Australian Accounting Standards Board

Abnormal return

Return on a stock beyond what would be predicted by market movements alone. Cumulative abnormal return (CAR) is the total abnormal return for the period surrounding an announcement or the release of information.

Absolute return fund

A type of hedge fund. Absolute return funds aim to meet objective performance targets rather than benchmark norms.


the Corporations Act 2001

Account-based income stream

A flexible retirement income stream that gives you unlimited access to your capital but no guarantees on how long the money will last. Account-based income streams include account-based pensions and account-based annuities.

Account-based pension

A pension purchased with superannuation money on retirement. You can choose the amount of pension you receive each year within minimum and maximum levels set by law. Your superannuation money is progressively drawn down until it runs out. For most people aged 60 and over, these pension payments have been tax-free since 1 July 2007. Account-based pensions are also known as allocated pensions or transition-to-retirement pensions.

Accounting earnings

Earnings of a firm as reported on its income statement.

Accrued benefits

Benefits already accumulated, as distinct from those to be built up in the future, ie. how much you have already saved.

Accumulation fund

A superannuation fund where your accrued benefit is the total accumulated value of your contributions and interest, less fees and costs. It is sometimes referred to as a defined contribution fund.

Accumulation index

An index that measures the movement of both the price and the returns of an index; for example, the movement in a share price and the dividends paid. An accumulation index assumes all returns are reinvested and compounded.

Accumulation phase

This is the period of time when a superannuation fund member is contributing to their superannuation account balance in the anticipation of funding their retirement at some point in the future, ie. usually when the member reaches retirement stage or drawdown stage.

Active management

An investment management style that seeks to achieve returns above a benchmark through asset allocation and stock selection, ie. through the skill of the investment manager. For example, if the Australian share market, as measured by the All Ordinaries Index, earns 10%, an active Australian share manager will try to earn more than 10%.

Active portfolio

A portfolio formed by mixing analysed stocks of perceived non-zero alpha values. This portfolio is ultimately mixed with passive market-index portfolio.

Additional contributions

See voluntary contributions.

Administration fee

A fee that covers the general running of the fund. A person pays this fee, and often other fees, annually to be a member of a given fund; some funds charge higher fees than others.


In estate planning terms, the administrator is the person appointed by a court to administer the estate of a person who dies interstate. An administrator performs the same function as an executor. A court may also appoint an administrator if a person dies leaving a will, but where there is no executor willing and able to apply for probate.

Adviser service fee

Commission paid to an adviser for recommending a fund.

Adjusted alphas

Forecasts for alpha that are modulated to account for statistical imprecision in the analyst's estimate.

After-tax super contributions

A contribution made into an individual's super fund that is paid from their after-tax income. Also referred to as a non-concessional or personal super contribution.

Age pension

A regular, fortnightly payment that an eligible person is entitled to receive from the government when they reach Age Pension age. Certain criteria must be met before a person is entitled to receive the government Age Pension. Administered by the government's social security system, the Age Pension is designed to provide income support to older Australians who need it.

Age pension age

The age at which an Australian can claim the government Age Pension.

Age service pension

A taxpayer-funded income stream payable by the Department of Veterans' Affairs (DVA) to a veteran who 'served in operations against the enemy whilst in danger from hostile forces of the enemy'. Similar to the Age Pension, but is payable to veterans five years earlier than the Age Pension.

Agency problem

Conflicts of interest among stockholders, bondholders, and managers.

Aggressive investment mix

A mix of investments that aims for high long-term returns by taking on greater short-term risk and volatility. Consists mostly of assets such as shares and property.

Agreed value

Car insurance policies are based on either 'agreed' or market' value. An agreed value policy has a set dollar value for your vehicle. Market value policies value your car based on the make, model and condition.

Agribusiness scheme

An investment in livestock, farming, horticultural or forestry projects, usually through a managed investments scheme.

Algorithmic trading

The use of computer programs to make trading decisions.

Allocated pension

A pension or annuity arrangement where a person chooses to withdraw from their account on a regular basis (e.g. monthly), an amount within prescribed legal limits, until death or there is nothing in the account. On death, the balance may be paid as a lump sum to a designated beneficiary, used to buy a further pension for a surviving spouse or it may continue as a reversionary pension. The main difference between an allocated and a traditional pension is that the former offers access to the invested capital with some flexibility in the regular payment amount, but it offers no protection against the money running out during the person's lifetime.

Allocation price

The price at which a unit in a unit trust is purchased.


The abnormal return on an overvalued or undervalued investment.

Alpha transfer

A strategy in which you invest in positive alpha positions, hedge the systematic risk of the investment, and finally establish market exposure where you want it using passive index.

Alpha value

The abnormal rate of return on a security in excess of what would be predicted by an equilibrium model.


Alternative assets are those don't easily fit into the mainstream asset class categories like equities, bonds, property or cash. While some alternative assets are exotic and higher risk, not all are. Alternative asset investment strategies have lower liquidity than regular strategies, are associated with higher fees and require investment managers to be highly skilled.

American Depository Receipts (ADRs)

Stocks that trade in the United States, but represent a specified number of shares in foreign stocks.

American option

An American option can be exercised before and up to its expiration date. Compare with a European option, which can be exercised only on the expiration date.

American style

A type of exercise style that allows the holder to exercise the warrant at any time up to and including the expiry date.

Announcement date

Date on which particular news concerning a given company is announced to the public. Used in event studies, which researches use to evaluate the economic impact of events of interest.

Annual member statement

A statement, required by legislation to be produced at least annually, sent to each superannuation fund member displaying specific information about their personal details and benefits. Information includes (but is not limited to): the amount at the beginning and end of the period and the calculation method; preserved amounts; member/employer contributions during the period; net earnings allotted; death benefit; and fees, charges and expenses.

Annual percentage rate

Interest rate is annualised using simple rather than compound interest.

Annual report

A comprehensive report on a company's activities and financial performance throughout a given year. For superannuation funds, this is a document that gives fund members a snapshot of the benefits that members receive, details of the fund's performance in regard to different investment portfolios and other important fund information.


A series or stream of regular payments (e.g. a monthly pension), purchased with a life insurance or superannuation lump sum to provide a retirement income. Where a superannuation fund makes the payments, the word 'pension' may be used. Payment amounts depend on the lump sum, expected future investment return, frequency of payments, expenses and the life expectancy of the individual purchaser or the term, if it is a fixed-term annuity. Generally, the annuitant chooses a payment value of any amount between prescribed upper and lower limits.


Patterns of returns that seem to contradict the efficient market hypothesis.


The person specified in a trust deed or will who can appoint or dismiss the trustee of a trust.

Appraisal ratio

The signal-to-noise ratio of an analyst's forecasts. The ratio of alpha to residual standard deviation.

Approved product lists

An approved product list is a formal menu or list of managed funds that your financial adviser or the advisory group they work for has researched and decided are high quality.

Approved securities

All margin lenders publish a list of shares and funds against which they are prepared to lend. A maximum loan-to-valuation is assigned to each security. In recent years equity derivatives, such as options, have been included on approved lists.

Approved trustee

A trustee company approved by the Australian Prudential Regulation Authority (which must be satisfied that the company can be relied on to perform the duties of a trustee in a proper manner) and fulfills other minimum liquidity/financial requirements. Only approved trustees can promote a public offer superannuation fund.


Australian Prudential Regulation Authority


A zero-risk, zero-net investment strategy that still generates profits.

Arbitrage pricing theory

An asset pricing theory that is derived from a factor model, using diversification and arbitrage arguments. The theory describes the relationship between expected return and factor exposure that follows from the absence of risk-free arbitrage opportunities.


Australian Securities and Investments Commission

Ask price

The price at which a dealer will sell a security.

Assessable income

Ordinarily, gross income before any deductions are allowed.


Anything of value in the form of cash (including amounts owed), fixed assets property or equipment, or intangibles such as a company's goodwill or brand. A superannuation fund's assets might include shares, property, cash or fixed interest investments. For accounting purposes, assets are resources held to produce future economic benefits, for example providing future cost savings or generating future revenue or capital gain.

Asset allocation

The distribution of a super fund's money across a range of asset types.(shares, property, fixed interest and cash) to make up their investment portfolio. Superannuation fund trustees base their asset allocation decisions on the relative investment outlook of the asset classes as well as the investors' risk profiles.

Asset class

A category or class of investments that your superannuation fund can hold. The major asset classes are shares, property, fixed interest and cash, which in turn can be broken down further to include, for example, domestic or international and direct or indirect property investments.

Asset consultant

A specialist consultant expert in helping a super fund devise its investment strategy and select investment managers to execute that investment strategy. Sometimes also called investment consultants.

Asset-test exempt income stream

Complying pensions.

Asymmetric information

Reflects the one-sided nature of the relationship large scale suppliers of natural resources have with their customers.

At call

Money that be withdrawn from an account whenever required.

At the money

The option's exercise price and the price of the underlying asset are equal.

ATM card

A card that provides access to your own money via ATM and EFTPOS facilities.

Auction market

A market where all traders in an asset meet (either physical or electronically) at one place to buy and sell.

Australian income

This is income paid on investments situated in Australia, whether in shares, units in a unit trust, bank deposits, property or other income-producing investments. It is income that an investor is entitled to in a financial year even though they may not have actually received it in that year.

Automatic Teller Machine (ATM)

A machine found in public places and outside banks used to withdraw cash from your account 24 hours a day.

Australian taxation office

ATO's role is to manage and shape the tax, exercise and superannuation systems that support and fund services for Australians.

Australian Financial Services Licence (AFSL)

The licence required to provide financial advice legally. Any organisation (or person), including super funds, can't provide financial advice unless it holds an AFSL.

Australian government guarantee on deposits

Refers to the Financial Claims Scheme (FCS) which provides protection to depositors of up to $250,000 per account-holder per authorised deposit-taking institution (ADI) (bank, building society or credit union) in the event of the ADI failing.

Australian Prudential Regulation Authority (APRA)

One of the Federal Government agencies which regulates superannuation funds, and other financial sector bodies, ensuring they operate within specific financial guidelines.

Australian Securities and Investment Commission (ASIC)

One of the Federal Government agencies regulating superannuation funds and the financial services sector. ASIC's main areas of responsibility are the Corporation's Law and the Financial Services Reform Act. In broad terms, consumer disclosure issues (i.e. fees) are regulated by ASIC while prudential matters are regulated by APRA.

Australian versus international assets

Asset classes can be further divided into other groups based on where the assets are located. This is why we refer to Australian equities, international equities and emerging market equities, which are investments in companies in emerging growth economies such as Brazil, Russia, India or China ( a grouping known as the BRIC economies). Bonds can also be divided according to whether the entity issuing the bond is based in Australia or in a major overseas country or emerging growth economy.

Average collection period

The ratio of accounts receivable to daily sales. Also called days' receivables


An employment standard that sets out minimum wages and conditions for an industry or occupation. Awards cover things like rates of pay, overtime, penalty rates and allowances.

Award superannuation

Certain employer super contributions specified in industrial awards representing 3 per cent of an employee's wage, paid into a super fund. The unions and employers established industry funds to accept these contributions

Baby boomers

Historically, individuals born between the years 1946 and 1961. You may also be a considered a member of the baby-boomer club if you were born in 1961-1965-at least for the reporting purposes of the Australian Bureau of Statistics

Balanced fund

A super fund or investment option that spreads its investments across a range of asset classes, but where usually around 70 per cent of the fund is held in shares and/or property. A balanced fund aims to produce high rates of return over the long term and will usually occupy a middle position in terms of risk - more volatile than a primarily cash and fixed interest fund but less volatile than a fund investing only in shares and property. A balanced fund may also be referred market linked, managed, capital growth, growth, managed growth.

Bank Bills

Bank bills are special securities issued by banks and which are negotiable orders (i.e, they can be traded) to pay a certain amount of money at a certain time in the future. They usually mature within six months. Bank bills are 100% guaranteed by the bank issuing the bills. In practical terms, bank bills are discount securities, which means they are issued at a discount to its face value bit redeemed at their face value at maturity - in this way, the interest rate is built into the face value price.

Bank Bill Swap Rate (BBSW)

The central benchmark interest rate in Australian financial markets at which banks will lend to each other (via bank bills) for periods of 6 months or less.

Bank term deposits

Investors can place their money in short-term bank deposits (called term deposits) for periods up to three years. When they do this give up liquidity and may suffer a break fee if they decide they need their money earlier than the term stated.

Balanced option

An investment option that can have more than half of a fund's assets in shares and the rest in property, fixed interest and cash. A balanced option often has a similar meaning as a growth option, but is generally more conservative than growth. You need to check the underlying assets rather than rely on terminology.


A process for individuals to be legally declared as being unable to meet their debt obligations.

Basis point

A commonly used measure of movement in investment return or fees/charges. One basis point equals one hundredth of one per cent. For example, if interest rates increase from 6.00 per cent to 6.25 per cent, it has moved by 25 basis points.


In investing, an index that can be used to evaluate the performance of an investment.

Benchmark unaware

Focuses on absolute returns and not wired to specific indices like the MSCI World Index


A person for whose benefit assets are being held. Beneficiaries of a superannuation fund are the members and their dependents.


The amount of money in the superannuation fund to which the fund member is entitled.


Includes remuneration and both monetary and non-monetary benefits. It does not include the fixed components of remuneration. Variable components, such as bonuses, are included.


The rate at which a dealer is willing to buy the base currency.

Binding death benefit nomination

A binding nominations means a fund trustee must follow a member's instructions relating to what happens to the member's super benefit if he dies. For a nomination to be binding, a member must nominate that his death benefit be paid to one or more dependants or is to be paid to the member's state.


When an investor choose a number of model portfolios, in the proportions of their choice, to construct their personal portfolio.

Blue chip share

A share in a well-established company with a record of stable earnings over a long period, typically a market leader or among the top companies in its sector.


