminology given when a number of investors place funds in an investment product containing selected investments operated by investment managers on behalf of investors.

Portability - The ability to transfer benefits from one investment or superannuation fund to another arrangement.

Portfolio - The total of all the investments owned by an individual or company which may include investments from several different sectors.

Practice Portfolio - A training exercise where individuals select, monitor and make specific investment decisions without actually investing any money.

Preference Shares - Shares that have a fixed rate of return and the first claim on dividends before ordinary shares. In bankruptcies, preference shareholders also have a claim on assets above ordinary shareholders.

Prescribed Payment System - A taxation collection procedure applicable to certain contracted work or services whereby a percentage of the value of the contract is forwarded to the Australian Taxation Office by the contractor. This is to offset the future taxation liability of the service provider.

Present Value - The amount of money which, if invested now, will grow to a specific amount by a specific date through the effects of compounding interest, that is, the current value of a future maturing investment.

Preservation - General terminology indicating the retention of superannuation benefits in a superannuation fund or rollover fund until the member is at retirement age. Also see Compulsory Preservation.

Price Earnings Ratio - A ratio used to measure the value of a share by dividing the price of the share by the annual earnings of that share.

Principal - The actual amount of money borrowed or invested before any interest or fees are added.

Proper Authority - A written authority, given by a holder of a Dealer's or Adviser's Licence to their representatives, allowing them to act on their behalf within the limits of the issued licence.

Property Trust - An investment unit trust where investors' funds are pooled and invested into the real estate market by fund managers.

Prospectus - A written statement detailing information on the investment and the fund managers as required by legislation, which is required by law to be provided to the public by companies or investment institutions on any investment which they offer to the public.

Provisional Tax - A form of taxation payable on certain levels of income, including investment and business income where PAYE tax has not been deducted. Wages and salary are excluded.

Proxy - The process by which voting rights at shareholders' meetings can be transferred to another individual.

Put Option - A contract that allows the holder to sell the commodity in the contract at a set price on or before a set date.

R

Rally - A sharp increase in the demand for shares or other securities, usually accompanied by increased sales and higher investment prices.

Reasonable benefit limit (RBL) – the maximum RBL amounts that an individual could receive from a superannuation fund or employer without incurring excessive benefits tax or losing all or part of a pension offset. No longer applies from 1 July 2007.

Receipt - An official acknowledgement of the payment of a due amount.

Recession - A slowing of business activity due to a poor economic environment, but not so severe as a depression.

Redeemable Preference Shares - Preference shares that can be redeemed at a specific price on a specific date.

Redemption - The process by which an investor converts an investment back into cash.

Renounceable Rights Issue - An entitlement to existing shareholders for new shares in that company at a price usually lower than the current market value. The entitlements or rights to these additional shares can be traded on the share market where, as with non-renounceable rights, should the owner not wish to take up the additional shares, the rights lapse. (Also see Rights.)

Repossession - A situation where a purchased item is reclaimed by the seller, usually due to a default in the payment process by the buyer.

Return on Investment - The total percentage profit including capital growth and income received from an investment. Can be quoted net or gross of tax or inflation.

Revaluation - The result of a change in the value of an investment, either upwards or downwards, after assessing the actual worth of the investment.

Reversionary Pension - A pension where the income flow will automatically transfer to the member's surviving spouse on the member's death.

Rights - An entitlement to the existing holder of shares for additional shares in that company, usually at a lower than current market price and in a specific ratio, such as one new share entitlement for every five shares already held. Rights are issued by companies as a form of raising additional capital.

Risk Management - The process by which an investor insures and balances risk, returns and security within an investment portfolio.

Risk-Reward Ratio - A concept which implies that the higher the reward or return sought from an investment, the higher the associated risk accepted by the investor.

Rollover - A term predominantly used to describe the transfer of superannuation benefits from one approved superannuation investment to another. Can also refer to the reinvestment of a fixed-interest investment at current market rates on the maturity of the previous investment.

S

Salary Continuance Insurance - A type of insurance contract that undertakes to provide a percentage of the current salary should the insured be prevented from earning a salary due to some form of disability.

Salary Sacrifice - A process by which a wage or salary earner diverts a proportion of their income from cash in hand to some other form of benefit.

Savings Plan - Any structured or ongoing procedure where an individual regularly allocates funds for savings or investment.

Scrip - A term given to the actual certificates which identify ownership of investments, such as shares and fixed-interest investments.

Securities - A general term for a range of investments, such as shares, stocks and fixed-interest investments including bonds and debentures.

Semi-Government Securities - Fixed-interest investments offered to the public and professional investment managers by state and federal authorities, such as Telstra, various state treasury corporations and state electricity commissions.

Share Premium - The additional cash amount at which shares are offered to the public above the face value of the shares.

Shares - Certification of ownership in a company, usually purchased to provide an annual income (dividend) from the company profits in addition to anticipated capital growth on the original investment. Also referred to as stock or equities, or ordinary shares.

Short-Term Investment - An investment period usually less than one year.

Simple Interest - An interest calculation where interest earned in the current period does not accrue interest in the next period.

