In our efforts to demystify the things we do and some of the jargon used in the financial industry, we'll be continually updating this page to provide a glossary of regularly used terms and definitions.
Advance Care Plan
A set of instructions regarding your values and the type of health care you wish to receive, should you become unable to make or communicate your own preferences.
A type of pension which pays you a guaranteed income for a set period of time, regardless of how markets perform. How much you receive is set when the annuity is purchased and can be a single amount or indexed each year (by a fixed percentage or in line with inflation).
The frequency of the payments can usually be monthly, quarterly, half-yearly or yearly and you can have the payments last for the rest of your life, your life expectancy or a fixed number of years.
An abbreviation referring to the Australian Securities Exchange, which is Australia's largest share market with roughly 2,200 companies and issuers listed.
An index that tracks the combined movement of the largest 200 publicly traded companies on the ASX and is considered the benchmark for Australian share performance.
When an asset has increased in value and is now worth more than when it was bought. If it is an investment asset (one owned to earn income), you could be liable for tax on that gain.
(Unrealised) Capital Gain
When the asset has increased in value but has yet to be sold.
(Realised) Capital Gain
When the asset which has increased in value is sold.
Death Benefit (Superannuation)
The superannuation benefit (or money payment) made after your death.
Death Benefit Nomination
Your direction to whom and/or what share, payment is to be made. This is your opportunity to ensure who you want your superannuation to go to.
At the end of the day who your super monies goes to, depends on the direction (nomination) made to the Trustee of your superannuation fund. If you don't make a nomination, the Trustee will need to decide who they believe your superannuation benefit should go to, according to the trust deed and trust law.
Deeming (Centrelink Age Pension)
The process Centrelink uses to assess the income you make from your investments. Rather than assessing each type of investment individually, they "deem" your assessable investment income as a set percentage of the value of your investments.
When an Australian Company earns a profit, it pays dividends to its shareholders, relating to that profit. The company is also required to pay tax on that profit at the Company Tax Rate. Shareholders, when determining their personal tax liability on income earned, are eligible for a credit on tax already paid by the company. This is to avoid the shareholder paying tax twice on the same profits made from their share of that company.
Investing with the assistance of borrowed monies.
When the interest on money borrowed, and other expenses relating to an investment, are greater than the income made from the investment and results in a short term loss. These actions are usually taken with the hope that the investment will grow in value, resulting in a net capital gain over time and be used to reduce your net taxable income.
When the expenses including interest on money borrowed is less than the income made from the investment.
Also known as Critical Illness or Living Insurance, Trauma Insurance provides you with a lump sum payment if you suffer a serious medical condition such as a heart attack, cancer or some major injuries.
The amount you receive from a benefit claim can be used for whatever you see fit. Whether it be paying your medical bills, clearing your debts or paying for necessary home modifications.
An Investment Profile is an assessment, generally by a financial specialist, determining an investors attitude to investment risk, return and volatility.
The assessment can consider investors' experience, goals and responses to hypothetical events when determining the appropriate investment profile. This in turn helps in creating a personalised investment portfolio for the investor.
Commonly used profile terms include: Conservative, Balanced and Growth.
When the value of a stock, bond, commodity or index shifts drastically (at least 10%) in the opposite direction to which it was trending, often caused by the market or asset being overvalued. It's usually a downward movement in value and happen fairly regularly, but are far shorter in duration than a recession, lasting anywhere from a couple of days to several months.
A type of loan available to homeowners, allowing you to borrow money against the value of your home. Like a regular loan it accrues interest, but it allows you to defer payment of the loan until you pass away, sell or move out.
Superannuation Guarantee (SG)
The compulsory contribution employers must make on behalf of their employees to their superannuation. The contribution must be 9.5% (minimum) of the employee's ordinary time earnings and needs to be paid at least every quarter to the employee's superannuation fund.