A medium to long-term investment issued by governments and companies which pays a regular, fixed interest amount for the term of the investment. The invested funds (the principal) are repaid at the end of the term (maturity).

Bond credit quality

Investing in a government or a company, it is important that they assess the quality of the bond. This is done by reviewing what are known as bond credit ratings. Bond credit ratings attempt to give investors an indication of the likelihood of a bond issuer honouring their debts.

BRIC economies

The four emerging economies of Brazil, Russia, India and China which collectively represent a powerhouse of future growth opportunity

Bring forward rules

Rules that allow you to bring forward up to two years of non-concessional


A person who arranges a contract between you and, for example, an insurance or mortgage service provider. Brokers usually receive a commission or fee for arranging a contract.


A fee charged by a broker for service.


A number that identified a specific branch or other financial institution within Australia. The BSB number plus an account number identifies a particular account.


Many investment professionals today advocate taking a "bucket" approach to determining a suitable investment risk profile. This means placing a certain amount of funds in the cash bucket for living expenses that may arise within the next two years, for such items as school fees, holidays, renovations and car repairs.


To accommodate small fluctuation in share and unit prices, margin lenders will allow the loan to valuation ratio to exceed the limit by a certain amount before making a margin call. This is called the buffer and is five or 10 per cent above the maximum LVR, depending on individual lenders.

Building society

Community-based financial institution usually owned by its members that offers traditional banking services like savings accounts and loans, listed on the APRA website as a building society. Also called a mutual building society.

Buy-sell margin

The difference between the buying and selling price of shares or units in a unit trust or superannuation fund.


A check that prevents you from going over your limit on calls, texts or data.


Money, or assets, or amount available to invest.

Capital depreciation

A decrease in the value of a capital asset.

Capital gain

A profit that a fund makes on the sale of an asset.

Capital gains tax

Tax payable on any profit made from selling an investment property or other type of assets

Capital gains tax (CGT) cap

Additional lifetime limit of $1.515 million (for the 2019/20) in non-concessional contributions, from the disposal of qualifying small business assets.

Capital gains tax (CGT) discount

A discount that a super fund can take advantage of when it sells an asset previously held for more than 12 months. The CGT discount is one-third of the capital gains, which means that the tax applicable is effectively 10 per cent.

Capital gains tax (CGT) exempt component

The capital gain from the sale of active business assets that a small business owner can roll over into a super fund to finance retirement. This component represents when a person disposes of any business assets and claims the capital gains tax retirement exemption.

Capital gains tax (CGT) retirement exemption

A special tax exemption for small businesses that sell business assets and put the money towards retirement. Any capital gains on the disposal of business assets up to a life time maximum of $500,000 are tax exempt, provided the moneys are used for retirement purposes.

Capital growth

The increase in value of an asset over time. Also known as capital gain.

Capital guarantee

A product where investors are protected against significant loss of the amount invested. Can contain clauses and performance hurdles that limit the protection. Also called capital protection.

Capital stable fund

A fund that invests across a range of asset classes but with a significant portion in defensive assets such as fixed interest investments and cash and a small portion in growth assets such as shares and property. This type of fund aims to provide a moderate level of income with some capital growth.


A low-risk asset that delivers a positive return; for example, a term deposit.

Cash advance

Cash withdrawn from a credit card account. A transaction fee is usually charged, as well as interest

Cash investments

Money invested in short-term, interest-paying investments. Having money in a bank account is an example of a cash investment.

Cash management account

A transaction account used to receive cash from investments such as dividends or proceeds of sales, and from which new investments are purchased.

Cash out facility

Offered by many retailers such as supermarkets, where you can take out extra cash from your cheque or savings account when you pay for purchases with your debit card.

Cash rate

The interest rate charged on overnight loans between banks. The Reserve Bank of Australia (RBA) sets a target cash rate in order to control monetary policy.


In relation to property law, a caveat is a legal notice that shows who has an interest in your property. You can't register a dealing (for example, to sell the property) until all caveats are removed or you get the consent of any people who hold a caveat. To put a caveat on your property or remove a caveat, contact your state's Land Titles Office.


The Federal Government agency that administers Australia's social security system.

Centrelink assets test

A means test that assesses the value of the assets you own against asset thresholds, and determines your eligibility for the Age Pension and other social security payments

Centrelink income test

A means test that assesses the level of income you receive each your against income thresholds, and determines your eligibility for the Age Pension and other social security payments.

Certified Financial Planner (CFP) or CFP Professional

The highest level of FPA (Financial Planning Association of Australia) membership, requiring strong tertiary qualifications and significant experience.


A contract between a seller and a buyer who are effectively betting on the short-term movements in the price of shares or other traded investments. The gain or loss is the difference between the price of the asset when the contract was made and the price in the future when the contract is closed out. If the price increases, the seller pays the buyer. If the share price decreases, the buyer pays the seller. Contracts are usually made with borrowed money (leveraged) which can magnify gains or losses.


A return of funds from a retailer or service provider to a consumer's bank account, line of credit or credit card, often initiated by the consumer's bank.


This stands for Clearing House Electronic Sub register System and means the system established and operated by ASTC for the clearing and settlement of CHESS approved securities, the transfer of securities and the registration of transfers.


The process of moving a customer from one financial product to another in order for an adviser or broker to earn a fee. This practice usually has little or no benefit to the customer.


A clearout occurs when your lender has not been able to get in touch with you, despite making reasonable efforts to contact you.


Generally, an employee does not have clients; the employer does. The same is likely to be true for directors of corporate licensees.

To ensure that the application of the code will not be evaded, this definition results in the code applying to a relevant provider who is an employee or  director of a financial services licensee as if the provider's clients included the retail clients of the provider's licensee and the retail clients of other relevant providers who have the same licensee.


A person who borrows money jointly with you. Each person is responsible for the loan, so if one of you does not pay, the other person must pay the full amount.


A payment made by the Government to the super fund of a low or middle income earner to reward them for making personal contributions to super.


Financial Planners and Adviser Code of Ethics 2019

Cold call

An unexpected call or visit by an unknown person, trying to sell something.


Property or assets you put up as security for a loan.

Collateralised debt obligations (CDO)

A bundle of individual loans such as car loans, credit card debt or corporate debt put together and sold as a single investment.


Items that are rare or in demand and may increase in value over time. Examples include artwork, antiques, coins and wine.


A fee paid to an adviser or salesperson as an incentive for selling a particular product. An upfront commission is based on the sale amount of the product. An ongoing commission is based on the balance of the account.


Process of converting part or all of a pension or annuity into a lump sum.

Comparison rate

A rate that helps you work out the true cost of a loan. It includes the interest rate, and most fees and charges relating to a loan, reduced to a single percentage figure.

Compound interest

Interest paid on the initial principal and the accumulated interest on money borrowed or invested.

Compound insurance

Cover that provides the policy holder with broad protection. For example, comprehensive car insurance will cover loss or damage to your car and any damage you may accidentally cause to other people's property.


Federal Commissioner of Taxation (in charge of administering the income tax, GST, FBT, HECS, the Medicare levy and superannuation taxes).

Commonwealth Seniors Health Card (CSHC)

A cardholder pays a concessional price for prescriptions under the Pharmaceutical Benefits Scheme. This card is available of Age Pension age who don't receive the Age Pension and earn less than the income threshold for the card.


The conversion of an income stream into a lump sum amount

Company fund

See employer sponsored fund

Complying fund status

The status a super fund attains when the fund allows all the rules under the superannuation and tax laws, including complying with the fund's trust deed.

Complying income stream

See complying pension

Complying life expectancy income stream

A complying income stream that's payable for a person's life expectancy

Complying life income stream

A lifetime income stream that satisfies specific rules and, if started before 20 September 2007, receives favourable treatment for Age Pension eligibility.

Compulsory superannuation contributions

Employer contributions made under the Superannuation Guarantee Scheme.

Complying superannuation fund

A superannuation fund that has chosen to be regulated under the Superannuation Industry (Supervision) Act 1993 (SIS) and which meets the Government's operational standards for superannuation funds. Only Regulated Superannuation Funds can be complying funds. If a fund is not a Regulated Superannuation Fund and/or is non-complying, it is ineligible for taxation concessions and so it will be taxed at full company rates rather than the concessional superannuation fund rates.

Complying pension

A pension arrangement that satisfies extra prescribed conditions and so qualifies for higher RBL thresholds.

Compound interest (or compound earnings)

Interest earned on interest or, in the case of a super fund, investment returns on returns.

Compulsory cash component

The percentage of cash held with the account to facilitate trading and payment fees.

Concessional component

This term applied to pre-July 2007 benefits. Certain redundancy and invalidity payments that were made before 1 July 1994.

Concessional contributions

Before-tax contributions that can include employer contributions, contributions made under a salary sacrifice arrangement and tax-deductible contributions by an individual.

Concessional contributions cap

Before-tax contributions receive concessional tax treatment up to this cap

Concessional super contributions

Concessional super contributions are payments put into your super fund from your pre-tax income and are tax deductible for self-employed people. They include your employer's super guarantee (SG) contributions. Concessional super contributions are taxed at 15% when they are received by your super fund.

Concessional tax rate

A rate of tax that's less than what a person ordinarily pays on income received during the year

Concessional tax treatment

A tax assessment that's subject to a concessional tax rate.


A process the Superannuation Complaints tribunal uses that attempts to get the parties to a complaint (the trustee and member) to resolve it by mutual agreement.

Condition of release

A term that means a member can take his super out of the super system after satisfying a condition, such as retiring, or becoming permanently disabled.

Condition report

Records the condition of a rental premises at the start of a tenancy.

Conflict of interest

A situation in which someone in a position of trust has competing professional and personal interests which could make it difficult for them to remain impartial.

Conservative option

Ordinarily, a low-risk investment option - a significant portion of the investments in cash and fixed interest investments.

Consolidated reporting

When a managed fund's responsible entity issues their investors with a consolidated tax report at the end of each financial year, the report will show how much taxable income the investor need to declare.

Consolidated revenue

Money collected from taxpayers to run the Australian Government.

Consumer Credit Insurance (CCI)

Insurance that covers you if something happens that affects your capacity to meet the payments on your loan. CCI usually covers risk such as illness, death, disability or involuntary unemployment.

Consumer lease

A consumer lease is an agreement where you get a hire an item (eg tv, fridge, washing machine), receive the item straight away and make regular payments until the term of the agreement finishes. At the end of the agreement term you will have paid more than the purchase price of the goods. These agreements might also be known as a rent to own, rent to buy agreement.

Consumer Price Index (CPI)

A measure that tracks quarterly changes in the price of goods and services . CPI increases are also known inflation.


The document that sets out the system of fundamental principles that the Federal Parliament can make law in. A matter not listed in Australia's Constitution us automatically a State issue.

Contribution fee

Upfront fee payable to an adviser or a financial organisation on contributions an individual makes to retail superannuation fund.

Contributions segment

Ordinarily includes non-concessional contributions made from 1 July 2007.

Contributions tax

A tax of 15 per cent on before-tax contributions

Contribute in-specie

A term that means to transfer assets into a superannuation fund rather than contribute money

Contract for difference

A contract for difference or CFD is an agreement which allows you to make a profit or loss from fluctuations in the price of the underlying instrument.

Cooling-off period

A period of time in which you can get out of a contract for the purchase of goods or services, if you change your mind. The rules on cooling-off periods vary between states and territories. Details of a cooling-off period will be included in the contract, if the good or service has one.

Corporate actions

An action taken by an entity for the purpose of giving an entitlement to holders of a class of the entity's securities

Corporate bond

A debt security issued by a company to investors to raise money to finance its business activities. Sometime called fixed-income securities because the issuer promises to pay a specific amount of interest on a regular basis and repay the principle on a set date.

Corporate master trust

A publicly offered master trust targeted at larger employers, normally marketed through superannuation consultants, which may offer discounted fees and other optional services.

Corporate superannuation fund

A superannuation fund established for the benefit of employees of a particular company, or group of companies, that is directly managed by the company. A corporate superannuation fund is sometimes referred to as an "in-house" fund.

Corporate trustee

Where the trustee of a superannuation fund is a company. The directors of that company are trustee directors of the superannuation fund. A corporate trustee may be a professional trustee company, a separate company specifically established to take on the responsibilities of a particular fund or the company sponsoring an employer plan.


The strength of a linear relationship between two variables. In investing, highly correlated assets tend to move together in response to changes in market and economics conditions. Adding assets with low correlation to existing assets in a portfolio improves diversification.

Country segments

Investment in international equities can also be made based on where the companies are located, e.g., into developed markets like the United States, Europe, Japan or Australia, or emerging and growth markets like Chine, Russia and South America.

Coupon rate

The annual interest rate on a bond, paid by a bond issuer, relative to the face value of the bond.

Credit card

A plastic card that gives you access to money the bank has agreed to lend you for a certain period of time.

Credit contract

A document that contains the details of a loan, including the term, interest rate, fees and charges, and repayments. Credit providers must provide you with a credit contract.

Credit file

A file kept by a credit reporting agency that shows your credit history. Lenders access the information in your file to help them decide whether to lend to you. They can also record a default on your file if you make loan repayments late, or don't pay a utility bill. Every time you make an application for finance an entry is recorded on your file showing the lender you applied to, the type of finance, the amount and the date.

Credit fund

Investors willing to take slightly more risk may wish to deposit their money into a credit fund, which is like a term deposit but the fund is run by a non-bank mortgage lender. Some credit fund operators are highly regarded and quite safe but some are not.

Credit guide

Anyone engaging in credit activities (for example, by providing credit or credit assistance to you) must give you a credit guide. A credit guide will contain information about the lender, such as their licence number and external dispute resolution (EDR) scheme membership. It will also include the sort of costs you might pay if you take a loan from the lender.

Credit limit

The maximum amount a bank will lend you under a loan or a credit contract.

