Glossary

Quick definitions for terms used in this guide.

Asset allocation: How your portfolio is divided among different asset classes (shares, bonds, cash). The primary driver of your portfolio's risk and return. More →
Asset location: Placing specific investments in the most tax-efficient account type. Different from asset allocation.
Bear market: A share market decline of 20% or more from a recent peak. Historically occurs every 4-6 years. More →
Best-interests duty: An adviser's legal duty to put you first. In Australia, advisers giving personal advice must act in your best interests (Corporations Act s961B). In New Zealand, advisers must give priority to your interests when they conflict with their own, and treat you fairly. More →
Beneficiary: The person who receives your money after you die. In Australia, a binding death benefit nomination tells your super fund who to pay; in New Zealand, KiwiSaver is paid out under your will. More →
Bond: A loan you make to a government or corporation. Bonds pay interest and are generally less volatile than shares. More →
Capital gains tax (CGT) discount: In Australia, residents who hold an investment for at least 12 months pay tax on only 50% of the gain (for gains up to 30 Jun 2027). It is replaced by indexing the cost base for inflation (from 1 Jul 2027). More →
Compound interest: Earning returns on your returns. $10,000 growing at 8% becomes $10,800 after year one, then $11,664 after year two (8% of $10,800, not $10,000).
Concessional contributions: Before-tax money paid into Australian super: your employer's Super Guarantee, salary sacrifice, and personal contributions you claim a deduction for. Taxed at 15% (2026-27) in the fund and capped at $32,500 (2026-27). More →
Debt-to-income ratio (DTI): Your total debt as a multiple of your gross yearly income. Australian banks face limits on lending at a DTI of 6 or more (from 1 Feb 2026). NZ banks face limits on lending at a DTI over 6 for owner-occupiers and over 7 for investors (from 1 Jul 2024). More →
Diversification: Spreading investments across many assets to reduce risk. A fund holding 3,000+ companies is highly diversified; a portfolio of 5 tech shares is not.
Diversified fund: A single fund holding shares (and sometimes bonds) across many countries and companies, rebalanced for you. The simplest way to invest. More →
ETF (Exchange-Traded Fund): A fund that trades on a stock exchange. Most ETFs are index funds. More →
FIF (foreign investment fund) rules: New Zealand tax rules for foreign shares and funds you hold directly. If their total cost is over $50,000 (as at Oct 2026), you are usually taxed on 5% (as at Oct 2026) of their opening value each year. More →
Franking credits: Your share of the tax an Australian company has already paid on the profits behind its dividends. You get them back as a tax offset. More →
HELP debt: An Australian government study loan. The balance is indexed each 1 June, and you repay it through the tax system once your income is over $69,528 (2026-27). More →
Index fund: A fund that tracks a market index by owning all or most of the shares in that index. Low cost, broadly diversified, consistently outperforms most active funds. More →
KiwiSaver: New Zealand's voluntary retirement savings scheme. You, your employer and the government contribute, and you can withdraw at 65 (as at Oct 2026) or for a first home. More →
Management fee: The yearly fee a fund charges, as a percentage of your balance. A 0.03% fee on $100,000 costs $30 a year. More →
PIE (portfolio investment entity): A New Zealand managed fund, including most KiwiSaver funds, whose returns are taxed at your prescribed investor rate (PIR) of 10.5%, 17.5% or 28% (as at Oct 2026). More →
Rebalancing: Periodically buying and selling to return your portfolio to its target allocation. More →
Salary sacrifice: In Australia, having part of your pre-tax pay paid into super. It is taxed at 15% (2026-27) in the fund instead of at your marginal tax rate. More →
Savings rate: The percentage of gross income directed towards building wealth. A key metric for financial progress. More →
Superannuation (super): Australia's retirement savings system. Your employer must pay the Super Guarantee of 12% (from 1 Jul 2025) of your earnings into your fund, and you can usually access it from age 60 (from 2024-25) once you retire. More →
Term deposit: Money deposited with a bank for a fixed term at a fixed interest rate. Often used for the slower-access tier of a cash cushion. More →