Investment Terms Explained
- Active
- deviating significantly from an Index or Benchmark.
- Added Value
- the difference between the actual return and an Index or Benchmark return.
- Annualised
- the average return each year for time periods longer than one year
- Asset Allocation
- the proportion of assets held in each asset class.
- Asset Class
- a type of investment such as New Zealand shares or cash.
- Benchmark Asset Allocation
- the long-term asset allocation based on preferences for risk and return.
- Currency Hedge
- financial instrument used to reduce the impact of exchange rate movements
- Diversification
- not putting all your investment eggs in one basket i.e. investing in a variety of stocks and asset classes
- Index
- a measurement of the market value of a group of stocks e.g. the NZX50 measures the market value of New Zealand’s 50 largest share issues.
- Passive
- replicating an index or having little or no deviation from the benchmark asset allocation.
- Real return
- the return over and above the rate of inflation.
- Risk
- the likelihood of earning less than you expect or of losing money.
- Stock
- an individual investment such as a share or a bond.
- Stock selection
- picking individual stocks to add value or reduce risk.
- Tactical Asset Allocation
- planned deviations from the Benchmark Asset Allocation designed to add value or reduce risk.