Crediting rate

The interest rate allocated to individual members' accounts after the deduction of all fees, costs and taxes. The crediting rate is based on the fund's actual earning rate, less any amounts paid into a reserving pool, after allowances for fund costs. If the trustee has a reserving (or smoothing) policy, the fund may build up a reserve asset pool by crediting a lower amount in years of high actual earnings and using this pool to credit a higher amount than expected in years of lower actual earnings. For retail superannuation funds, the performance reported in the media is usually always the crediting rate.

Credit rating

An assessment of the credit-worthiness of individuals and corporations, based on their borrowing and repayment history.

Credit report (credit reference)

A report that details your credit history, including every time you have applied for credit or defaulted on a repayment. It is held by a credit reporting agency and a lender must ask you for permission to get this report.

Credit reporting agency

An organisation that collects and sells credit information on individuals and companies.

Credit union

Community-based financial institution owned by its members that offers traditional banking services like savings accounts and loans, listed on the APRA website as a credit union.


A person to whom you own money.

Critical Information Summary (CIS)

A document supplied by a telecommunications provider that contains information about what you will pay and what you will get for your money. The information is presented in the same way so you can easily compare one provider's price and service with others.

Crystallised segment

Super funds must calculate a crystallised segment as at 30 June 2007, representing certain ore-July 2007 benefit components. This calculation must be done by 30 June 2008.

Currency risk

The risk that the value of your investments will be affected by changes in foreign currency exchange rates.


An entity, usually a company, used by your super fund to hold assets on its behalf with the main benefit being administrative efficiency and closer monitoring of invested assets. It brings together the fund's investment portfolios, collects income, reports on asset values, and provides registered addresses of offshore investments and, if the trustees of a plan are individuals, eliminates the necessity to transfer ownership of assets to a new individual each time there is a change in the trustee.

Death benefit

On the death of a member, a payment from a super fund in the form in the form of a lump sum payment ( a superannuation lump sum death benefit) or income stream (a superannuation income stream death benefit).

Death benefits dependent

A spouse or child under the age of 18, and anyone (including adult children) who has an interdependency relationship with the member. Any other person who is financially dependent on a member is also treated as a dependent.

Death benefit pension

See superannuation income stream death benefit

Death benefit termination payment

A lump sum amount payable by an employer on a member's death. Contact the Australian Taxation Office for more information

Death and disability insurance

An insurance policy that provides death cover and disability insurance

Death cover

The amount of money paid out to dependents or other beneficiaries on the death of the person covered.


A medium-term investment issued by a company where investors lend them money in exchange for a regular and fixed interest amount for the term of the investment. The invested funds (principal) are repaid at the end of the term (maturity) and are usually secured by tangible property. They may be offered at call or for a set period.

Debit card

A plastic card that gives you access to your bank accounts via ATM and EFTPOS facilities.

Debt agreement

A legal agreement for the repayment of unpaid debts that is less formal and intrusive than bankruptcy. The agreement is between you and all of your unsecured creditors and allows you to pay back your debts over an extended period of time at an amount per week you can afford.

Debt consolidation

When several loans are combined into one, with the aim of reducing repayments. Also known as loan consolidation.

Debt investment

Comprises cash and fixed interest investments. You lend money to an organisation in return for interest payments. The company you lent to now owns you or is indebted to you.

Debt to equity ratio

Total debt divided by total equity. A company's equity represents the amount of shareholder's funds.

Deceased estate

The property owned by a deceased individual that can be inherited under a will. Most individuals also have other assets that they own or control that are dealt with on death outside will, e.g. joint property, life insurance or a family trust.

Debt wrap

A borrowing facility that allows the borrower to operate a number of loan sub-accounts within a single loan contract.

Deemed income

Income that is based on rate of return that's assumed for an investment even when that rate isn't what the investment actually returns.

Deeming rates

Rates used to determine deemed income when assessing eligibility for Centrelink entitlements against the Centrelink income test.

Deeming thresholds

A set level of income for a single person or a couple at which the deeming rate increases to a higher percentage.

Default fee

An amount of money that you may be charged if you fail to make a repayment when it is due on a loan or credit card.

Default fund

Since 1 July 2005, the super fund where an employer's super contributions must go, if an employee doesn't choose a fund.

Default investment option

Where a superannuation fund offers member investment choice, the default option is the option in which members' contributions and accrued balance are invested if the member does not actually elect a specific option.

Defensive asset

Defensive assets, also called income assets, are those that are expected to hold their value regardless of economic conditions and deliver investment income. For this reason, they play a protective role in investment portfolios, particularly as a hedge against inflation.

Deferred establishment fee

A fee charged by a lender when a loan is paid off before a set period has elapsed e.g. 3 years. Also known as an exit fee. It's to cover the costs the lender incurred in setting up the loan.

Deferred payment

A debt that can be paid off at some time in the future.

Defined benefit fund (Plan)

Where a member's retirement benefit is calculated using a formula relating years of employer service, or fund membership, and average salary during the years prior to retirement (e.g. a retiring member may receive 15 per cent of final average salary for each year of membership). As a result, end benefits do not strictly depend on investment returns as the employer-sponsor carries the long-term investment risk and so may have a greater say in how the fund invests the money than is the case in accumulation funds.

Defined benefit pension

A term-certain (such as life expectancy) pension or lifetime pension that's payable from a super fund.

Defined contribution fund

See accumulation fund


The process by which individuals or businesses reduce the relative size of their assets (debt) to equity.


The rate of change of a warrant price with respect to a change in the price of the underlying instrument.

Department of Veterans' Affairs (DVA) Cards

Concession cards available to recipients of the Age Service Pension. DVA cards entitle recipients to discounted prescriptions and in some cases, free medical care.


See death benefits dependant and dependant under the superannuation laws.

Dependant under the superannuation laws

A spouse, or child of any age, or anyone who has an interdependency relationship with the member. Any other person who is financially dependent on a member is also treated as a dependant. adult children, however, aren't considered dependants under the tax laws (see death benefits dependants).

Deposit bond

Can be used in place of a deposit when a buyer exchanges contracts on a property. It guarantees that the buyer will pay the full deposit by an agreed date.


A decrease in the value of an asset


An instrument which derives its value from the value of an underlying instrument (such as shares, share price indices, fixed interest securities, commodities, currencies etc.). Warrants and options are types of derivatives.


A formal written decision of the Superannuation Complaints Tribunal

Direct debit

A payment collection method that allows loan or service providers to draw money from your bank account on a regular basis.


Refers to permanent or temporary, short or long term sickness or incapacity. The definition spectrum ranges from a person's inability to perform their normal occupation to an inability to perform each and every duty of any occupation for which they are qualified by education, training or experience. The definition applied to an individual case depends on the type of disability and the insurance policy terms and conditions. The permanent disablement definition is usually more strict than temporary disablement, meaning there are more requirements and it is more difficult to prove permanent disability than temporary disability. Superannuation and tax legislation also define 'disablement'. The tax legislation definition is used to determine whether benefits receive concessional tax treatment on payment.

Disability insurance (or disability cover)

An insurance product that pays the policyholder a lump sum or income stream if he becomes disabled

Disclosure document

The document prepared by the warrant issuer which is dispatched to prospective subscribers of a warrant series. Disclosure documents are also known as either a product disclosure statement (PDS) or an offering circular.

Discretionary investment option

An investment option where the individual investor selects the underlying investment product or investment manager.

Dispute resolution

A way to resolve issues instead of going to court. All Australian Financial Services (AFS) licensees, banks and other credit providers must belong to a dispute resolution scheme


Refers to when investments are spread across a number of individual assets, classes of assets, countries or investment managers. The objective of diversification is to reduce total overall risk.

Dividend income

Resident shareholders are tax assessable on dividends paid out of any company profits, including capital profits and profits that are exempt from tax. Dividends include any distributions made by a company to its shareholders, including certain distributions made in a return of capital.

Dividend yield

A financial ratio that measures how much a company pays out in dividends each year relative to its share price.

Division 293 tax

An extra 15% tax on the super contributions of high income earners. This tax is charged if your income plus your concessional super contributions are above $250,000. There are different tax rules for members of defined benefit super funds. More details are available on the Australian Tax Office website. Find out more about tax and super.

DIY super fund (self managed superannuation fund or small APRA fund)

A super fund with four or fewer members

Dollar cost averaging

A technique that consists of regularly placing a fixed sum of money into the same investment. By doing this, investors will always by purchasing units at an average cost which is lower than the average unit price over the entire period.

Domestic currency

The currency issued for use in a particular jurisdiction. For example, this would be Australian dollar for Australia.

Double dipping

A longstanding but declining practice in Australia, where some retirees spend their super payout as quickly as possible and them claim the Age Pension.

Early termination fee

A fee which may be applied if a loan is repaid earlier than the stated term.

Earnings Per Share (EPS)

A financial ratio calculated by dividing the company's earnings (profits) by the number of shares on issue. The higher the EPS, the more a share is potentially worth. See also price equity ratio.

Earnings rate

The rate of investment return achieved by a superannuation fund before the deduction of fees and taxes. Also called yield, return, return on investment, rate of return. The earnings rate can be expressed either before tax, (i.e. based on gross earnings) or after tax (i.e. on net earnings).

Effective interest rate

An annual interest rate that takes into account the effect of compound interest and fees. Also known as an effective yield or the annual percentage rate (APR).

EFTPOS (electronic funds transfer at point of sale)

EFTPOS is an Australian network for processing credit cards, debit cards and charge card payments at the 'point of sale'. EFTPOS also allows users of the system to withdraw cash at the time of purchasing a product or service through the merchant's EFTPOS terminal. This function is known as 'debit card cashback' in many other countries.

Eligible Termination Payment (ETP)

Generally a lump sum payment from a superannuation fund or RSA or an an employee when he/she ceases employment.

Eligible rollover fund

A special super fund that looks after benefits for 'lost' members

Eligible service period

Applicable to pre-July 2007 benefits. The period of time that a person is a member of a super fund and, in some cases, the membership period of other super funds.

Emerging markets

Countries outside the mainstream western and more successful Asian economies that are rapidly industrialising but remain volatile

Employer share scheme

An employer scheme that gives employees shares, or the opportunity to purchase shares, in the company, sometimes at a discount to market rates. Shares may be offered as part of an employee's remuneration or bonus, or through a loan or salary sacrifice arrangement.

Employer sponsor

An employer who contributes to a super fund via an arrangement between the employer and the trustee board of the fund.

Employer-sponsored fund

A superannuation fund created by an employer or group of employers for the benefit of employees. Employer sponsored superannuation funds include corporate funds, government funds and industry funds.

Enduring power of attorney

Like an ordinary Power of Attorney (PoA), an enduring power of attorney authorises your nominated representative to make property and financial decisions for you. Unlike an ordinary PoA, an enduring PoA continues to have effect if you become mentally incapacitated at a later date.

Environment, Social and Governance (ESG)

ESG or ethical investing is an investment methodology that seeks to invest in companies, properties or bonds that are aligned with the personal values of the investor.


A financial ratio calculated by dividing the company's earnings (profits) by the number of shares on issue. The higher the EPS, the more a share is potentially worth. See also price equity ratio.


An equity is part ownership of a company. Equities are also known as shares or stocks. Shareholders are entitled to dividends which represent their portion of the company's profits.


The value of an asset such as your house or property, less any money owing on it.

Equity access loan

A loan that allows people with equity in their homes to use that equity to borrow for investment. Investors can nominate a portion of the credit limit in their home loan (the available equity) as security for a margin loan. The maintenance of separate home loan and margin loan accounts helps keeps the borrower's tax position simple.

Equity investment

An investment where you buy and hold shares in a company or property from which you expect to receive income and capital gains.

Equity release

A way of accessing the equity in your home to provide you with additional funds in retirement


A holding account designed to receive the super benefits of lost members and those with low account balances that are no longer receiving contributions.

Establishment fee

A one-off fee which may apply to set up a personal or other loan.


A term that means any assets that a person owns

Ethical investment

An investment where assets are selected based upon some ethical, environmental or social criterion.


An ETP will receive concessional tax treatment up to the ETP cap amount. The amount in excess of the ETP cap amount will be taxed at the top marginal tax rate.

European style

Type of exercise style which allows the holder to exercise the warrant only on expiry day.


In relation to an insurance contract, it is the amount of an insurance claim that consumers have to pay. The amount is specified in the insurance policy.

Excess contributions tax

Penalty tax applicable when an individual exceeds the concessional contributions cap or the non-concessional contributions cap. The penalty tax is imposed on the individual rather than the super fund, although the tax can be deducted from the individual's super account.

Exchange rate

The price at which the currency of one country can be exchanged for the currency of another

Exchange traded fund

A managed fund or unit trust that is quoted and traded on a stock exchange such as the ASX. ETFs generally seek to mimic the performance of a specific index, such as the S&P/ASX 200 index, a currency, such as the USD, or a commodity, such as gold.

Exchange Traded Options (or ETOs)

Options which are bought and sold in the options market operated by ASX.

Exchange-Traded Treasury bond (ETB)

A type of Australian Government Bond quoted and traded on the Australian Securities Exchange that is a medium-to long-term debt security with a fixed face value ($100) and a fixed annual interest rate.

Exchange-traded treasury indexed bond (ETIB)

A type of Australian government bond quoted and traded on the Australian Securities Exchange. It is a medium to long-term debt security with a fixed interest rate but a face value that is adjusted for movements in the Consumer Price Index (CPI).

Excluded value

Anything that is not included in a mobile phone plan for a regular monthly payment.


In relation to an insurance contract, it is something that is specifically not covered under the insurance policy. Depending on the type of policy these may include specific events, illnesses or pre-existing conditions.

Execution risk

When a lack of market liquidity causes a gap between the price at which you place a trading order, and the price you receive. This can be a risk when trading certain complex products such as contracts for difference (CFD) and foreign exchange (FX) contracts.


A person specified in a will, or appointed, to administer the will.

