Australian Investment Dictionary | Australian Stocks | Australian Investments | Australian Real Estate | For Overseas Investors

The following is a list of Australian investment and financial terms compiled by the Moneysmart website, with their meanings explained one by one to help you understand the relevant concepts:

A

Account number
A number assigned by a bank or financial institution to a specific account. BSB number Used together, they uniquely identify the account.

Account-based pension
A pension purchased with retirement funds that allows retirees to choose the amount they will receive each year within the minimum and maximum limits set by law. Funds are withdrawn gradually until they are exhausted. Since July 2007, pension payments have been tax-free for most people aged 60 and over. Allocated Pension.

Accumulation fund
A pension fund in which your retirement benefits depend on your and your employer's contributions, as well as the fund's investment returns. Defined Benefit Fund different.

Accumulation index
A composite index that measures price and earnings changes, such as stock price changes and dividends paid. It assumes all earnings are reinvested and compounded.

Active investment management
Fund managers try to obtain above-market returns for investors by frequently buying and selling investments.

Actively managed
An investment management approach whereby a fund manager regularly buys and sells assets with the goal of outperforming a specific market index, such as the ASX200.

Administrative financial platform
An online platform for buying and selling units in various managed funds, providing a consolidated overview of investments and tax reporting. Financial advisors receive fees based on the amount invested through the platform.

Advance fee fraud
A scam that tricks victims into paying fees in exchange for the promise of large returns. Also known as the "Nigerian scam."

AFS Licence (Australian Financial Services License)
Issued by the Australian Securities and Investments Commission (ASIC), it allows individuals or companies to legally engage in financial services business, including selling, advising on, or trading financial products. Only work with licensed businesses for better protection and dispute resolution.

After-tax super contribution
The amount paid into a superannuation fund after paying income tax is different from Pre-tax contributions (such as salary sacrifice).

Age Pension
A regular payment provided by the Australian Government to eligible retirees, subject to meeting certain eligibility criteria.

Agreed value
A pre-agreed fixed amount in an auto insurance policy, which is usually greater than the market value.

Agribusiness scheme
Investments involving livestock, agricultural, horticultural or forestry projects, usually through Managed Investment Scheme conduct.

Allocated pension
The pension purchased with retirement funds at retirement has now been Account-based pension replace.

Annual percentage rate (APR)
A percentage that represents the base cost of the loan, excluding other fees, such as account establishment fees. A credit card may have multiple APRs (such as the APR for purchases, cash withdrawals, and late payments).

Annuity
An investment purchased with a one-time investment that guarantees a fixed income for an agreed number of years or for life.

ASFA Retirement Standard
The retirement living cost standards provided by the Australian Superannuation Association are divided into two categories: "basic" and "comfort", and the amount required is estimated based on living needs.

Asset
Anything you own, including financial assets (such as cash, stocks) and physical assets (such as homes, cars).

Asset allocation
A method of allocating investments among different asset classes, such as stocks, real estate, fixed income, and cash.

Asset class
Investment categories that exhibit similar market behavior, such as cash, fixed income, real estate, and equities.

Asset manager
An individual or firm that manages investments on behalf of others.

ASX200
An index of the performance of the top 200 companies by market capitalisation on the Australian Stock Exchange.

Australian credit licence
Issued by ASIC, it allows individuals or companies to legally engage in lending activities. For better protection, only work with licensed companies.

Australian financial services (AFS) licence
A license issued by ASIC allows the legal provision of financial services business, including selling, advising and trading financial products.

Australian Government guarantee on deposits
Under the Financial Claims Scheme (FCS), each account holder is protected up to AUD 250,000 per financial institution.

Australian Prudential Regulation Authority (APRA)
The body responsible for regulating Australia's financial services industry, ensuring the financial system is stable, efficient and competitive.

Australian Securities and Investments Commission (ASIC)
A federal government agency that enforces laws relating to corporations, securities, financial services, and credit to protect consumers and investors.

Australian Securities Exchange (ASX)
Australia's largest securities exchange, providing trading in stocks, futures, options, bonds, etc.

Authorised deposit-taking institution (ADI)
Institutions authorised under the Banking Act 1959, including banks, building societies and credit unions.

B

Balanced fund
A fund that invests across a variety of asset classes (such as cash, fixed income, real estate and equities) with the goal of achieving capital growth and a reasonable level of income over the medium to long term.

Bank bill swap rate (BBSW)
The benchmark interest rate in the Australian financial market, the interest rate applicable when banks lend to each other using bank bills for a period of 6 months or less.

