We’ve all been there. But don’t worry. Here’s a quick jargon buster to help you join in the conversation with confidence.
- GDP – Gross Domestic Product. A measurement in dollar terms of the total goods and services produced within a particular economy (for example Australia) over a year excluding income earned outside the country. GDP is considered one of the main yardsticks of the health and vitality of an economy.
- CPI – Consumer Price Index. A quarterly measurement of movements in the prices of a fixed list of goods and services. The CPI is used as a guide in adjusting award wages and other costs, which are linked to the inflation rate.
- Inflation – An increase in the volume of money and credit relative to available goods and services, resulting in a continuing rise in the general price level.
- Hedging – Taking steps to protect against, or at least reduce, a risk; a form of insurance. The term is common in futures and foreign exchange markets where traders use trading facilities, currency trading stores or online trading to protect themselves against future price or exchange rate variations.
- Liquidity – The ease with which any investment can be converted into cash.
- Derivative – Financial tool which enables investors to obtain returns from an investment in a market or a particular security without physically purchasing that security. They generally require a small deposit, can usually be bought or sold more quickly than physical securities and are generally much cheaper to transact. Derivatives can be used as a risk management tool or to speculate. They can provide key benefits in that they can improve liquidity and reduce transaction costs.
- Option – A type of derivative. It is a contract giving the holder the right but not the obligation to buy or sell an underlying asset at a specified price during a given period of time.
- Shares – Also known as equities. A person who buys a portion of a company’s capital becomes a shareholder in that company’s assets, and as such could receive a share of the company’s profits in the form of an annual dividend. There are different types of shares, for example ordinary, preference, cumulative preference and participating preference shares.
- Volatility – A measure of the variability of returns. It is often taken as a proxy for investment risk.
- Growth investments – These investments generally include Australian and international shares, resources and property investments. These assets are expected to experience capital growth and a degree of risk is involved.
- Yield – A measure of return on an investment expressed as a percentage (calculated by dividing the income from an asset by its current capital value).
Like to know more?
If you’d like to know more about the world of investments, check out AMP Capital’s comprehensive A-Z glossary.
And if you’d like to know more about how to invest, talk to one of our financial advisers who specialise in helping people like you.