Exempt amount

An amount based on the pension's purchase price and the life expectancy of the person receiving the income stream. This amount isn't counted when assessing whether a person satisfies the Centrelink Income Test


The action taken by the holder of a call option if he/she wishes to purchase the underlying foreign currency or by the holder of a put option if he/she wishes to sell the underlying foreign currency

The price at which the call or put foreign currency option can be purchased (if a call option) or sold (if a put option). Also referred to as 'strike price'

Exit fee

A charge levied on a member's benefit when all or part is withdrawn from a superannuation fund or RSA. Exit fees, also called redemption fees or charges, vary substantially between funds.

External manager model

Some infrastructure assets are operated by external managers, often investment banks. This approach has been criticised for adding to the cost and complexity of the investment.


A person with a duty to act in the best interests of another person, e.g. and executor of a deceased estate must act in the best interests of the beneficiaries and in accordance with the terms of the will of the deceased.

Financial assets

Assets that people invest in, and that a value can be place on. They're dividend into broad categories called assets classes.

Financial Information Service (FIS)

A not for profit financial education and information service that's available to anyone.

Financial Services Guide (FSG)

A document that can assist you in deciding whether to use the services of an adviser. The documents explains what services the adviser offers, how she operates, how the advisers gets paid (including any commissions), how she deals with customer complaints, and any interests, associations or relationships that might influence the advice the advisers gives.

Financial services licensee or liensee

A person who holds a financial services lience

Financial product

defined in Division 3 of Part 7.1 of the Act

Fixed income bonds

Fixed income and bonds are the world's biggest asset class. Understanding how they work will help you see how they can fit into your investment portfolio.

Fixed interest investments

Relatively low-risk investments that are effectively like term deposits, but not necessarily as secure. A person gives money to a bank, company or government and, in return, it promises to pay the person a certain amount at set periods and repay the original amount after an agreed period of time. These investments can traded before they're due to be repaid.

Fixed model portfolio weighting

When a provider makes trades during rebalancing to ensure the proportions of the personal portfolio, attribute to each model portfolio, remain as originally selected.

Floating model portfolio weighting

When the model portfolios perform differently from each other, relative to the proportion of their personal portfolio, and move (float) away from the model portfolio weights that were originally selected and are not adjusted by the provider.

Forex / FX

An abbreviation of 'foreign exchange'

Foreign sourced income

As a general rule, Australian tax residents pay tax on income from foreign sources, but how this works in practice can be affected by the operation of Australian double taxation agreements (DTA) with various countries. On top of this, Australia's tax legislation contains a range of tax concessions and exemptions for specific items of foreign source income.

Forward exchange contract

An agreement to exchange one currency for another currency on an agreed date (for any date other than the 'spot' date)

Forward points

The interest rate differential between two currencies expressed in exchange rate points. The forward points are added or subtracted from the spot rate to give the forward or outright rate.

Forward rates

The rate at which foreign exchange contract is struck today for settlement at a specified future date.

Forward contract

The contract undertaken at the forward rate as specified above.

Franked dividend income

Australia's dividend imputation system allows companies to attach franking credits to dividends in proportion to the amount of company tax already paid in the earnings. A fully franked dividend means that the dividend is paid out of earnings on which the full 30 per cent company tax rate has been paid. Investors can claim a credit for the company tax paid before paying income tax on the dividend income.

Franking credits

Pre-paid tax on franked dividends from shares. This pre-paid tax can count towards any other tax that a super fund has to pay, reducing any tax payable on concessional contributions or capital gains.

Fringe benefits

Items such as cars, low-interest loans and car parking, this individual may include in salary packages

Fringe benefits tax

One of those Johnny-come-lately taxes that the Australian Government introduced to claw back taxes lost due to workers reducing the income tax they paid by packaging fringe benefits.

Full vesting

Where a member is entitled to the full benefit accrued in their name in a superannuation fund.


Pooled investment product

Fund Choice

A person having a say over what type of superannuation fund he can join. Fund choice is different from investment choice, which means a person has a say over where a fund invests his super.

Functional currency

The currency that a business prepares its accounts in, This may not be the domestic currency of the country which the business is mainly based in.

Fund of fund investment option

An investment option where the investor selects a general risk profile but the super fund or master trust provider selects the underlying investments from a range of products managed by external investment managers. Can also be referred to as multi-manager options.

Fund manager

An organisation that specialises in the investment of a portfolio of assets on behalf of individuals and organisations, subject to the investor's guidelines. Also as an investment manager.

Gearing ratio

The proportion of the market value of the security that the debt represents, expressed as a percentage. Lenders apply a maximum gearing, or loan to valuation, ration to margin loans, depending on the volatility of the securities in the portfolio.

Genuine redundancy payment

A payment that represents the amount that exceeds what the person who has been made redundant would have received had he voluntarily resigned in other circumstances

Genuine redundancy tax-free amounts

The amounts of the genuine redundancy payment that an individual can receive tax-free


The total value of all the goods and services produced within a country's borders.


A list of complex definitions made up by superannuation experts to confuse their customers.


A company that has the greatest market share in a particular industry without having monopoly. A gorilla usually has greater leeway in its decisions. For example, it may charge a higher price for its products without fear of losing too much business.

Governing documents

These documents set out the rights and obligations of product providers and unit holders and include:

  • scheme constitutions and compliance plans for managed investment schemes
  • insurance policies for investment life insurance products
  • governing rules of the fund, including the trust deed, for superannuation funds.

Statements made in PDSs and other documents relating to the product need to be consistent with statements in the governing documents.

Governing rules

See Trust Deed

Government bonds

The largest sector of the bond market by size are bonds issued by governments. Investors like lending money to governments because, in theory, they can just increase taxation rates if they need money. As a result, governments should never run out of money to repay their debts - this makes them low-risk borrowers and highly favoured by investors.

Government Superannuation Plan

A fund run for government employees. Similar to corporate funds except the members are public servants.

Gross income

Income before any tax is deducted

Group life insurance

Insurance arranged for a group associated in some way (e.g. superannuation fund members), for whom certain assumptions about an average state of health can be made. Premiums are often cheaper for each individual in the group than if the person had arranged their own insurance. Most funds acquire group life insurance for each member up to certain levels (the automatic cover limit) without having to provide evidence of insurability or good health.

Growth assets

Growth assets are those that are expected to grow in value over time. The reason their value grows is that the income they produce (usually in the form of profits and dividends) also grows. Investors know that an asset that produces a growing income is worth more to them than an asset that produces an income that doesn't change.

Growth investment manager

An Investment manager that picks stocks in which to invest where prices are likely to move with the market and economic trends. Sometimes referred to as 'momentum managers'.

Growth options

See balanced Option

Growth pensions
See term allocated pensions.

Guaranteed payment period

A period of time that another person can continue to receive income payments, or a lump sum, after the person originally receiving the income stream dies.


A hedging transaction is one which protects as asset or liability against a fluctuation in the market.

Hedge fund

An investment fund that invests into financial instruments not normally available to mainstream investors, e.g. derivatives and options, and trades on these tactically and strategically. Reflecting these approaches, hedge funds generally do not follow normal benchmarks.

Holding lock

When an investor transfers an existing stock holding into the SMA and fixed this holding at a level of their choice . When the investor's personal portfolio is rebalanced, the nominated stock holding is maintained at, or above, the selected level. This is often used to protect tax parcels.

Home equity loan

A loan that allows people equity in their homes to borrow against that equity for personal or investment purposes. Investors may also be able to nominate a portion of the equity in their home (the availability equity) as security for a margin loan. The maintenance of separate home loan and margin loan accounts helps keep the borrower's tax position simple.

Implemented consulting

An extension of traditional asset-consulting services where investment advice and funds management are combined into the one service. Effectively, this allows a superannuation fund to delegate the role of selecting investment managers to the asset consultant. It is an extension of a super fund outsourcing its administration function.

Imputation credit income

Imputation credits are itemised separately and included in taxable income. These are credits investors receive if a company they invest in directly or indirectly through a managed fund has already paid tax on income from which they have received a distribution. These credits can be used to offset other tax liabilities.

Income stream

The cash flow of an asset. Usually paid to the owner on a regular basis and may represent a large part of the return (as in the case of bonds) or a smaller part.(as in the case of equities).

Independent review

Independent reviews can be undertaken by parties that are not directly involved in the unit pricing functions. For example, independent review may be undertaken by internal audit, the compliance unit, the risk management unit, external auditors, actuaries or by the other external advisers, depending on the circumstances. Product providers must decide who is the appropriate entity to undertake the independent review, based on the circumstances and taking account of legal obligations.


A method of adjusting thresholds or prices by linking them to a certain measure such as inflation or a rise in wages. The aim of indexation is to reflect amounts in today's dollars.


An income levels or rates or amounts that are adjusted annually in line with increases in average weekly earnings or inflation or another measure.

Indexed income stream

See indexed pension

Indexed investment management

When your super fund's investment managers try to match, or replicate the performance of the investment markets. E.g. if the Australian share market returns 10 per cent, an indexed investment manager should have earned 10 per cent. The main reason for using an indexed investment manager is that their fees can be lower.

Indexed pension

An income stream that increases in line with inflation or increases in average weekly earnings.

Individually Managed Account (IMA)

A managed account where the professional investment manager manages investment portfolios and implements different investment decisions across the accounts based on the personal circumstances and objectives of each investor.

Industry fund

A multi-employer superannuation fund, in many cases established by an industrial Award, e.g. employer associations and unions, usually covering a specific industry or range of industries.


Revenue is linked to inflation. In many infrastructure contracts the government or regulator allows the operator to increase prices on tolls in line with changes in the cost of living.


The physical assets which society requires to facilitate its orderly operation. These come under the heading of transport, energy, water, communications and social.

Inherited tax liabilities

When an investor purchases a pooled unitised fund, they also buy the realised and unrealised gains. Accordingly, a portion of the price may be attributed to previously derived Capital Gains Tax (CGT) income. The investor would then be entitled to a distribution of this income which be taxable.

Investment philosophy

A manager's investment philosophy represents the firm's basic set of investment beliefs.

Investment risk profile

Investment risk profile is a description of what type of investor you are. This can encompass how much investment risk you are willing to take, your investment time horizon and what level of volatility (performance variability) you are prepared to accept.

In-house superannuation fund

The same as a corporate superannuation fund.


Institute of managed account providers. The industry body representing managed account professionals set up in 2006.

In-the-money option

An option with intrinsic value. A call option is in the money if its strike price is below the current spot price. A put option is in the money if its strike price is above the current spot price.

In-specie contribution

A non-cash contribution to a super fund; for example, transferring the title of an office into the name of the fund's trustees or transferring ownership of shares

In-specie transfer

When an investor's existing stocks are transferred into their personal portfolio.

Instalment gearing

A loan that can be drawn down in regular instalments, usually monthly, and used to accompany a savings plan.


Financial protection against a possible future event with the terms of coverage specified in the policy document. Insurance normally offers protection for individuals, families and other dependents in the case of death and disability where the protection is against injury or ill-health which would prevent normal employment.

Interdependency relationship

A close personal relationship between two people who live together, where one or both provides for the financial and domestic support, and care of the other. This definition can include parent-child relationship that don't fall within the definition of death benefits dependant, and sibling relationships.

Intellectual property

From an SMA perspective, this is the stock picking strategy of the model provider

Inter-vivos trust
A trust established by deed during the lifetime of the settlor, in contrast to a testamentary trust.


A person who dies without leaving a valid will dies interstate. The person's deceased state is managed by an administrator.

Intrinsic value

The value of a security, justified by factors such as assets, dividends, earnings, and management quality.

Invalidity component

An invalidity payments known as concessional component or a post-June 1994

Investment choice

Where members of a superannuation fund are able to choose from a range of investment options how their money is invested. Same as Member Investment Choice.

Investment manager

An organisation that invests a portfolio of assets on behalf of other individuals and organisations, subject to the guidelines set out by the individual or organisation. Also referred to as a fund manager.

Investment option

One of the investment choices from which the member may choose to invest if the fund offers investment choice.

Investment menu

The full list of a super fund's investment choices.


The act of purchasing an asset or an interest in an asset.

Investment choice

A feature of a fund through which a member has a say over where his super fund invests his super

Investment income tax

Tax payable by a super fund on assessable income, including a fund's investment income

Investment manager

An investment specialist hired by a trustee to invest super money on the trustee's behalf.

Investment strategy

A formal plan identifying the super fund's financial goals (investment objectives) and the fund member's tolerance for risk and the investment time horizon

Issue price

The amount a person pays to subscribe for a warrant. May also be called 'premium'.


Integrated Trading System is the name of the computerised trading system used by ASX to trade equities, options, warrants, interest rare securities and some futures.

Legal disability

A person who is unable to give a legally enforceable promise is under a legal disability. This includes persons under the age of 18 and individuals who are insane or otherwise mentally impaired.

Legal personal representative

Also referred to as a personal representative, executor or administrator.

Licensed adviser

An adviser that has satisfied specified criteria and certain standards under the Financial Services Reform Act 2001. Only licensed advisers can call themselves a 'financial adviser' or a 'financial planner.'

Life expectancy

A statistically based average of the number of years a person is expected to live. Statisticians can measure life expectancy at birth or during a person's life.

Life expectancy age

You're expected to live to this age, on average

Life expectancy pension

A guaranteed income stream for a fixed period representing a person's life expectancy

Life income streams

See lifetime pension

Life interest

A beneficial interest in the income of a testamentary trust for the lifetime of the beneficiary. The capital of the trust passes to the remainder man on the death of the tenant. Likewise, a life estate is an interest in the land that terminates on the death of the beneficiary.

Life Insurance

See death cover

Life tenant

A beneficiary who has a life estate; also known as life beneficiary

Lifetime indexed pension

An indexed pension payable for life. Many lifetime pensions also pay a reversionary pension.

Lifetime pension (or lifetime annuity)

A guaranteed income stream for a person's lifetime and maybe the spouse's lifetime too.