Bankruptcy
The process of legally declaring bankruptcy when an individual is unable to meet their debts. Bankruptcy proceedings typically involve the liquidation of assets and the restructuring of debts.

Benchmark
In investing, an index used to evaluate the performance of an investment, such as the ASX200, is widely used as a benchmark index for the Australian stock market.

Beneficiary
The person who is entitled to receive assets or benefits upon the death of the owner. For example, the beneficiaries of a pension fund are usually the members themselves or their family dependents (if the member dies).

Bid-ask spread
The difference between the bid and ask prices for a stock or other asset. This difference is crossed when you buy at the seller's ask price or sell at the buyer's bid price.

Binding death benefit nomination
In a superannuation fund, members can nominate beneficiaries, and upon the member's death, superannuation must be paid to the nominated beneficiary, unless the payment is unlawful.

Blue chip share
Refers to the stock of a company that has a leading position in its industry and has stable long-term profits. It is usually one of the largest companies in the market.

Bond
A medium- to long-term investment instrument issued by a government or company that provides fixed interest payments and a return of principal at maturity. Often part of a fixed-income investment.

Break fee
A fee you may pay if you make early repayment during the term of a fixed-rate loan. The greater the drop in interest rates, the higher the fee may be.

Bridging finance
A short-term loan used to bridge the financing gap between purchasing a new home and selling an existing home.

Broker
An intermediary who helps you arrange a contract with a service provider, such as an insurance company or lender. Brokers typically earn income through commissions or fees.

Brokerage
A fee charged by a broker for services provided, such as a brokerage commission on a stock purchase or sale.

BSB (Bank Branch Code)
A six-digit code that identifies a specific branch of an Australian financial institution. Combined with the account number, it uniquely identifies an account.

Building society
A community financial institution owned by its members that provides traditional banking services (such as savings accounts and loans). Usually regulated by APRA, also known as a "building society". Credit Union.

Buyer advocate
A professional who provides evaluation and negotiation support to a homebuyer, typically for a fee.

C

Call option
An options contract that gives you the right (but not the obligation) to buy an underlying asset at a specified price on or before a specific date in the future. Use this option when you expect the asset's price to rise.

Capital

personal: Funds or other assets used for investment.
company: Funds provided by owners or investors to achieve the company's business goals.

Capital depreciation
A decrease in the value of a capital asset, such as real estate or machinery.

Capital gain
The difference between a property’s sales price and its purchase price (including purchase and selling costs) and is usually a positive figure.

Capital gains tax
A tax on profits from the sale of an asset, such as gains from the sale of real estate or stocks.

Capital growth
The phenomenon of asset value increasing over time, also known as capital appreciation.

Capital guarantee
A product that protects investors from significant losses and often includes restrictions or performance thresholds, also known as Capital protection.

Capital stable fund
A fund that invests across multiple asset classes, primarily in defensive assets (such as fixed income and cash) with a smaller allocation to growth assets (such as equities and real estate), with the goal of providing stable income and achieving moderate growth.

Cash advance
Cash withdrawals from a credit card account are usually subject to transaction fees and interest, which accrues from the date of withdrawal until the balance is paid in full.

Cash investments
An investment that pays interest over a short period of time, such as a bank account or a time deposit.

Cash management account
A trading account used to receive investment earnings (such as dividends or sales proceeds) and to purchase new investments.

Cash out facility
Many retailers (such as supermarkets) offer a service that allows you to withdraw extra cash when you pay for your purchases with your debit card.

Cash rate
The interest rate on overnight loans between banks is set by the Reserve Bank of Australia (RBA) to implement monetary policy.

Caveat (Title Notation)
A legal notice associated with real estate that shows who has an interest in your property. You cannot complete a transaction (such as selling the property) until all notations are removed or the holders' consent is obtained.

Cboe Australia (CXA)
Australia's second largest stock exchange, offering an alternative trading platform for Australian-listed securities, as well as a variety of unique products such as warrants and funds.

Chargeback
The return of funds by a retailer or service provider to a consumer's bank account, line of credit, or credit card, usually initiated by the consumer's bank.

Churning
Switching clients from one financial product to another so that an advisor or broker can earn a commission, often with little to no benefit to the client.

Clearout
Loss of contact occurs when a lender is unable to contact a borrower despite making reasonable efforts.

Co-borrower
Someone you borrow money with. Co-borrowers are jointly liable for the loan, and if one party defaults, the other party must repay the full amount of the loan.

Co-contribution
A government payment of up to £$500 to the superannuation fund of a person on a low or moderate income. It only applies if the person makes voluntary after-tax contributions.