Speculator - An investor who wishes to make an above-average return by investing in the most profitable investment available with somewhat less regard to the nature or risk of the actual investment.

Spread - A risk-reduction technique of purchasing a number of investments in the same investment sector.

Stag - An investor who attempts to make a quick profit in the share market by buying shares that are not yet publicly listed by subscribing to the new issues, then selling these shares on the share market when listed or very soon after they have been listed.

Stagflation - Economic terminology describing economic stagnation, of little or no growth, with increasing inflation.

Stamp Duty - A government tax applicable on certain types of documents, including cheques, some hire and purchasing agreements and securities in stock exchange transactions.

Stockbroker - An individual who is a member of a stock exchange and who acts as an agent buying and selling shares and other securities on behalf of investors.

Stock Exchange - The market where shares and other fixed-interest listed securities can be bought and sold subject to the regulations of the stock exchange and the government legislators.

Sum Insured - The agreed-to amount in an insurance contract payable to the insured in the event of certain defined occurrences.

Superannuation - A government supported investment process where individuals accumulate funds for their retirement.

Superannuation Guarantee Charge - Amount collected by the Australian Taxation Office from any employer who does not provide the required minimum superannuation benefits for employees.

Surrender Value - The cash value of a life insurance policy if it is cancelled prior to the maturity date.

Syndication - The process by which a group of investors provide funds for a specific investment and which is not considered a general offer for investment to the public.

T

Tax-Free Component – Introduced from 1 July 2007, the tax-free component is generally funded by non-concessional contributions. Tax is not payable on withdrawal of tax-free components.

Taxable Component – Introduced from 1 July 2007, the taxable component is generally funded by concessional contributions. When paid to members under age 60, lump sum tax is calculated on taxable components and they are required to be declared on member’s tax returns.

Taxable Income - That amount of income remaining from assessable income after removing all allowable tax deductions.

Taxation - The process by which the government obtains finance from income earners and companies to pay for the cost of government.

Taxation Minimisation - The legal process of arranging or investing in investment sectors to reduce the tax payable to a minimum.

Tax Shelter - An investment used for minimising or deferring taxes.

Temporary Disablement Insurance - An insurance contract where an agreed amount is paid to the insured should the insured suffer a temporary disablement as defined in the insurance contract.

Term Deposit - An income-producing investment where funds are placed on deposit with a financial institution for a fixed period of time at a fixed interest rate.

Term Insurance - An insurance contract for a specific amount and for a specific time, usually a 12-month period, which has no investment component in the contract.

Transition to retirement – from 1 July 2005, a person who has reached their preservation age can access their superannuation through an income stream without having to retire permanently from the workforce.

Trauma Insurance - A form of insurance that covers the insured for specific illnesses, such as cancer, where the benefit is usually paid on diagnosis rather than death.

Treasury Note - A short-term money market security which pays interest only on maturity, and is issued by the Federal Government through the Reserve Bank.

Trust - Money or assets held by an individual or organisation, known as the trustee, in accordance with instructions in the trust deed.

Trust Deed - A legal document stating the purposes for which a trust has been established and the rights and obligations of all parties involved in the trust including the trustee, the trust manager and the trust beneficiaries.

Trustee - A person or organisation who undertakes the duties, as defined in a trust deed, in accordance with trust law for the benefit and on behalf of the beneficiaries.

U

Underwriter - Usually a stockbroker or a merchant bank who provides a guarantee to a company wishing to raise funds through a share or rights issue that he or she will purchase the shortfall, if any, between the number of shares actually purchased by the public and the total number of shares available in the issue.

Unfunded Benefit - A superannuation plan where no specific contribution rate is established by the employer with termination benefits being calculated and paid from the company or organisation's cash reserves.

Unit Trust - A pooled investment structure that allows a manager to accept and invest funds from the public in accordance with the trust deed and, in conjunction with the trustee, manages the funds for the benefit of the investor.

Unsecured Notes - Fixed-interest loans for a specific term at a specific rate but without security.

V

Value Added - General terminology for the adding of value to goods or services by a second party before transferring them to a third. Through their expertise and volume purchases, fund managers should add value to the investments they purchase on behalf of unit trust holders.

Venture Capital - Capital investment for a new business or technology which would therefore be exposed to a higher level of risk (as compared to ongoing business opportunities).

Vested Benefit - The total entitlement of a member from a superannuation fund at a particular point in time which includes all employee contributions and earning plus all or part of the employer's contributions and earnings.

Volatility - Fast unpredictable changes in the total returns from an investment. The opposite of a stable investment.

W

Whole-of-Life Policy - A life insurance contract that guarantees to pay a specific amount of money on the insurer's death. Unlike term insurance, a whole-of-life policy can be kept in force until the insured either cashes in the policy or dies.

Will - A legal statement through which individuals can have their assets distributed in a prescribed manner after their deaths.

Y

Yield - The total income earned from an investment normally expressed as a percentage.

©Trevor Gibson 1996. All rights reserved. No part of this publication (Mastering Your Money) may be copied or reproduced, stored in a retrieval system, or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without prior permission of the Publisher.

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