Limited Liability Company (LLC)


Limited Partnership (LP)

Most private equity firms structure their funds as limited partnerships. Investors represent the limited partners and private equity managers the general partners. Australian private equity funds are often structured as unit trusts.


Publicly traded assets, such as trusts and companies whose securities are listed on stock exchanges, provide investors with the ability to enter and exit the investment relatively easily.

Liquidity support vehicle

Mechanism that allows investors in illiquid assets to quickly convert their holdings into cash if they wish.

Liquidity premium

This is the additional return for investing in a security that cannot easily be turned into cash.

Listed asset

A company that is publicly owned and listed on a recognised exchange.

Listed debt

Debt traded on an active exchange. Listed debt can include corporate bonds and hybrids.

List investment companies

These are type of investment fund that is incorporated as a company listed on the ASX. Investors buy or sell units in a LIC by buying or selling shares in the company listed on the ASX

Listed property

Constitutes shares in property companies or units in property trusts listed on the Australian Stock Exchange.

Loan to Valuation Ratio (LVR)

Also called 'loan to value ratio' this is the amount you can borrow as a percentage of the value of the security. For example, a loan of $50,000 secured by a portfolio valued at $50,000 would be 50 per cent LVR.


A provision in the underwriting agreement between an investment bank and existing shareholders that prohibits corporate insiders and private equity investors from selling at the time of the offering.

Long and short positions

When you buy a financial instrument, you have a long position. When you sell a financial instrument, you have a short position.

Longevity risk

The chance of a person out living their retirement savings.

Lost member

A member whom a super fund is unable to contact.

Lost member register

A central register keeping records of lost members and their super accounts

Lower transitional ETP Cap

An ETP paid under transitional rules receive the maximum concessional tax treatment available up to this cap. Note that an ETP is not a payment from a superannuation fund. Contact the Australian Taxation Office for more information.

Low Income Tax Offset (LITO)

A tax offset available to all taxpayers on lower incomes

Low-rate cap

A lifetime limit that applies to superannuation lump sum paid from a taxed benefit after the age of 55 but before the age 60.

Lump sum

In superannuation terms, the benefit taken as a single payment, rather than taken as a pension or annuity.

Lump Sum Reasonable Benefit Limit (RBL)

The limit on the amount of concessionally taxed benefits an individual is able to receive over their lifetime from one or more superannuation funds, RSAs or other sources when taken as a lump sum. In an attempt to discourage the taking of lump sum benefits, the lump sum RBL is lower than the pension RBL.

Lump sum tax

The tax payable on a lump sum superannuation payout. There can be as many as six components of an Eligible Termination Payment for tax purposes.


Focuses on the major aggregates, such as gross domestic product and the balance of payments, and the links between them in the context of the national economy.

Managed Discretionary Account (MDA)

An umbrella term used to refer to any services where the clients hand in their money or other assets to the MDA operator and give that operator the discretion to managed those assets on their behalf.

Managed fund

A financial product where the money of many investors is pooled into one investment vehicle and the assets are invested according to a single investment strategy.

Management Expense Ratio (MER)

The expenses of a fund (e.g. investment, administration, trusteeship) as a proportion of the fund's asset value.

Management fee

The fee charged by a superannuation fund's operator(s) for investment management, administration, trusteeship.

Managed growth funds

To obtain a greater return through capital growth; lower income streams.

Managed Investment Scheme (MIS)

Also known as 'managed funds', 'pooled investments' or 'collective investments'. It is a scheme where money is pooled together with that of other investors in exchange for an interest in the scheme.

Managed Treasury Fund

One of the ranges of wholesale trusts offered the funds.

Management group

This comprises the lead manager and co-managers


The difference between buying and selling rates/prices of investments, e.g. units in an investment trust.

Margin call

A margin call occurs when the loan to valuation ratio exceeds the borrowing limit and the buffer. When the markets fall and asset values go down the LVR will go up. Once a margin call is made the investor must take action to restore the account to its appropriate LVR.

Marginal rate of tax

The rate of income tax payable on a person's top portion of income earned.

Mark to market

A valuation method where, at then end of each trading day, security holders re-price their assets in line with the market value. Listed assets immediately reflect current valuations on their securities . Unlisted assets are re-valued on a periodic basis

Market-linked income stream

See term allocated pension

Market-linked pension

See term -allocated pension

Market maker

A firm quotes both a buy and a sell price in a financial instrument or commodity, hoping to make a profit on the turn or the bid/offer spread.

Master trust (fund)

A trust, which allows a large number of unconnected individuals and/or companies to operate their superannuation arrangements under a common trust deed. This allows economies of scale in the operation of the trust resulting in cheaper costs for individual investors and/or companies. Life companies, banks and other specialist superannuation service providers promote master trusts. Effectively a retail super fund with member investment choice.


Bond maturity refers to how long until the bond, or the debt, is fully repaid.

Maximum Deductible Contribution (MDC)

The maximum amount of superannuation contributions that can be made by a self-employed person, or an employer for an employee, to a complying superannuation fund or RSA and claimed as a tax deduction.

Maximum superannuation contribution base

An indexed limit, up to which an employer can contribute 9 per cent of an employee's salary. If a person's income for Superannuation Guarantee purposes exceeds this base, the employer makes contributions on the basis of the maximum superannuation contribution basis of the maximum superannuation contribution base.

Means Testing (or means test)

An assessment of any resources a person may have available to support himself. In relation to the Age Pension, whether a person already has enough and resources to look after himself.

Medicare levy

A tax that the Federal Government imposes on Australian taxpayers to help fund the country's public health system.

Medicare levy threshold (seniors)

If the income of an individual of Age Pension Age is under the this threshold, the individual is not required to pay the Medicare levy.

Medium term investment

An investment which generally matures between two and five years.


Major developments with huge and potentially enduring implications globally, like urbanisation, climate change, the scarcity of fossil fuels and the burgeoning population growth

Member Contributions Statement (MCS)

A special form your super fund must lodge with the Australian Taxation Office and the details all contributions to the fund.

Member investment choice

Where members of a superannuation fund are able to choose from a range of investment options how their money is invested. Same as Investment Choice.

Member protection rule

A requirement that super fund must follow and that means super fund's annual administration fee can't be greater than the investment return credited to a member's account, if the account balance is less than $1,000

Member statement

An Annual summary of a member's benefit in the super fund, including how much money is in the member's super account and contributions made during the year.

Mezzanine Finance

A form of finance that combines debt and equity components to provide flexibility to the investor and the company. Mezzanine investing is riskier than traditional senior debt since the debt portion is in the form of subordinated debt (the level of financing senior to equity but below senior debt). Thus, if a company goes into liquidation subordinated debt financiers will rank below senior debt financiers in the credit chain.

Minimum trade size

When securities in a personal portfolio are only traded if the trade size meets the specified size. It is the smallest trade that can be done in a personal portfolio.

Model portfolio

Model portfolios are similar to regular retail managed funds. The difference is that in a retail managed fund, the investor buys in the fund and investment decisions are made collectively by the investment manager on behalf of all the managed fund's investors. In a model portfolio, the investor owns or has 'beneficial ownership' of the underlying investments.

Model portfolio manager

The manager of the model portfolio (referred to as the model portfolio adviser, model provider or the fund manager).

Monitoring body

defined in section 910A of the Act

Mortgage funds

Mortgage credit funds offer yields above that of cash term deposits and most offer

MSCI World Index

A benchmark for international equity performance typically used by traditional equity fund managers.

Multi-manager investment option
An investment option where the monies are assigned to several investment managers. See also Fund by Fund Investment Option.

Negative gearing

The income produced by the investment is less than the interest on the borrowing used to purchase the investment.

Net Asset Value (NAV)

The value of a fund's holdings, which may be calculated using a variety of valuation rules.


The internal rate of return net of management expenses and fees.

Net Present Value (NPV)

A project's net contribution to wealth. It is the present value minus the initial investment. It computes the expected value of one or more future cash flows and discounts them at a rate that reflects the cost of capital.


When buys and sells are matched and off-set against each other. Can be done at both portfolio and scheme level.

No-negative equity guarantee

A mortgage contract guarantee that the debt is never going to exceed the value of your home.

Nominal interest rate

The interest rate expressed in money terms.

Nominal return

The rate of return in simple monetary terms with no allowance for inflation. For example, in a year where the investment return was 10 per cent and inflation.8 per cent, the nominal return is 10 per cent but the real (after inflation) return is 2 per cent.

Nominated beneficiary (or nominated beneficiaries)

A person (or persons) whom a fund member nominates to receive the super if the member dies. Anyone nominated must be a dependent or a person's legal representative

Nominated representative

Generally a financial adviser, or professional adviser, who will provide all instructions to the SMA provider on behalf of the investor

Non-beneficial ownership

As opposed to beneficial ownership. Usually when the clients invests in shares within a unitised managed fund.

Non-binding nomination

A type of nomination that helps the trustee to decide who is eligible for a death benefit, especially when a lot of people may claim to be financially dependent.

Non-commutable income streams

An income that can't be converted into a lump sum payment

Non-commutable lifetime pension

A lifetime pension (or annuity) that can't be converted to a lump sum amount

Non-complying fund

Where a superannuation fund fails to meet prescribed Government standards and conditions, and as a result does not qualify for concessional tax treatment. Funds can be non-complying either through choice or because there are operational shortcomings.

Non-concessional contributions

After-tax contributions including spouse contributions and contributions made under the Super Co-contribution Scheme

Non-concessional contributions cap

The level of non-concessional contributions that can be made each year before penalty tax is payable.

Non-contributory superannuation

Type of superannuation in which the member does not personally contribute.


Individuals who aren't dependants and, ordinarily, can only receive a death benefit when first paid to the deceased member's estate

Non-preserved benefit

A benefit that is either restricted or unrestricted.


Anyone entering Australia on an eligible temporary resident visa

Not-for-profit funds

Super funds such as industry funds, public sector funds and corporate funds


The rate at which a dealer is willing to sell the base currency

Omega ratio

While both the Sharpe and the Sortino ratios rely on an assumption of returns being normally distributed, the Omega ratio does not make such an assumption. As a result it is a relative measure of the likelihood of achieving a given return. The higher the ratio the better.

Ongoing fees and charges

Same as management fee.

Online calculators

A calculator that's accessed via the internet, and that can be used to work out how much a person is likely to need in retirement, or how much life insurance he may need, or how much a fund charges in fees.

Open position

Any transaction that has not been settled by a physical payment or is matched by an equal and opposite deal for the same value date.

Opportunity sets

Market dynamics providing investors with significant upside opportunity and limited downside risk that focus more on the long-term than today's trading fundamentals


Options are similar to an insurance contract. For a premium, the purchaser can insure against an adverse exchange rate. If the insured exchange rate moves adversely for the purchase, the purchase can exercise the option. If the exchange rate moves favourably, the purchase can abandon the option and take advantage of the favourable exchange rate. The buyer has the right but not the obligation to exercise the option.

Organisation for Economic Cooperation and Development (OECD)

Formed in 1961 to promote cooperation among industrialised member countries on economic and social policies. The 25 members are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, UK and USA.

Out-of-the money option

An option with no intrinsic value, i.e. a call whose strike price is above the current spot price or a put whose strike price is below the current spot price. Its value is solely time related.

Outright forward

A foreign exchange transaction involving either the purchase or the sale of a currency for settlement at a future date. It is the same as a forward contract.

Outright rate

The forward rate of a foreign exchange deal based on the spot price plus or minus the forward point, which represents the difference in interest rates between the two currencies.


Over the Counter ("OTC") means that you do not trade in a CFD through an exchange or market; rather, it is a transaction between you and the CFD provider.

Pairs trading

Stocks are paired up based on underlying similarities, and long/short positions are established to exploit any relative mispricing between each pair.

Par value

The face value of the bond.

Passive investment management

Same as indexed investment management.

Passive investment strategy

See passive management.

Passive market-index portfolio

A market-index portfolio.

Pass-through security

Pools of loans (such as home mortgage loans) sold in one package. Owners of pass-through receive all principle and interest payments made by the borrowers.

Payback period

Time taken for a project to recover its initial investment.

Payout ratio

Dividend as a proportion of earnings per share.


Product disclosure statement


The transition from the end of an expansion to the start of a contraction.

P/E effect

That portfolios of low P/E stocks have exhibited higher average risk-adjusted returns than high P/E stocks.


Performance numbers show how the fund performed at a point in time during specific market conditions. If those conditions were repeated one would expect similar performance.

Personal trust

An interest in an asset held by a trustee for the benefit of another person


A regular periodic payment paid to an individual who meets certain qualifying conditions. A variety of Government, social security or private pensions exist.

Periodic review

The frequency and nature of reviews are at the discretion of the product provider, based on the circumstances and taking account of legal obligations.

Personal portfolio

An investor's account into which their investments are allocated within an SMA. A personal portfolio is generally constructed using a selection of model portfolios and a compulsory cash component.

Plowback ratio

The proportion of the firm's earnings that is reinvested in the business (and not paid out as dividends). The plowback ratio equals 1 minus the dividend payout ratio.

Private Investment in a Public Entity (PIPES)

A private negotiated injection of equity into a publicly listed company, usually in the form of converting preference shares.

Policy committee

The Superannuation Industry (Supervision) legislation requires a policy committee where a public offer fund or sub-fund has more than 49 members, or where five or more members of a public offer fund (or sub-fund) with 5 to 49 members request the formation of such a committee. A policy committee consists of equal numbers of employer and member representatives who facilitate communication between the members and the trustee and provides an avenue for members' enquiries and views on the fund's operation.

Political risk

Possibility of the expropriation of assets, changes in tax policy, restrictions on the exchange of foreign currency for domestic currency, or other changes in the business climate of a country.

Pooled investments

Any form of investment in which a number of individuals, e.g. members of a superannuation fund, place their money with a professional investment manager to manage the total fund on their behalf but produce a return to them individually. Pooled investments may also comprise unit trusts, cash management trusts, friendly society bonds and shares.