Collateral
Property or assets, such as a house or car, that you provide as security for the loan.

Collateralized debt obligations (CDO)
A portfolio of multiple loans (such as auto loans, credit card debt, or corporate debt) that is sold as a single investment.

Collectables
Items that are rare or in high demand and may appreciate in value over time, such as art, antiques, coins, and wine.

Commission
A fee paid to an advisor or salesperson as an incentive to promote a specific product. This can be a one-time commission or an ongoing commission based on an account balance.

Commutation
The process of converting part or all of a pension or annuity into a lump sum payment.

Comparison rate
A rate that helps you calculate the true cost of your loan, including interest and most associated fees.

Compound interest
Interest calculated on the principal and accumulated interest, which grows rapidly over time.

Comprehensive insurance
Insurance that provides comprehensive protection, such as comprehensive car insurance, which covers vehicle loss, third-party property damage caused by accidents, etc.

Concessional super contributions
Self-employed individuals are eligible for tax deductions for superannuation contributions made from pre-tax income, such as the employer's Superannuation Guarantee (SG).

Condition of release
Specified events that allow you to access your retirement savings, such as permanent retirement upon reaching the retention age, turning 65, or becoming totally disabled.

Conflict of interest
When someone is in a position of trust, impartiality may be compromised by competing professional and personal interests.

Construction loan
A loan designed for construction of a home for owner-occupied use.

Consumer credit insurance (CCI)
Insurance that pays out the loan in the event of an event that affects your ability to repay, such as illness, death, or job loss.

Consumer lease
An agreement that allows you to rent an item (such as a laptop, TV, or refrigerator) for regular rent payments, but you do not own the item at the end of the lease.

Consumer price index (CPI)
It records changes in purchasing power by measuring price changes for consumer goods and services, including food, transportation, and healthcare.

Contracts for difference (CFD)
A high-risk, leveraged derivative contract that allows customers to speculate on short-term market fluctuations, but most people end up losing money.

Conveyancer
A person who helps handle all the legal aspects of buying a house and is responsible for reviewing and interpreting the terms of the contract.

Cooling-off period
After purchasing goods or services, you have the right to cancel the contract within a certain period of time. The specific rules vary between states and territories.

Corporate bond
A debt security issued by a corporation, typically promising periodic interest payments and the return of the principal at maturity.

Corporate Collective Investment Vehicle (CCIV)
An investment fund that operates as a corporate structure and allows investors to purchase shares in sub-funds.

Coupon rate
The annual interest rate on a bond, calculated on its par value and payable by the issuer.

Credit card
A plastic card issued by a bank that allows you to borrow money for a certain period of time.

Credit contract
A document detailing the terms of a loan, such as the term, interest rate, fees, and repayment schedule.

Credit file
A file maintained by a credit reporting agency containing your credit history and used for loan approval purposes.

D

Death benefit
Amounts paid to your beneficiaries from a pension fund or insurance policy after your death. For example, payments from a pension fund or life insurance policy.

Debenture
A medium-term investment instrument issued by a company in which investors lend money to the company in exchange for regular, fixed interest payments. The principal is repaid upon maturity of the investment and is usually secured by tangible property. The investment may be immediate or fixed-term.

Debit card
A plastic card used to access funds from a bank account via an Automated Teller Machine (ATM) or EFTPOS facility.

Debt agreement
A legal agreement to repay unpaid debts that is simpler and less disruptive than bankruptcy. It is an agreement between you and all your unsecured creditors that allows you to repay your debts in weekly installments that you can afford.

Debt consolidation
Combining multiple loans into one loan to reduce repayment burden is also known as loan consolidation.

Debt investment
Including cash and fixed-income investments, you lend money to an institution in exchange for interest payments. At this point, the institution has a debt to you.

Debt to equity ratio
The ratio of a company's total debt divided by its total equity. Equity represents the shareholders' share of capital.

Default fee
A fee you may be charged if you fail to pay your loan or credit card balance on time.

Defensive asset
Cash or fixed-income investments, which generally have lower risk and are less volatile than growth investments.

Deferred establishment fee
A fee charged by a lender when a loan is repaid early within a set period (e.g. 3 years). Also known as an exit fee, this fee is used to compensate the lender for its set-up costs.

Deferred payment
An arrangement that allows the deferral of debt repayment until a future point in time.

Defined benefit fund
A pension fund where retirement benefits are calculated according to a predetermined formula. This formula is usually based on your average salary in the years before retirement and your years of service in the company or public sector.

