Glossary of terms

No doubt you've heard the term 'financial jargon'. This glossary provides you with a simple guide to the investment terms you'll find on the RaboDirect website. Click on the alphabet letters below to help yourself to a clearer understanding.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Capital Gains Tax (CGT): Tax that applies to the profit on the sale of an asset acquired after 19 September 1985 - except for principal residences.
Capital Growth: Appreciation in the capital or market value of an investment (e.g. an increase in the value of an investment property), as opposed to income derived from a managed investment product.
Capital Guarantee: When an investor buys into a product and he/she is guaranteed to get back at maturity either part of all of the money he/she invested on day one.
Cash: As an investment term, cash is not just money held in the bank, or in your hand. Cash includes liquid investments made in the money markets with terms that are less than 1 year. Cash is one of the major asset classes and is considered a defensive investment.
Cash Management Trust (CMT): A type of unit trust that invests in the money market. CMTs generally invest primarily in fixed interest securities for no longer than twelve months. As these securities are highly liquid, CMTs can accommodate cash flows, both in and out, on a daily basis, thereby offering retail investors flexibility that is not present in a traditional term deposit.
Closed Fund: A fund that does not accept new investors. Additional contributions from existing investors may be accepted.
Compounding Interest: Interest paid on interest, as well as on the initial investment. For example, a $100 investment that earns 5% generates $5 per year. With compounding, it would generate $5 the first year, making a new basis of $105; then $5.25 the next year, for a basis of $110.25; $5.51 the next year and so on. In a managed investment, reinvesting dividends and capital gains takes advantage of the power of compounding.
Conservative Fund: A fund which is designed to provide stable returns by only taking necessary risks. Typically, a conservative fund will have a relatively high percentage of its funds invested in defensive assets such as fixed-interest bonds and cash.
Consumer Price Index (CPI): Measures the change in the cost of a fixed basket of products and services, including housing, electricity, food, and transportation. This allows comparisions of the relative cost of living over time and is used as a measure of inflation. CPI is calculated by the Australian Bureau of Statistics.
Corporations Act: A national scheme of legislation dealing with the regulation of companies and the securities and futures industries.
Currency Hedging: An investment technique used to protect against or reduce the risk of losses from changes in the exchange rates of different currencies.
Currency Risk: The risk that funds invested overseas gain or lose value as a result of a falling or rising Australian dollar.
Custodian: An organisation which holds assets (e.g. cash, shares) and settles transactions on those assets on behalf of third parties.