Pooled Superannuation Trust (PST)

A unit trust which can only invest in assets of superannuation funds, approved deposit funds (ADFs), PSTs and certain other tax advantaged entities. It is regulated by the SIS Act. They must satisfy set operational standards set out in the SIS Act.

Portable alpha; alpha transfer

A strategy in which you invest in positive alpha positions, then hedge the systematic risk of that investment, and, finally, establish market exposure where you want it by using passive indexes.


The list of holdings in securities owned by an investor or institution.

Portfolio construction

This involves how the portfolio is constructed and within what limits.This could include weights to individual securities (whether shares or bonds), country weights, sector weights and limits to different credit ratings.

Portfolio insurance

The practice of using options or dynamic hedge strategies to provide protection against investment losses while maintaining upside potential.

Portfolio management

Process of combining securities in a portfolio tailored to the investor's preferences and needs, monitoring that portfolio, and evaluating its performance.

Portfolio opportunity set

The expected return-standard deviation pairs of all portfolios that can be constructed from a given set of assets.

Posterior distribution

Probability distribution for a variable after adjustment for empirical evidence on its likely value.

Preferred habitat theory

Holds that investors prefer specific maturity ranges but can be induced to switch if risk premiums are sufficient.

Preferred stock

Stock that has preference over common stock with respect to dividends or other forms of payments in association with the liquidation of a company. Preferred stock holders may also have other rights such as the ability to block mergers or sack current management.


The amount paid for the option transaction. It is usually expressed in currency terms or as a percentage of foreign exchange rate

Premium bonds

Bonds selling above par value.

Present value of growth opportunities (PVGO)

Net present value of firm's future investments.

Price-earnings (P/E) ratio

The ratio of a stock's price to its earnings per share. Also referred to as the P/E multiple.

Price value of a basis point

The change in the value of a fixed-income asset resulting from a 1 basis point change in the asset's yield to maturity.

Price-weighted average

Weighted average with weights proportional to security prices rather than total capitalisation.

Primary market

New issues of securities are offered to the public here.

Primitive security, derivative security

A primitive security is an instalment such as a stock or bond for which payments depend only on the financial status of its issuer. A derivative security is created from the set of primitive securities to yield returns that depend on factors beyond the characteristics of the issuer and that may be related to prices of other assets.


The outstanding balance on a loan.

Prior distribution

Probability distribution for a variable before adjusting for empirical evidence on its likely value.


Lenders allow investors to pay their interest a year in advance. Useful for tax purposes.


The regulatory requirement that certain superannuation benefits be maintained either in a superannuation fund or RSA until permanent retirement on or after the member reaches a certain age, the preservation age. Early release of preserved amounts may occur if the person dies, becomes disabled or gains APRA or trustee approval for early release.

Primary issue

The issue of the warrants by the warrants issuer to subscribers in the primary market.


A financial services licensee who has authorised the relevant provider to provide, on its behalf, personal advice to retail clients.

Private equity

Sometimes referred to as alternative assets or loosely as venture capital. Includes the different forms of financing that can be provided over the various business cycles of a private company (i.e. unlisted company). The finance is provided by one or more private investors to help develop, resurrect or grow a business. Private equity financing can be broken down into the follow stages of a company's development. These include seed capital, start-ups, venture capital (early stage), expansion capital, buyouts (management buyouts and management buy-ins) and restructuring or turnaround investment.

Private Finance Initiative (PFI)

Utilises private sector capital and skills to fund the development of public sector services, eg schools, hospitals, roads, but it is only the fixed assets and provision of services in relation to those assets (eg building maintenance) that fall within the PFI. The operation of the services, such as education provision in a school, remains the obligation of the government.

Private placement

The sale of securities not registered with a recognised exchange to institutional investors or wealthy individuals. These transactions are frequently facilitated by an investment bank.

Private sector bonds

The second largest sector is private sector bonds, referred to as corporate debt.


Involves a private enterprise or syndicate purchasing a government asset or service.


Unit priced products include:

  • investment life insurance policies
  • allocated annuity and pension products provided by life insurance companies
  • superannuation funds
  • wholesale or retail managed investment schemes
  • pooled superannuation trusts

Product provider

Providers of unit priced products include life companies offering investment life products and superannuation, allocated annuity and pension products, superannuation trustees offering registered managed investment schemes and other fund managers offering managed investment schemes or pooled superannuation trusts.


A grant of probate is a certificate granted by the Supreme Court of a State or Territory that a will has been proved valid and that authority to administer the deceased estate has been granted to the executor.

Profit margin

See return on sales

Program trading

Coordinated buy orders and sell orders of entire portfolios, usually with the aid of computers, often to achieve index arbitrage objectives.

Proper authority

An instrument under the Corporations Law which signifies the responsibility of a securities dealer or investment adviser for acts of an employee or agent. Proper authorities are required to be provided to certain categories of employees of fund managers, stockbrokers and investment advisers.


A broad asset class encompassing office buildings, factories, shopping centres and other developments. Super funds can either invest in these investments directly or indirectly, via listed property

Property trusts

While many Australians invest directly into the property market by holding residential property for rent, it is easier, cheaper, more liquid and geographically diverse to invest through a managed investment trust. These trusts are usually listed on the ASX and are called Real Estate Investment Trusts (REITs).

Proportioning rules

The rules that apply to benefit payments- an income stream or lump sum must reflect the proportion of tax-free and taxable components that make up super benefit

Prospect theory

Behavioural (as opposed to rational) model of investor utility. Investor utility depends on changes in wealth rather than levels of wealth.


A final and approved registration  statement including the price at which the security issue is offered


Lenders guarantee up to 100 per cent protection of the secured assets. There is an interest rate premium for this guarantee/insurance.

Protected covenant

A provision specifying requirements of collateral, sinking fund, dividend policy, etc., designed to protect the interests of bondholders.

Protective put

Purchase of stock combined with a put option that guarantees minimum proceeds equal to the put's exercise price.

Provisional relevant provider

defined in section 910A of the Act


An instrument empowering an agent to vote in the name of the shareholder.

Prudent investor rule

An instrument manager must act in accord with the actions of a hypothetical prudent investor.

Pseudo-American call option value

The maximum of the value derived by assuming that an option will be held until expiration and the value derived by assuming that the option will be exercised just before an ex-dividend date.

Public offer fund

Anyone can join in a public offer fund. Financial organisations, such as banks and insurance companies, usually market these types of funds to the public in the form of retail superannuation funds. Many industry funds are no public offer funds.

Public sector employees

A term that covers employees working in local government, the Commonwealth and State public services, public healthcare, and in Australia's public universities

Public sector fund

A superannuation fund for public sector employees.

Public to private

A transaction where an under-analysed, 'ignored' publicly listed company is de-listed and managed as a private company.

Purchase multiple

A valuation parameter associated with the purchase price of a specific investment. It is analogous to the P/E ratio using in public listed companies.

Pure plays

Bets on particular mispricing across two or more securities, with extraneous sources of risk such as general market exposure hedged away.

Pure yield curve

Refers to the relationship between yield to maturity and time to maturity for zero-coupon bonds.

Pure yield pickup swap

Moving to higher-yield bonds


An option to sell a foreign currency amount at a specified price at any time between now and the expiration of the option contract.

Put bond

A bond that the holder may choose either to exchange for par value at some date or to extend for a given number of years.

Put-call parity theorem

An equation representing the proper relation between put and call prices. Violation of parity allows arbitrage opportunities.

Put/call ratio

Ratio of put options to call options outstanding on a stock

Quality of earnings

The realism and conservatism of the earnings number and the extent to which we might expect the reported level of earnings to sustained.

Quick ratio

A measure of liquidity similar to the current ratio except for exclusion of inventories (cash plus receivables divided by current liabilities)


A specialist usually working in portfolio management or bond research who develops systems that map past movements in financial markets with a view to predicting future equity, commodity and currency values.


Investment surveys rank investment managers according to the investment performance of their products. Managers in the top quarter of those participating in the survey are said to be 'top quartile performers'. Similarly, an investment manager's performance may fall in the second, third or fourth quartile, or be simply 'above average'.

Random walk

Describes the notion that stock price changes are random and unpredictable

Rate anticipation swap

A switch made in response to forecasts of interest rates.

Real assets, financial assets

Real assets are land, buildings, and equipment that are used to produce goods and services. Financial assets are claims such as securities to the income generated by real assets.

Real rate of return

The rate of return of an investment, minus the inflation rate (usually taken as the consumer price index) over the same period. For example, if an investment produces a 10 per cent return but inflation is 8 per cent; the real return is 2 per cent.

Realised compound return

Yield assuming that coupon payments are invested at the going market interest rate at the time of their receipt and rolled over until the bond matures.


Realigning the proportions of assets in a portfolio as needed.

Registered bond

A bond whose issuer records ownership and interest payments. Differs from a bearer bond, which is traded without record of ownership and whose possession is its only evidence of ownership.

Regression equation

An equation that describes the average relationship between a dependent variables and a set of explanatory variables.

Regret avoidance

Notion from behavioural finance that individuals who make decisions that turn out badly will have more regret when the decision was more unconventional.

Relevant provider

Defined in section 910A of the Act

Reasonable Benefit Limit (RBL) - abolished 1 July 2007

The maximum concessionally taxed superannuation benefit a person can receive over their lifetime. Superannuation benefits greater than an individual's RBL were taxed at the highest marginal rate. RBLs for pensions were more generous than for lump sums to encourage retirees to finance retirement via an income stream rather than cash. RBLs were abolished from 1 July 2007.


The process where a client's actual holdings are compared to the updated model portfolios and changed accordingly.

Rebalancing date

Usually each business day before the market opens.


The restructuring of a company's balance sheet by either increasing or decreasing the amount of corporate debt. The aim is to alter the capital structure of a company in order to improve its profitability. This strategy is considered to be a form of financial engineering.

Regular gearing

A loan that can be drawn down in regular instalments, usually monthly, and used to accompany a savings plan into managed funds.

Regulated superannuation fund

Under the Superannuation Industry (Supervision) legislation, a fund is eligible to receive tax concessions only if it is classed as a Regulated Superannuation Fund and meets specified operational standards. A Regulated Superannuation Fund is one which: elects to comply with SIS legislation, has either a corporate trustee or pays retirement benefits as pensions, is an indefinitely continuing superannuation, pension, provident or benefit fund.

Regulatory risk

Many infrastructure companies operate in regulated markets. There is a risk that the actions of a regulator or the intervention of government will adversely affect the revenue of the business and therefore the price of the stock.

Reinvestment rate risk

The uncertainty surrounding the cumulative future value of reinvested bond coupon payments


Real estate investment trust, which is similar to a closed-end mutual fund. REITs invest in real estate or loans secured by real estate and issue shares in such investments.

Relative strength

The extent to which a security has out-performed or underperformed either the market as a whole or its particular industry

Remainder man

A person (or persons) who has a beneficial interest in the capital of a testamentary trust, while another beneficiary has a life interest. The property in the testamentary trust vests in or passes to the remainder man on death of the life tenant.

Replacement cost

Cost to replace a firm's assets.

Representativeness bias

People seem to believe that a small sample is just as representative of a broad population as a large one and therefore infer patterns too quickly.

Repurchase agreements (repos)

Short-term, often overnight, sales of government securities with an agreement to repurchase the securities at a slightly higher price. A reverse repo is a purchase with an agreement to resell at a specified price on a future date.


The amount that remains after the debts of the deceased have been paid and amounts have been set aside to satisfy any distributions of particular assets or legacies specified by the deceased.

Residual capital value

A remaining balance of an income stream

Residual claim

Refers to the fact that shareholders are at the bottom of the list of claimants to assets of a corporation in the event of failure or bankruptcy.

Residual income

See economic value added (EVA)

Resistance level

A price level above which it is supposedly difficult for a stock index to rise.


Any physical item produced for trade purposes. Australia's resources include coal, goal, aluminum and oil.

Responsible entity

The licensed entity or body that operates a managed investment schemes or separately managed account.

Restricted benefit

A person's benefit may include this type of benefit if she was a super fund member before 1 July 1999. A person can cash this benefit when she resigns from an employer who is contributing to her super fund.

Restricted non-preserved benefit

This benefit is restricted until a person leaves his job. A person's super may include this type of benefit if he was a super fund member before 1 July 1999.

Retail client

Defined in sections 761G and 761GA of the Act

Retail managed funds

These are managed funds available through mainstream investment managers, such as those associated with financial planning groups, banks, life insurance companies or other wealth management group. In retail managed funds you buy units in the fund directly from the fund's responsible entity or through an intermediary that they have an association with, such as a financial adviser or stockbroker. Retail managed funds may also be referred to as public unit trusts or mutual funds.

Reverse mortgage

A loan that allows a person to borrow against the equity in his home. The repayment of accumulated interest and the original loan amount is deferred until the property is sold, which can be after the person dies.

Reversionary income stream

An income stream payable to someone else, for example a spouse or children, if a member dies.

Retail super fund

A super fund established by a bank, life office, financial planning dealer group, or fund management group. Retail super funds are usually open to the public. Corporate master trusts are a special type of retail super fund.

Retirement Income Policy (RIP)

A three-pronged Government Strategy intended to save Australia from a funding crisis triggered by Australia's ageing population

Retirement income stream

An income stream that produces regular income payments during a person's retirement

Retirement Savings Account (RSA)

A bank - or similar - account established for holding superannuation savings. RSAs are similar to regular bank accounts but have restrictions upon withdrawals like regular superannuation funds. RSAs invest super savings into bank deposits and so usually pay lower rates of interest than regular super funds, but their fees are lower than regular super funds.

Return multiple

A common measurement used in the private equity market is the amount realized for the investment divided by the original cost of the investment, otherwise known as realization ratio or return multiple. The measurement does not take into consideration the time value of money.

Return on assets (ROA)

A profitability ratio; earnings before interest and taxes divided by total assets.