Dependant
People who depend on you for financial support, such as children under 18 or a non-working spouse.

Deposit bond
In the home purchase transaction, a guarantee that can be used instead of a cash deposit to ensure that the buyer will pay the full deposit on the agreed date.

Depreciation
A decrease in the value of an asset, such as the natural depreciation of a vehicle or equipment.

Derivative
A financial instrument whose value is derived from an underlying asset (such as a stock, commodity, or index). Common derivatives include options and futures contracts.

Direct debit
A payment method that allows a lender or service provider to debit your bank account on a regular basis.

Dispute resolution
Alternatives to litigation. All Australian Financial Services (AFS) licensees, banks and other credit providers must participate in a dispute resolution scheme.

Diversification
Reduce risk by diversifying investments across different asset classes or multiple targets within the same asset class.

Dividend
A portion of a company's profits paid to its shareholders based on the number of shares each shareholder holds. A franked dividend is a payment of the portion of a company's profits on which taxes have already been paid.

Dividend yield
Measures the dividends a company pays each year relative to its share price.

Division 293 tax
An additional 15% tax is levied on superannuation contributions made by high-income earners. This tax applies if your income plus concessional superannuation contributions exceed $250,000. The tax rules for defined benefit superannuation members are different; see the Australian Taxation Office (ATO) website for more information.

E

Section E

Early termination fee
A fee that may be charged when a loan is repaid before the specified due date.

Earnings per share (EPS)
A financial ratio calculated by dividing a company's earnings (profit) by the number of shares outstanding. The higher the EPS, the higher the potential value of the shares.

Effective interest rate
The annualized rate of return, which includes the effects of compounding and fees, is also called Effective rate of return or Annual Percentage Rate (APR).

EFTPOS (Electronic Funds Transfer at Point of Sale System)
Australia's network for processing credit, debit, and charge card payments. EFTPOS also allows users to withdraw cash from merchants' terminals when making purchases (similar to "debit card cashback" features in other countries).

Eligible rollover fund (ERF)
An account used to hold the retirement funds of a lost member or a low-balance account that is no longer receiving contributions.

Emerging market
The transition of low- or middle-income economies from developing to developed countries is often accompanied by significant economic and political reforms.

Employer share scheme
A plan offered by an employer that allows employees to receive company shares at a discount, perhaps as part of a salary, bonus, or salary sacrifice arrangement.

Enduring power of attorney
Similar to a regular power of attorney, but even if you later lose mental capacity, the power of attorney remains in effect, allowing the trustee to make property and financial decisions for you.

Enhanced regulatory sandbox
The Australian Government allows businesses to test innovative financial services and credit activities without having to hold an Australian Financial Services Licence (AFS) or a credit licence during the testing period.

Entity
It can be a business, company, individual or group of individuals.

Equities
Partial ownership of a corporation entitles shareholders to dividends, which represent their share of the company's profits.

Equity
The value of an asset (such as a house or property) after deducting any outstanding loan payments.

Equity investment
An investment in company stocks or real estate that is purchased and held for the purpose of generating income and capital appreciation.

Equity release
For ways to use your home equity to generate additional funds during retirement, see Reverse Mortgage or Home Reversion.

Establishment fee
A one-time fee you may pay when setting up a loan.

Estate
All of an individual’s assets, including real property and personal property, as well as all of his or her debts.

Ethical investment
An investment strategy that aims to promote environmental, social, or ethical values and avoids investments in industries that are harmful to health, society, or the environment, such as chemicals, tobacco, or weapons manufacturing.

Excess
In relation to insurance contracts, this is the amount that the consumer is required to pay in the event of an insurance claim, the specific amount of which is stated in the insurance policy.

Exchange rate
The exchange rate of one country's currency in exchange for another country's currency.

Exchange-traded fund (ETF)
A managed fund or unit trust that is listed and traded on a stock exchange (such as the Australian Securities Exchange) and typically mimics the performance of a particular index, currency or commodity.

Executor
The person named or appointed in a will to administer it.

F

Face value
The value of a security set by the issuing company and paid at maturity, which may differ from its market value.

Fee for service
A fee paid to a service provider (such as an accountant, consultant, or lawyer) that, unlike a commission, is direct payment for specific work performed.

Finance broker
Anyone who negotiates a loan between a borrower and a bank or other credit provider must be authorised by ASIC.

Financial adviser
An individual or organisation representative authorised by ASIC to provide advice in areas such as investments, superannuation and estate planning.

