WHAI RAWA INVESTING 101 SERIES GLOSSARY

Active fund

A manager or team of managers choose what companies and/or other investment assets should go into the ‘basket’, and they attempt to outperform the market.

Diversification

Spreading risk by choosing different investments. For example, instead of buying a single share worth $800, buying 80 shares worth $10 in different companies, industries and countries around the world. Most funds like KiwiSaver schemes, Whai Rawa and other managed funds are diversified for you.

Fund

A basket of shares and/or other investment assets. This ‘basket’ could include Apple, Microsoft, Tesla etc. There are different types, such as conservative, balanced, or growth, each with a different mix of assets. Whai Rawa for example has three fund options, Tōtara-Conservative, Mātai-Balanced and Rātā-Growth.

Exchange traded funds (ETF)

Investments that let you purchase small pieces of many different shares in a single transaction, with no or low minimum amount required. An example of this is the NZ TOP 50, who invest in the fifty largest NZX listed companies.

Index fund

Generated by computers and track an index. Since they just follow a set of rules, they tend to track the movements of the overall market, a specified market such as a real estate index or an asset class like a bond/fixed interest index e.g. the S&P 500 Index fund.

Interest

Interest is an amount that you earn for saving your money. Interest earned from deposits are calculated based on the amount you have saved.

Investing

Investing is the act of allocating savings with the expectation of generating an income or profit.

Investment timeframe

How long you want to invest for, think about how soon you expect to need your money back from your investments at any time.

Investor profile

The type of investor you are, based on your capacity to invest, attitude toward risk and investment timeframe or horizon (duration).

Managed funds

Pools of investors’ money that are invested by specialist fund managers. KiwiSaver is a common example.

PIR

Prescribed Investor Rate – the tax rate for your investment earnings from a Portfolio Investment Entity (PIE) such as KiwiSaver.

Return

What you might ‘get back’ when you invest. You can also have a negative return.

Risk

The chance your investments actual gains differ from the expected outcome or return.

Shares/Stocks

Shares and stocks are the same thing, and the wording is used interchangeably. Owning a share or stock means you own an individual piece of a company.