Return on equity (ROA)

An accounting ratio of net profits divided by equity.

Return on sales (ROS), or profit margin

The ratio of operating profits per dollar of sales (EBIT divided by sales).

Reversal effect

The tendency of poorly performing stocks and well-performing stocks in one period to experience reversals in following periods.

Reversing trade

Entering the opposite side of a currently held futures position to close out the position.

Reward-to-volatility ratio

Ratio of excess return to portfolio standard deviation

Riding the yield curve

Buying long-term bonds in anticipation of capital gains as yield s


In investment terms risk is a measure of volatility. Volatility is a measure of the variability of returns and is the standard deviation of investment returns over a specific period of time. The higher the standard deviation, the higher the level of risk associated with that investment.

Risk and return characteristics

Asset classes can also be defined according to their investment characteristics such as their likely investment return, how risky they are, how fast they are expected to increase in value and how they distribute income.

Risk arbitrage

Speculation on perceived mispriced securities, usually in connection with merger and acquisition targets.

Risk-averse, risk-neutral risk lover

A risk-averse investor will consider risky portfolios only if they provide compensation for risk via a risk premium. A risk-neutral investor if funds the level of risk irrelevant and considers only the expected return of risk prospects. A risk lover is willing to accept lower expected returns on prospects with higher amounts of risk.

Risk-free asset

AN asset with a certain rate of return; often taken to be short-term T-bills.

Risk-free rate

The interest rate that can be earned with certainty

Risk lover

See risk-averse


See risk-averse

Risk premium

An expected return in excess of that on risk-free securities. The premium provides compensation for the risk of an investment.

Risk profile

The level of risk a person is willing to tolerate

Risk-return trade-off

Investors must take on greater risk if they want higher expected returns.

Risk sharing

Sharing the risk of a portfolio of given size among many investors

Risky asset

An asset with an uncertain rate of return


Robo- advice is streamlined automated financial advice delivered online through a website or smart device app. Robo-advice usually covers how to identify your investment profile and design a simple asset allocation strategy. It may also cover allocating you into exchange traded funds via a managed account with which the company that runs the robo-advice website has an association.


The transfer of all or part of an ETP into a complying superannuation fund, RSA or is used to purchase an annuity from a life company or registered organisation.

Rollover exemption

An exemption that permits a business owner to defer any capital gains tax payable on any capital gain from the sale of a business asset, provided that the business owner purchases another active business asset with the proceeds of the sale.

Rollover-foreign exchange

Where the settlement of a deal is rolled forward to another value date based on the interest rate differential of the two currencies e.g. next day.

Running yield

The interest rate on an investment expressed as a percentage of the capital invested, thus showing the actual cashflow of the amount paid for the investment.

Sale and lease-back arrangement

Asset is sold to a lessor on condition it is leased back to the previous owner

Salary packaging

A more precise term for describing the practice of reducing your taxable income by making superannuation contributions from before -tax salary (salary sacrificing)

Salary sacrifice

An arrangement between an employer and an employee which involves the employee giving up part of their pre-tax salary in exchange for the employer providing an alternative benefit, such as superannuation contributions.

Same-day funds

Funds that do not require clearing through the payments system; required for exchange settlement account

Same-sex couple

Two people of the same gender who are in a relationship. For the purpose of superannuation law, a live-in relationship between two women or two men.

Scatter diagram

Plot of returns of one security versus returns of another security. Each point represents one pair of returns for a given holding period.

Seasoned new issue

Stock issued by companies that already have stock on the market.

Secondary market

The trading of warrants on ITS after the primary issue

Secondary market transaction

The buying and selling of existing financial securities; transfer of ownership, no new funds raised by issuer

Second-pass regression

A cross-sectional regression of portfolio returns on betas. The estimated slope is the measurement of the reward for bearing systematic risk during the period

Sector rotation

An investment strategy which entails shifting the portfolio into industry sectors that are forecast to outperform others based on macroeconomic forecasts.

Sectorial flow of funds

The flow of funds between surplus and deficit sectors in an economy; the business, financial, government, household and rest-of-the-world sectors

Secure site

A web site that a person can only access with a password

Secured debt

A debt instrument that provides the lender with a claim over specified assets if the borrower defaults


The value of the cash or investments the borrower provides the lender as security for the loan.

Securities and Exchange Commission (SEC)

The regulator of the securities markets in the USA

Securities portfolio

Financial securities held by an institution for investment and trading purposes

Security analysis

Determining correct value of a security in the marketplace

Security characteristic line

A plot of the excess return on a security over the risk-free rate as a function of the excess return on the market


Non-liquid assets are sold into a trust; the trustee issues new securities; cash flows from the original securities are used to repay the new securities

Segmented markets theory

All bonds are not perfect substitutes; investors have different preferences when investing in either short- or longer-term bonds

Self-managed superannuation fund

A small super fund that's regulated by the Australian Taxation Office


When securities are sold at the client's discretion

Semi-Government Securities (SEMIS)

Long-term coupon securities issued by central borrowing authorities


The term used to describe bonds issued by state government borrowing authorities in Australia

Semi-strong form efficiency

All publicly available information is fully reflected in a share price

Senior Australian Tax Offset (SATO)

A tax offset that's available for retirees who are of Age Pensions age or older, or of Service Pension Age.

Senior concession allowance

A six monthly tax free payment to Commonwealth Seniors Health Card Holders to help with regular bills such as electricity and gas, rates and motor vehicle registration fees.

Separately Managed Account (SMA)

A portfolio made up of securities that are beneficially owned by the individual investors and managed by professional managers or model portfolio managers. Unlike investing in a managed fund, an SMA investor can add, delete or "lock" shares in an SMA.

Serial offering technique

Each series tranche has the maturity and coupon terms set when the facility is established

Service fee

Charged by a lender to offset ongoing loan account administration costs

Service pension

See Age Service Pension

Service pension age

The pension age for a male or female veteran who has qualifying service and the qualifying age for a male or female.

Service provider

Where a product provider decides to outsource certain functions, those functions are performed by a service provider.

Selecting super

A complete resource for employers looking to outsource and monitor their superannuation. It comprises a suite of services, including the Selecting Super Handbook and website and extends to monitoring of outsourced superannuation arrangements, market assessment reports, tender management and consumer report cards.


Actual physical exchange of one currency for another between dealer and client.

Settlement risk

The possibility that one party to a financial transaction will not deliver value


The person who provides an initial gift of cash or property to create an inter vivos trust.


A unit o ownership in a company that entitles a person to a share of the profits in the form of dividends and the benefit of any increase in the share price because of the strong performance of the company.

Share market

A formal exchange that facilitates the issue, buying and selling of equity securities

Share options

The remuneration of a manager may include an option to purchase shares in the company at a specified price

Share price index

Measures changes over time in the price of shares included in the index

Share price to net tangible assets ratio

Current share price relative to the firm's net tangible assets

Share price pattern

A graph over time of movements in a share price or a market index

Share purchase plan

An offer to existing shareholders to purchase a fixed dollar amount of new ordinary shares

Share split

A proportional division of the number of shares issued by a company.

Sharpe ratio

This is the ratio of the three-year return less the risk-free rate of return and the three-year monthly annualized standard deviation. It measures your return per unit of risk. The higher the ratio the better.

Shelf registration

Registration with the SEC of a delayed or continuous debt issue

Short position

Entering into a forward contract to sell an asset that is not held at that time

Short straddle

The simultaneous selling of a call option and a put option with a single exercise price

Short strangle

The simultaneous selling of a call option and a put option with equally out-of-the-money exercise prices

Short-call party

The writer (seller) of a call option

Short-term debt

A debt financing arrangement for a period of less than one year.

Short-term investment

An investment which generally matures in less than two years.


Singapore inter-bank offered rate: the average of rates at which selected banks in the Singapore market will lend to each other

Simple interest

Interest paid on the original principal amount borrowed or invested.


Superannuation Industry (Supervision) Act 1993. This is now the governing legislation for superannuation funds, approved deposit funds (ADFs) and pooled superannuation trusts. The trustees of these entities must comply with SIS in order for the funds to be concessionally taxed.


Performance objectives should be specific, measurable, achievable, realistic and timely.

Smart beta funds

Smart beta funds are special types of indexed funds that follow more complex composite or hybrid measures such as an index based on the most profitable companies, companies with the highest sales, companies that are most reliant on overseas revenue.

Small APRA fund

A DIY super fund that's regulated by Australian Prudential Regulation Authority

Small super fund

A fund with four or fewer members, more popularly known as a DIY super fund.

Socially Responsible Investment (SRI)

An innovative form of investing because it focuses on investing in companies that will form part of a socially and environmentally sustainable world. SRI aims to achieve more than financial returns. Its non-financial aims include issues such as attempting to boost working conditions and helping the environment.

Sole purpose test

The legal test used to judge a true superannuation fund. It requires that superannuation funds be maintained for the sole purpose of providing benefits on reaching retirement or preservation age, or to members' dependents or estate on the member's death before retirement. Other benefits approved as 'ancillary purposes' under the sole purpose test include the termination of employment and disablement due to ill-health. In order for a superannuation fund to qualify as a Regulated Superannuation Fund, it must comply with the sole purpose test.

Sortino ratio

This is a variant of the Sharpe ratio in that it rewards upside investment returns but penalizes investment returns below a specified target. While the Sharpe ratio treats both equally, the Sortino ratio measures your returns per unit of downside risk.

Sovereign risk

A risk that a foreign government will default on its obligations

Special-Purpose Vehicle (SPV)

A trust established to hold securitised assets and issue asset-backed securities.

Specialised option

An option which generally invests in less than three asset sectors.

Specific market risk

The risk that the value of a security will change due to issuer-specific factors


A situation where a part of a company is separated from the whole and begins an existence as an independent company.

Split funding

Where investment of the monies of a plan are split between two or more investment managers.

Spot transaction

Locks in an exchange rate today for settlement and delivery in two business days from the date of the transaction


A spouse can be a married or de factor partner of the opposite sex, or former spouse. A spouse can also be a partner of the same sex.

Spot rate

The arrangement to exchange currencies in two working days. For example, if a currency is sold 'spot' on Monday, it will be exchanged on Wednesday with the counterparty.


The difference between bid and offer prices

Spread position

Buying and selling of related, same-delivery-date contracts to benefit from price variances

Standard delivery

Futures contract-settled by physical delivery of the specified asset

Standard deviation

A statistical measure of the dispersion of a set of data around a central point

Standardised approach to credit risk

Provides risk weights to be applied to balance-sheet assets and off-balance-sheet items to calculate minimum capital requirement

Standby facility

A contingency line of credit that is established with a financial institution

Statement of Advice (SOA)

A document that sets out the advice given to a consumer by their licensed financial planner or adviser. It must include the basis on which the advice is given, details of the providing entity, and information on any payments or benefits the adviser or licensee will receive.

Start-up capital

Financing provided to companies which have not yet fully established commercial operations and may also involve continued research and product development. Essentially it is money provided to companies to develop a concept.

Stock liquidity

The percentage of a corporation's shares available for trading on a stock exchange


Acts as the agent for an investor in the buying and selling of stock-market securities

Stock-market index 

A measure of the price performance of the share market or a sector of the market

Stop loss order

An order to buy or sell when a particular price is reached either above or below the price that prevailed when the order was given


Buying and selling of contracts with different delivery dates to benefit from price variances

Straight bond 

A fixed-interest bond paying equal periodic coupons; principal repayable at maturity

Straight corporate bond

A long-term debt instrument paying a fixed interest coupon; principal repayable at maturity

Straight eurobonds

A fixed-interest bond paying periodic coupons; principal repayable at maturity

Strategic asset allocation

A portfolio structured to meet an investor's personal preferences.

Strategic range

The minimum and maximum weighting allowed within each asset sector. These ranges vary accordingly to the type of discretionary option and a are changed infrequently.

Strike price

refer to 'exercise price'

Strip of FRAS

A series of consecutive forward rate agreements over time

Strong form efficiency

All publicly available information and private research is fully reflected in a share price

Structured finance

Funding provided for major infrastructure projects


Investment managers are often said to have a "style" that describes their approach to investing. E.g. they are active or passive, or they invest in growth or value companies. Style can be very subjective and should be interpreted with caution as some styles can change as the markets change. However, investment managers who stick to their style are highly regarded.

Socially responsible investing

See Ethical Investment.

Subordinated debt

A long-term debt issue; holders' claims are subordinated against all other creditors, but before equity holders

Subordinated junior debt

Claims of these security holders are subordinated after all other creditors


A lender retains a loan while transferring the right to receive interest and principal payments

Sub-prime loans

Where a lender waives normal lending criteria in order to provide a loan to a party who otherwise could not obtain a loan

Sub-prime mortgages

Loans to borrowers that under normal credit assessment standards would not have the capacity to repay

Subscribers to an issue

Agree to purchase some of the securities offered


When an investor substitutes an individual security with another ASX listed security, cash, or pro-rates across the other securities in the personal portfolio.

Sum of negative returns

This is the total of all monthly negative returns. It is a measure of the risk of capital loss.

Super cycle of credit

Refers to the multi-decade era of breakneck growth in credit, financial instruments and sophistication which the credit crunch brought to an end late in 2007.

Super co-contribution scheme

The Federal Government makes matching super contributions on behalf of Australian employees who make voluntary contributions and earn less than $53,564 year (for the 2019-20 year).


A system where money is placed in a savings fund to provide for a person's retirement.

Superannuation Complaints Tribunal (SCT)

An independent body established to investigate complaints about super funds that can't be resolved by internal complaints processes.

Superannuation death benefit

Benefit payable from a superannuation fund upon a member's death.

Superannuation fund

In regulatory terms, a superannuation fund is defined as 'a fund which is indefinitely continuing, and is a provident, benefit, superannuation or retirement fund; or is a public sector superannuation scheme'. It is usually governed by a trust deed and administered for the primary purpose of providing benefits for members on retirement, or alternatively, on resignation, death, disablement or other specified event. Funds complying with legislative requirements are eligible for taxation concessions.