Financial Claims Scheme (FCS)
The Australian Government-backed safeguard provides deposit protection of up to $$250,000 per depositor, covering accounts with banks, building societies and credit unions.

Financial counsellor
A professional who provides free, confidential, independent assistance to people with financial problems, often within the community or welfare agency.

Financial influencer
People who discuss financial products and services through social media platforms or websites may receive commissions for promoting specific financial information or products.

Fixed interest investment
An investment that offers a fixed interest rate and includes items such as term deposits, government bonds, and corporate bonds.

Fixed rate home loan
Allows borrowers to lock in the interest rate on their loan for a set period of time, usually 1 to 5 years.

Float (IPO)
The process by which a company is listed on a stock exchange and shares are offered to the public, also known as IPO (Initial Public Offering).

Fully franked dividend
For dividends where the company has paid taxes, shareholders can receive a credit for the taxes paid by the company, called Franking Credit.

G

Gearing
Using borrowed money to invest, such as using a mortgage to buy a house or using a margin loan to buy stocks.

Goods and Services Tax (GST)
Australia imposes a GST rate of 10% on most goods, services, and other items. To calculate the price including GST, multiply the price excluding GST by 1.1. To calculate the GST portion, divide the price including GST by 11.

Government bond
A medium- to long-term, fixed-income investment issued by the government that pays a fixed interest rate (coupon rate) at regular intervals and the principal is repaid at maturity.

Government co-contribution
The Australian Government provides additional contributions to the excess superannuation contributions of low-income earners to help them accumulate more superannuation before retirement.

Green bonds
Bonds used to finance climate change and environmental benefit projects.

Greenwashing
A marketing ploy that portrays an investment product or strategy as more sustainable or ethical than it actually is.

Growth asset
Assets such as stocks and real estate not only generate income but also have the potential to increase in value over time.

Growth fund
Funds that invest in growth assets offer higher long-term returns but greater short-term volatility.

Guarantor
A person who guarantees a loan for another person. If the borrower cannot repay, the guarantor is responsible for repayment.

H

Hardship variation
Modifying loan terms to make the loan more manageable due to financial hardship, such as extending the repayment period or temporarily reducing the payment amount.

Hedge fund
A fund that invests in stocks and other securities using a variety of strategies to achieve positive returns in both rising and falling markets.

Hedged
Fund managers use strategies to offset some or all of the impact of exchange rate fluctuations on overseas investment returns.

Holder Identification Number (HIN)
A unique identification number assigned by the Australian Securities Exchange (ASX) to clients of a brokerage firm and used to identify the share holder.

Home reversion
Allows homeowners to sell a portion of their home’s future value and receive a lump sum payment, retaining the remaining equity in their home.

Honeymoon or introductory interest rate
A preferential interest rate initially offered on a loan or credit card that typically returns to the standard rate after a period of time.

Hybrid security
A financial instrument that combines characteristics of bonds and equity, typically paying a fixed or floating interest rate and potentially convertible into shares of the issuing company.

I

Identity fraud/theft
Impersonating others to steal money or obtain other benefits.

Imposter entity
Entities impersonating Australian registered businesses or licensed financial services institutions.

Imputation credit
A tax credit paid by a corporation to its shareholders to offset taxes the company paid before dividends were distributed.

Income producing asset
Any asset that produces income, such as stocks that pay dividends, investment properties that generate rental income, bonds and bank accounts that generate interest.

Income protection insurance
Pays for lost income when you are unable to work due to illness or injury. Usually based on your annual income in the 12 months before the injury.

Index fund
A managed fund that aims to match or track the returns of a specific market index, such as the ASX 200.

Industry fund
Originally established for employees in specific industries, retirement funds are now mostly open to the public, with low costs, limited investment options, and profits accruing to members.

Inflation
The phenomenon of prices of goods and services increasing over time.

Initial coin offering (ICO)
A high-risk, blockchain-based fundraising method similar to an initial public offering (IPO), but which may not offer legal rights and protections.

Initial public offering (IPO)
The process of listing a company on a stock exchange and issuing shares to the public, also known as Float.

Insider trading
Legal penalties for using non-public information to trade financial products include fines and imprisonment.

Insurance policy
A written legal agreement that stipulates what is insured and the amounts.

Interest
A fee, usually calculated as a percentage, for the use of borrowed funds and may be fixed or floating.

Interest rate
The ratio between the amount borrowed and the amount paid, usually expressed as an annual percentage.

International transaction fee
Credit card fees may apply when processing transactions with overseas merchants or financial institutions, even if the transaction is in Australian dollars.

Investment
An asset purchased for income or capital appreciation.

