Planning for your retirement? Wondering about your current investment options, property investment or how to get the best out of your KiwiSaver account? If you’ve found your way here, chances are you’ve either put some money aside already, or you’re planning to do so. But first things first. Why is investing a smart idea?


  • Active Funds

    A fund whose style is to get investors the best results by choosing investments and trading them. They typically have teams of experts to analyse all the available information, and make decisions around currency, and asset allocations to improve investment returns.

  • Asset Classes

    An asset class is a group of investments that exhibit similar characteristics, behaves similarly in the marketplace and is subject to the same laws and regulations. The five main
    asset classes are equities (shares), property, fixed interest or bonds, commodities (gold and oil) and cash or term deposits.

  • Asset Allocation

    The mix of investments chosen in order to get certain results. Typical mixes are from the main asset classes. For a growth investor, for example, the asset allocation will include more growth assets such as shares and property, and for a conservative nvestor the weighting will be towards fixed interest
    and term deposits.

  • Capital Gain

    The profit you make when you sell an
    investment for more than you paid for it. If you buy a house for $300,000 and sell it for $320,000, your capital gain is $20,000. A capital loss is when you sell an investment for less than you paid for it.

  • Capital Growth

    When the value of your investment (your capital) grows. If you invested $100,000 in shares last year that are worth $110,000 this year, your capital growth is $10,000, or 10%.

  • Diversification

    This is spreading your risk by choosing different individual investments within an asset class. So instead of buying $1000 dollars’ worth of shares in a single company, the same amount of money can be invested in the shares of different companies, industries and countries around the world.

  • Equity

    The amount of something you own, typically in a property or business. If you sold the asset and paid back any money you owed on it, your equity would be what’s left. For example, if you have a house worth $350,000 and a $300,000 mortgage, your equity in the house is $50,000.

  • Fixed Interest Investments

    Long-term, interest-earning assets, such as bank term deposits and bonds. These investments are generally lower risk, and offer a reliable return that can be used as income.

  • Investor Profile

    This is the type of investor you are, based on your capacity to invest, attitude toward risk and time horizon (duration). Your investor type will determine what mix of investments are chosen, since different kinds of investments work in different ways and are suited for different purposes.

  • Managed Funds

    Managed funds work by pooling money from many investors and then using this money to buy a variety of assets. You will get a return based on the overall performance of the managed fund. In a unit trust, each investor owns a specific portion (units) of the total fund.

  • Nominal Return

    The money you get back from an investment, without taking inflation into account.

  • Official Cash Rate (OCR)

    The interest rate set by the Reserve Bank to influence the price of borrowing money in New Zealand. Changes in the OCR can affect how much interest we pay on our mortgage and how much we earn on our savings.

  • Passive Funds

    Passive funds are more ‘hands off’ than active funds – they simply follow and track the performance of a given market, avoiding the costs of their fund managers choosing investments and trading often. This generally makes them cheaper than active funds.

  • Pension/Annuity

    An income paid at regular intervals to a retired person, by a government or a superannuation scheme.

  • Portfolio Investment Entity (PIE)

    Managed funds which have special lower tax rates. When you invest in a PIE, the tax on the income from your investment will be based on your prescribed investor rate (PIR).

  • Prescribed Investor Rate (PIR)

    The tax rate for your investment earnings from a PIE such as KiwiSaver.

  • Real Return

    The money you get back from an investment, including the effects of inflation. If your investment achieved a nominal return of 5% and inflation was 2%, your real rate of return is 3%. This is good to keep in mind when looking at term deposit rates, for example.

  • Risk

    The probability that the actual return on an investment will be lower than the investor’s expectations. All investments have some level of risk associated to it due to the unpredictability (volatility) of the market’s direction. Equities tend to have higher volatility than fixed interest, but also tend to produce higher returns over the long term.

  • Securities

    A real or virtual document that proves ownership of shares, bonds and other investments. This term is sometimes used interchangeably with ‘investments’ and the shares and bonds themselves.

  • Shares

    A share in the ownership of a company and entitlement to any dividends. These are sometimes referred to as ‘equities’ or ‘stocks’ as well.

  • Volatility

    A market’s volatility is its likelihood of making major, unforeseen short-term price movements at any given time. Highly volatile markets are generally unstable, and prone to making sharp upward and ownward moves. Markets with low volatility are less likely to see such spikes, and are as such more stable. As a general rule, most highly volatile markets come with greater risk, but also greater chance of profit over the long run.