Superannuation Guarantee (SG)

A prescribed minimum level of superannuation contributions that an employer must provide for employees. The Superannuation Guarantee (Administration) Act 1992 prescribes the levels. If the employer does not meet their obligations they incur a penalty charge, known as the SGC in addition to having to pay the appropriate contributions.

Superannuation Guarantee Charge (SGC)

A charge imposed under the Superannuation Guarantee Charge Act 1992 on employers who do not meet the minimum Superannuation Guarantee requirements for their employees.

Superannuation income stream

A series of regular payments from a superannuation fund

Superannuation income stream death benefit

An income stream payable from a super fund on a member's death

Superannuation Industry (Supervision) Act 1993 (SIS)

Legislation providing prudential, i.e. financial and governance, standards for superannuation funds administered by three regulators: the ATO, Australian Securities Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA).

Superannuation lump sum

A lump sum payment received from a super fund

Superannuation lump sum death benefit

A lump sum payable from a member's super account upon the member's death

Superannuation managed funds

Superannuation managed funds are managed funds that hold superannuation savings, i.e. retirement savings that attract concessional rates of taxation. The only difference between normal managed funds and superannuation managed funds is the rate of taxation that applies to investment deposits or investment earnings. There is no difference to the fund's investments, the role of the investment manager or the responsibilities of the responsible entity.

Superannuation surcharge

A surcharge (tax) of up to 15 per cent imposed on certain superannuation contributions, specified rollover amounts, and termination payments. The surcharge applies to people whose annual incomes exceed prescribed limits. The effect of the surcharge is that for high income earners their level of contributions tax can be doubled from 15 per cent to 30 per cent.

Super match

This product enables a super fund to search the Lost Members Register on a member's behalf.


Defined in subsection 921F(2) of the Act

Support lines

Lower price levels where an increase in demand halts a price fall

Surplus units

Savers or providers of funds; funds are available for lending or investment

Swap contract

An agreement between two parties to swap future cash flows; interest rate swaps and currency swaps

Swap rate

The fixed interest rate specified in a swap contract.

SWB index ($A)

The Salomon Brothers World Bond Index in Australian dollars. It is a market proxy for international bond portfolios. All income is invested.


Electronic system operated by global financial institutions that facilitates international financial transactions

Symmetrical triangles

A series of price fluctuations with each top and bottom smaller than the previous triangle.


A collection of investors will pool their financial resources to simultaneously purchase securities from a corporation.

Syndicated loan

The provision of loan funds by a group of financiers for a single project

System being down

Occurs when payments by the official sector to the private sector are less than payments to the official sector

System surplus

Occurs when payments by the official sector to the private sector exceed payments to the official sector

Systematic risk

Exposures that affect the price of the majority of shares listed on a stock exchange

Systemic risk

The risk that the failure of an institution will adversely affect the market as a whole

T + 3

Settlement of a share transaction will occur in three business days

Tactical asset allocation

A portfolio structured to take account of a dynamic investment environment


A charge levied by a government on imports into the country

Taxable component

The taxable portion of a superannuation benefit. An individual pays tax on this component if she receives a benefit under the age of 60 or receives an untaxed benefit.

Taxed benefit

The benefits paid from a source where tax has been paid on the concessional contributions and earnings of the fund.

Taxed element

A person's taxable component is usually a 'taxed' element, unless the person belongs to a public sector fund. See untaxed benefit.


A term that means a person is able to take advantage of much lower rates of tax than he ordinarily pays on income.

Tax file number

A unique number issued by the Australian Taxation Office to identify individuals and organisation for tracking the payment of tax and to improve the efficiency of data collection.

Tax-free component

The portion of the benefit that's tax-free. Ordinarily includes non-concessional contributions and certain pre-July 2007 benefits.

Tax offset

An offset that reduces the tax payable on taxable income

Technical analysis

Explains and forecasts price movements based on past price behaviour

Tender panel

A group of banks that agree to make a market in a particular security; quote bid and offer prices

Tender system

Investors bid a price on government securities, thus setting the yield; allocated in order of lowest yields

Term allocated pension

An allocated pension type investment but with elements of the tax and social security benefits and concessions of complying pensions. Also referred to as growth pensions.

Term certain pension (or term-certain annuity)

A guaranteed income stream for a set period of time, between one year and 25 years. Recipients can choose to receive a residual capital value.

Term deposit

An arrangement where a person deposits a certain amount of money with a bank or financial institution for a set period of time and an agreed rate of interest.

Term loan

A loan advanced for a specific period, usually for a known purpose; may include a fixed interest rate or a variable interest rate

Term of issue

The rights, conditions and obligations of the warrant issuer and the warrant holder. These terms are contained in the disclosure document.

Terminal value

The expected value of the an asset at the end of an investment period. If the investment is not publicly traded, then the terminal value is subject to the valuation and appraisal procedures of the valuer. These procedures can have a high degree of subjectivity.

Testamentary trust

A trust created by will or established by operation of a statute in respect of assets of a deceased estate.

Testamentary gift

A gift or money or specific property made by the testator in a valid will.


The person who makes a will.

Time value

The amount of money option buyers are willing to pay, above the intrinsic value, for an option in the anticipation that, over time, a change in the foreign currency value will cause the option to increase in value. In general, an option premium is the sum of time value and intrinsic value. Any amount by which an option premium exceeds the option's intrinsic value can be considered as time value.

Total and permanent disability insurance

An insurance product that pays the policyholder a lump sum or income stream if she becomes permanently disabled.

Total equity

The money you deposited in your account plus dealings conducted on your account and the positions you hold. The total equity balance is used to establish if there is a requirement for additional margin to be paid in respect to your account.

Total expense ratio

A bundled measure of your super fund's total fees and expenses expressed as a percentage of your account balance.

Trailing stop

Stop-loss positions can be adjusted as the price of the underlying security rises. If the shares are worth $30 when they are purchased the stop loss might be set at $25. If the share price goes up to $40 the stop loss can be adjusted up to $35.

Transition-to-retirement income stream

A non-commutable income stream that's available before retirement

Treasury note (T-note)

A short-term discount security issued by the government; face value payable at maturity

Trust deed

A document setting out the rules for the establishment and operation of a fund. Provisions cover the appointment and removal of trustees, membership rules, receiving and investing contributions, trustee discretionary powers, and benefit payments.


A person or company (corporate trustee) appointed under the terms of the trust deed to hold the trust assets for the beneficiaries and to ensure operation in accordance with the trust deed. Trustees owe a fiduciary duty to the beneficiaries. Superannuation trustees must also comply with certain legislative duties.

Decisions which, under the trust deed and/or rules for a plan, are specified to be exercisable in any manner, solely at the discretion of the trustees. eg death payments.

Trust fund

Managed funds established under a trust deed; managed by a trustee or responsible entity

Trust relationship

The trustee's responsibility to members of a super fund.

Two-way prices

The dealer quotes both a buy (bid) and a sell (offer) price on a currency

Uncertified securities

Electronic record of share ownership; original share certificate is not issued.

When there is not enough insurance to cover the value of the insured property.


The measure of performance against an index, competitor or any other benchmark.


Underweight is less than the benchmark holding in an asset class; overweight is greater than the benchmark holding.


An institution that supports the issue of securities by a client and agrees to buy any securities not bought by investors.

Underwriting banks

Banks that agree to purchase any unsold notes at the issue and future rollover dates

Undistributed income

Generally, where some of the income is retained in the unit trust, the trustee is held responsible for tax on that amount, and the undistributed income in the unit trust is taxed at the top marginal rate. Such high tax rates apply to discourage investors hiding income inside trusts.


Relates to unfolded public sector arrangements, which means the Government hasn't coughed up the cash for super contributions

Unified Managed Account (UMA)

Comprehensive portfolios of individual separate accounts and packaged products, such as mutual funds and exchange-traded funds (ETFs), with a complete asset allocation in a single account.

Unit linked investment

Funds directly link the value of the plan's investments in the fund to the market value of the underlying assets.

Unit price

The value of a company or investment expressed as a single unit. A unit is similar to a company share.

Unit trust

A form of pooled investment trust governed by a trust deed has trustees and is promoted and managed by professional investment managers. Investors purchase units whose value is set either by the market (if the trust is listed) or by the trustee who adjust price according to valuations (if it is unlisted). Unit trusts can include property trusts, equity trusts, cash management trusts.

Unrestricted benefit

This type of benefit isn't subject to preservation and can be accessed at any time, subject to the rules of the super fund.

Untaxed benefit (or untaxed element)

A benefit that hasn't been subject to contribution tax or earnings tax. The benefit is subject to a higher rate of tax than a taxed benefit.

Untaxed Fund

A super fund where the Government hasn't yet paid in the cash for the additional employer contributions it has agreed to pay on behalf of employees.

Untaxed plan cap

The recipient of the untaxed benefit can receive concessional tax treatment of superannuation lump sum benefits up to this limit.


Denotes the redistribution of population from rural to urban settlements, notably within emerging economies like China and India that have a burgeoning consumer class.

Unlisted asset

A company that is privately owned and not listed on the stock exchange. Unlike a listed company that is publicly owned and listed on a recognised exchange.

Unlisted debt

Debt that is not traded in an active market such as the stock or bond market. Typically the term unlisted debt market refers to the private structured debt market. This type of debt implies complex legal arrangements between share holders, borrowers and lenders.

Unlisted mortgage scheme

A mortgage scheme that is not listed on a public market, such as the Australian Securities Exchange.

Unlisted property trust

A property trust that is not listed on a public market, such as the Australian Securities Exchange.

Unsecured loan

A loan for which no asset has been used as security. The interest rate is usually higher than for a secured loan as there is a higher risk to the lender of not getting their money back.

Unsecured note

A type of fixed interest investment issued by a company whereby it promises to pay regular interest payments and return the capital at the end of the investment term. There is no security offered for the investment.

Unsolicited calls

An unexpected call or visit by an unknown person, trying to sell something.

Unsystematic risk

Exposures that specifically impact on the share price of a particular corporation

Uptrend line

Achieved by connecting the lower points of a rising price series


A sub-class of infrastructure assets that includes power, water, sewerage and communications facilities.

Value at risk (VaR)

A statistical probability model that measures financial risk exposures based on historic observations.

Value date

Settlement date of a spit or forward deal

Value investment manager
Investment managers that pick stocks on the basis of the company's inherent potential value. In a low return market value investment managers often outperform because they better identify quality companies.

Vanilla swap

A swap of a series of fixed interest rate payments for variable interest rate payments.

Variable interest rate

An interest rate on a loan that changes from time to time; based on a specified reference interest rate

Variable-rate debt

The interest rate payable on a debt facility may vary from time to time

Vertical bear spread

A combination options strategy; buy a put and sell a call with a higher exercise price

Vertical bull spread

A combination of option contracts with the same expiration date but different exercise prices

Vertical takeover

When the target company in a merger and acquisition operates in a business related to that of the takeover company.

Vested benefit

The amount of vested benefit is the minimum sum which must be paid to a member of a superannuation fund when the member becomes entitled to a benefit on withdrawal.


The extent of fluctuation of security prices, interest rates, exchange rates and so on, It is usually calculated by measuring standard deviation, which is the degree of variations of returns around the mean return . Increasing levels of dispersion around the mean lead to higher standard deviation, indicating a higher level of risk.

Voluntary contributions

All contributions other than compulsory superannuation contributions. Individuals under the age of 75 can make voluntary contributions to a complying superannuation fund.

Vintage year

The year a fund was formed.


A financial instrument that conveys a right in the form of an option

Warrant code

A six letter code assigned to a warrant by ASX to identify it on ITS.

Warrant issuer

The institution that issues the warrant

Warrant series

All warrants with the same of issue and underlying instrument and having the same warrant issuer, exercise price, expiry date and settlement procedure. each warrant series has a separate warrant code.

Weak form efficiency

Share price changes are independent and not based on historic price data

Wealth channel

The effects of monetary policy changes on asset values.


Percentage or proportion of the portfolio invested in each asset class.

Weight average issue yield

The average of the proportional yields bid on a bond issue


Also called "badging". When a party, independent to the SMA provider or responsible entity (such a dealer group, acccountant or broker) badges the SMA services as their own services (eg the third party can choose their own name for their services, the model portfolios they wish they wish to offer, and fee structure).

Wholesale fund

Wholesale funds are designed to cater for professional investors with significantly higher minimum investments amount, typically in excess of $100,000 per fund.

Wholesale investment manager

An investment manager that focuses upon large investments, often from super funds. Wholesale investment managers generally are specialised companies restricted to customers with very large amounts of money to invest.

Whole-of-life policy

A life insurance policy that incorporates a risk component and an investment component, thus accumulating bonuses and a surrender value.

Wholesale market

A direct financial flow transactions between institutional investors and borrowers.


The Last Will and Testament is a formal statement of a testator's wishes as to the disposition of assets of the testator on death. To be valid and effective it must comply with strict conditions.

With-holding tax

Tax levied on dividends paid abroad.

With-recourse factoring

The factor company can recover future accounts receivable bad debts from the firm

Working capital

Finance required by a firm to fund its day-to-day operations

Wrap account

An investment consulting relationship for the management of a client's funds by one or more money managers that bills all fees and commissions within one comprehensive fee.

Write downs

A decrease in the market value of an investment established by a valuation.

Yankee bond

A foreign bond issued into the US capital markets; issued in USD by a foreign borrower.

Yield curve

A graph, at a point in time, of yields on a particular security with a range of terms to maturity

Yield to maturity

The return received on an investment held until its maturity date; expressed as a percentage


The total rate of return on an investment, comprises investment income and capital gains (or losses)

2019 Rainmaker SelectingSuper Awards
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Advisers win annual renew law relief
11 June 2021, 10:05pm
The federal government will introduce a carve out to help financial advisers to meet their ongoing fee disclosure obligations. Read more