Issuer
A legal entity, such as a government or corporation, that creates, registers, and sells securities to raise capital.

J

Joint account
An account at a financial institution owned jointly by more than one person. Any joint holder can operate the account; however, restrictions may be placed on the account requiring the signature of all joint holders to withdraw funds.

Joint tenants
A joint property held by two or more people in equal shares. Upon the death of one of the joint holders, the property automatically passes to the other joint holders, regardless of any will.

L

L section

Lay-by (installment purchase)
Items purchased with a deposit and recurring payments cannot be retrieved until they are paid in full.

Lease
A legal document that grants someone the right to use a property under specified conditions, usually in the form of rent.

Lenders Mortgage Insurance (LMI)
Insurance that protects the lender against loss if the borrower defaults on the loan. Usually payable in a lump sum when the loan amount exceeds 80% of the property's value.

Leverage
The use of financial instruments or borrowed capital to increase potential gains or losses, such as borrowing to buy property or investing in derivatives.

Liability
A debt or debt owed, such as a bank loan or credit card balance.

Life cover
An insurance policy that pays a set amount to the insured's beneficiaries upon the insured's death. Also known as term life insurance or death insurance.

Limited recourse loan
A loan used to purchase a specific asset, under which the lender’s recourse is limited to the purchased asset if the borrower defaults.

Liquidity
The ease with which an investment or financial product can be converted into cash. For example, shares of publicly listed companies are highly liquid, while real estate is less liquid.

Loan to Value Ratio (LVR)
The loan amount as a percentage of the property's value. Calculated by dividing the loan amount by the property's value. For example, if you buy a house worth A$600,000 and borrow A$450,000, your LVR is 75%.

Low-doc loan
Loans that require less financial documentation to prove income and assets typically have higher interest rates and may include restrictions.

M

Managed Discretionary Account (MDA)
An individual investment account in which the investor owns the assets but authorizes the MDA provider to buy and sell investments on his or her behalf.

Managed fund
Funds from multiple investors are pooled and invested in assets such as cash, stocks, bonds and listed real estate investment trusts, which are then managed by a fund manager.

Margin loan
A loan used to invest in stocks or managed funds, with the investment itself serving as security for the loan. If the value of the investment falls below an agreed level, a margin call may be triggered.

Market index
A statistical measure of changes in the value of a market, asset class or industry sector, such as the Australian Securities Exchange's All Ordinaries Index.

Master trust
Allows investors to pool their funds and invest in a variety of options at wholesale prices, often for easier reporting. Also called an investment platform or omnibus account.

Mortgage
A form of loan, usually secured by property, used to ensure repayment of a debt (such as a home loan).

Mortgagee (lender)
The person or institution, usually a bank or financial institution, that provides mortgage loans.

Mortgagor (debit)
The person who receives a mortgage loan is usually the property buyer.

N

Negative gearing
When you borrow money to invest, the return on your investment (such as rental income) is less than the costs of borrowing money (such as loan repayments and repairs). Some expenses are tax deductible.

Net asset value (NAV)
The value of assets minus liabilities, often expressed per unit or per share, such as the per unit value of a managed fund or exchange-traded fund.

Net worth
The difference between the total value of all assets and the total value of all liabilities.

No Negative Equity Guarantee (NNEG)
Protects your debt on a reverse mortgage from exceeding the value of your home by placing a cap on the amount you can owe.

No-Interest Loans Scheme (NILS)
A community program that provides interest-free loans to low-income individuals and families.

Non-concessional super contributions
Contributions made into a pension using after-tax income or savings are no longer taxed when they enter the pension fund.

O

Offset account
For a transaction account linked to a mortgage account, interest is charged only on the balance after offset (mortgage balance less offset account balance).

Option
A contract that gives the buyer or seller the right, but not the obligation, to buy or sell an asset at a set price by a specific date.

Overdraft facility
An arrangement that allows you to withdraw funds in excess of your account balance.

Over-the-counter (OTC) market
A market where financial products (such as corporate bonds or derivatives) are traded directly between two parties, rather than through a centralized exchange.

P

Part P

Passively managed
Fund managers adopt a buy-and-hold investment approach, aiming to generate returns similar to the index they track, such as the ASX 200.

Payday loan
A short-term cash loan secured by your next paycheck, usually with a very high interest rate and repayment required by a certain date.

Pension
A stream of income paid regularly, such as from a government pension or superannuation account.

Phishing
Attempts to obtain your personal information (such as usernames, passwords or bank details) via email or text messages.

