Money Buzzwords That Could Change Your Life
19 October 2021
Bond: An investor loans money to a company, government or councils for a fixed time, and receives a set interest rate.
Capital gain: The increase in value of an asset, like a house, over time. It’s the difference between its value now and what you paid for it.
Compounding interest: Compounding interest can supercharge your savings. You earn interest on your balance, which makes your balance bigger, so you have a larger balance to earn interest on.
Cryptocurrency: A digital or virtual currency that uses computer coding for security. Bitcoin is one example of a cryptocurrency.
Diversified portfolio: Having a mix of investments, which helps reduce your risk. It’s about not having all your eggs in one basket.
Dollar-cost averaging: Investing regularly, whether the market is up (more expensive) or down (cheaper). You’re getting an average return, overall.
House equity: How much you own of your house. Your equity is the value of the house less what you owe. You can also borrow more against your equity for other investments, for example a rental property.
ESG: Considering ‘environmental, social and governance’ factors when investing.
Interest rate: The return a lender wants from a borrower for using the lender’s money. The return is usually a percentage of the money borrowed.
Leverage: Borrowing money to fund some of an investment to increase its potential return.
Managed fund: Where money is pooled with other investors’ money, and invested by a fund manager in different types of investments.
Portfolio: A group of financial assets held by an investor, sometimes managed by an adviser or broker.
Risk: Risk means the level of uncertainty around your investment returns. All investments, including KiwiSaver, come with risk. Taking on more risk should mean you could get higher returns over time, but also potentially larger losses if the market suddenly changes.
Return: What an investor earns on an investment during a certain time period.
Share market: A regulated, electronic marketplace where shares are bought and sold.
Shares: One share is a small part of a company, and a unit of ownership. Buying a share, or shares, makes you a shareholder.
Term deposit: A deposit, held at a bank or similar, over a fixed timeframe, for an interest rate. The interest rate is paid because you have loaned the bank your money.
Volatility: Ups and downs in the markets. This makes your balance grow or drop.
Published 25 February 2020
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