Plain vanilla option
A standardized, simple option with an expiration date, a strike price, and no other additional features.

Ponzi scheme
A fraudulent scheme that uses funds from new investors to pay interest to earlier investors, with the scam collapsing when no new investors can be found.

Portfolio
The collection of assets held by investors, including stocks, fixed income, derivatives, real estate, collectibles, managed investments and cash.

Power of Attorney (PoA)
A document authorizing someone to act on your behalf in legal or business matters, either generally or for a specific purpose.

Preservation age
The age at which pension can be withdrawn is between 55 and 60 years old, subject to meeting the conditions of release.

Price earnings ratio (P/E ratio)
A financial ratio that measures whether a stock is overvalued or undervalued. It is calculated by dividing the price by the earnings per share (EPS).

Probate
A document issued by a court that certifies the validity of a will and authorizes an executor to administer the estate according to the will’s terms.

Pump and dump scam
After buying company stock, they organize campaigns through social media or online forums to push up the stock price, and then sell the stock to make a profit, while other shareholders suffer losses due to the decline in the stock price.

R

Record of Advice (ROA)
Investment advice records
A simple document used to confirm advice from a licensed financial planner or advisor. Similar to a Statement of Advice (SOA), but shorter and simpler. Often used to confirm changes or implementation of advice in a previous SOA to existing clients.

Redraw facility
Extraction Features
Allows you to access extra funds that have been deposited into your mortgage account.

Refinance
Refinancing
Replacing or extending an existing loan with funds from the same or a different financial institution.

Regulatory risk
Regulatory risks
The risk that changes to government policy or regulation may affect your benefits, such as changes to superannuation policies. These changes typically occur after an election or when the federal budget is released. See also Taxation risk(Tax risk).

Rent to buy
Hire Purchase Scheme
A purchase arrangement, such as leasing an item like a laptop, TV, or refrigerator for a certain number of years (e.g., three years), with an agreed amount to purchase the item at the end of the lease, which is specified in the agreement. You do not own the item until all payments have been made. This is different from a consumer lease, where you do not own the item at the end of the lease. Do not confuse this with a high-risk Rent-to-Purchase Housing Scheme Confusingly, the latter is usually targeted at people who can't get a standard home loan.

Rental bond
rental deposit
A bond paid by a tenant to the landlord when they rent a property. It serves as security for the landlord in case the tenant damages the property or defaults on rent when they move out. The amount varies by state or territory, but is usually equivalent to at least four weeks' rent.

Renter's insurance
renters insurance
Provides insurance coverage for contents within a rental property.

Responsible entity
Responsible Entity
A licensed entity or institution that operates a managed investment scheme.

Retirement savings account
Retirement Savings Account
An account offered by a financial institution for saving for retirement. These accounts are generally simple and low-cost, but also offer lower returns.

Return
Returns
The income obtained from investment.

Reverse mortgage
Reverse Mortgage
A type of loan, often used during retirement, that allows people to tap into their home equity. The loan amount depends on age, the value of the home, and how the funds are drawn (as a lump sum, periodic payments, or on-demand). Interest is added to the loan and compounded accordingly. The loan is typically repaid when the borrower moves out or the home is sold (for example, during an estate settlement).

Reversionary beneficiary
inheritance beneficiaries
Upon your death, the person who will inherit the balance of your pension income stream may be your spouse, children or other dependents.

Reward scheme
Rewards Program
A program offered by a credit card issuer or retailer that rewards you with points based on your spending. Points can be redeemed for goods and services. Credit cards that offer rewards often come with higher annual fees and interest rates.

Risk
risk
The chance an investment may lose value or provide less-than-expected returns.

Risk tolerance
Risk tolerance
The degree of uncertainty you are willing to accept in investment returns, particularly the degree to which you are willing to tolerate negative returns while pursuing positive returns.

S

S&P 500
S&P 500 Index
A stock market index that measures the performance of the stock market capitalization of the 500 largest companies in the United States.

Salary sacrificing
Salary Sacrifice
Arrange with your employer to pay part of your pre-tax salary into superannuation as additional contributions. This is a tax-saving strategy that is generally suitable for middle- to high-income earners.

Savings account
savings account
A deposit account offered by a bank or financial institution, typically offering a higher interest rate than a basic transaction account, and allowing the account holder to deposit and withdraw funds at any time.

Secondary card
Supplementary Card
A supplementary credit card designated by the primary cardholder. All purchases will be charged to the primary cardholder account. The primary cardholder is responsible for transactions on both cards.

Secured loans
mortgage loans
A loan secured by an asset. If the borrower defaults on the loan, the lender may sell the secured asset to recoup the funds. Contrast with an unsecured loan.

Self-managed super fund (SMSF)
Self-managed superannuation funds
A private superannuation fund managed by an individual and regulated by the Australian Taxation Office (ATO). Each fund can have up to six members, all of whom must be trustees.

Settlement
Settlement
The transfer of ownership of a financial product (such as a stock or ETF) in the form of money. Settlement is handled by a broker or its agent.

Share
stock
Partial ownership of a company, also called stock or equity. Shareholders are entitled to receive dividends from the company's profits.

Short selling
Short selling
The sale of securities or commodities that are not owned. Investors borrow securities and sell them immediately, then buy them back at a lower price to repay the lender. This is a form of speculative investing, with the expectation that the security's price will fall, leading to a profit.

Sophisticated investors
High net worth investors
A person who holds a certificate from a qualified accountant and proves that his assets or income meet certain standards is exempt from certain disclosure requirements under the law. For example:

Annual income of at least $250,000 for two consecutive years, or
Net assets of at least $2,500,000

Speculative investment
speculative investment
An investment with a high level of risk that may result in a significant profit, but may also result in a total loss of the invested capital.

Stamp duty
stamp duty
A transaction tax levied by state governments for items such as car registrations, mortgages, and real estate transfers.

Stapled super fund
Fixed pension funds
From 1 November 2021, when you start a new job, if you don’t choose a new super fund, your employer will pay the contributions into your existing super fund, which is tied to you and stays with you as you change jobs.

Statement of Advice (SOA)
Investment Advice Statement
Documentation required from financial planners when providing financial advice, including the basis for the advice, details of the provider, and any remuneration or benefits to be received by the advisor or licensee.

Stocks
stock
A portion of ownership in a company, also called a share or equity.

Strata title
Strata Title
A form of ownership in a multi-unit building, such as a condominium, in which each unit has a separate title and the common areas are considered common property.

Superannuation (Super)
pension(Super)
Contributions made by you and your employer to a special fund during your working years provide a source of income in retirement.

Superannuation guarantee (SG)
Pension protection
Employers must pay a minimum contribution to their employees' superannuation fund, currently 11.5% of pre-tax pay.

Sustainable investing
Sustainable investing
Investment strategies that take environmental, social or governance (ESG) factors into account.

Swaps
Swap
A form of financial contract where two parties agree to exchange a set of cash flows or assets, such as a swap where one party pays the difference between the value of an ETF's assets and the value of the index it tracks.

T

Takeover
Acquisition
When one company proposes to acquire control of another company, it is an acquisition.

Tax file number
Tax file number
A unique number assigned to taxpayers by the Australian Taxation Office (ATO) for tax administration purposes. This number is provided to employers, welfare and allowance providers, banks and other investment institutions.

Taxation risk
tax risks
The risk that changes to the tax system may affect investment results, such as changes to superannuation taxation policies.

Tax-free threshold
Duty-free threshold
The Australian Taxation Office sets an annual income level below which you are exempt from income tax.

Tenancy
Leasehold
The right of a person to occupy land or a building under a lease or other agreement.

Tenants in common
Co-tenant
A property owned jointly by two or more persons, each of whom owns a separate share and can designate heirs in a will.

Term deposit
Fixed Deposits
An account in which funds are deposited with a financial institution for a fixed period of time, typically at a fixed interest rate that is higher than a checking account.

Third party property insurance
Third-party property insurance
A type of auto insurance that covers you for damage to other people's property (such as a car or home), as well as legal costs.

Total and permanent disability (TPD) insurance
Total disability insurance
A type of life insurance that provides coverage for rehabilitation, debt repayment, and future living costs in the event of total and permanent disability.

Transaction account
Trading Account
A bank account that can be used for everyday transactions, with funds readily available.

Transition to retirement scheme
Transitional Retirement Plan
Allowing people to reduce their working hours as they approach retirement without reducing their income, or to save tax through substantial salary sacrificing and use their super to cover their daily expenses.

Trustee
trustee
An individual or company that manages assets for the benefit of others.

U

Unsecured loan

Unsecured loans

A loan that is not secured by an asset. The interest rate is usually higher because the lender assumes a higher risk.

V

Variable interest rate
floating interest rate
The interest rate on an investment or loan may rise or fall over time. Contrast with a fixed interest rate.

Volatility
Volatility
It reflects the volatility of asset returns over a period of time. The greater the volatility, the higher the risk.

Australian Investment Dictionary: TY Section