Her Magazine is New Zealand’s only women’s business lifestyle magazine! Her Magazine highlights the achievements of successful and rising New Zealand businesswomen. Her Magazine encourages a healthy work/life balance.
Issue link: https://viewer.e-digitaleditions.com/i/49418
her inform Financial Jargon Demystified Bonds – a much hackneyed word, a bond commonly means a loan to a large company or a government Yield – you get interest on a bank deposit, but on bonds and shares they call it the yield – usually expressed as a percentage Safe investment – does such a thing exist? Even a bank can go broke, as the BNZ nearly did in 1991, so rather think of investments in terms of risk. A government bond will be very low risk, and banks in New Zealand will be low risk. Gearing or leveraging – means borrowing, and this term is often used in relation to buying a property. Deleveraging – during the boom before the 2008 credit crunch money was easy to borrow, and individuals and governments all round the world borrowed huge amounts. It is now generally agreed that we all need to reduce borrowings, which is known as deleveraging. OCR – official 90 day cash rate, which is set by the Reserve Bank of New Zealand. This is used to try and control inflation. If inflation is rising the Reserve Bank of New Zealand may raise the OCR (the cost of borrowing) to discourage excessive borrowing, in turn hopefully taking the pressure off inflation. Diversification – what wise investors do to avoid the poorhouse! Often misunderstood, i.e. diversification across five finance companies in 2008 did not work. EQC – Earthquake Commission, which builds up reserves to help pay for earthquake damage. The EQC in New Zealand now has no money after the Christchurch quakes, and is now underwritten by the Government. When the EQC runs out of money the taxpayers of New Zealand must come to the rescue. PSA – a disease that is wiping out kiwifruit orchards in the Bay of Plenty – sadly a good reason to diversify widely. Christchurch – very sadly another reason to diversify. Bank – an organisation that will lend you an umbrella when the sun is shining, but will want it back when it starts to rain. Emergency funds – you should have three to six times your monthly income in an emergency fund and not in the bank where you have your mortgage. Tenant – a person who pays the mortgage on your rental 52 | December/January 2012 | HER MAGAZINE investment property, but you are liable for the mortgage, tenant or not. Cashflow – what we all need form the cradle to the grave – ignore cashflow planning before you retire at your peril. National superannuation – at age 65 a couple gets about $26,000 pa net. In future the entry age is likely to rise to 67 or even 70. It is already straining the Government's coffers, and younger people would be wise not to count on it too much. Kiwisaver – a good plan as long as someone else is putting in money as well as you – currently the Government and your employer are. It would not surprise anyone to see the Government eventually pull out, but force employers to contribute more. Locked in – Kiwisaver is locked in to the official retirement age, which is currently 65. Saver – a smart person (any saving is good saving). Borrower – there are good borrowings and bad borrowings. Not to be taken lightly and should be thought about indepth before doing so – get outside advice from someone who, unlike many borrowers, does not wear rose coloured glasses. Freedom – what savers get when their mortgage is paid off and their savings are growing. Scam – these are everywhere, especially via emails – don't pay anyone and don't give out credit card numbers or passwords. If in doubt ignore them – you will hear from them again soon if they are genuine. Gold – glittery stuff that some people like to own as a hedge against a global financial failure or high inflation. However, the price can be static for years and years and it pays no interest or dividends. Strategy – something you should have before investing in property, shares, and gold, i.e. when to take profit. If for example you bought gold at $1200, you might have a strategy of selling 25% at $1400, another 25% at $1600 and so on. If your strategy is to wait until it doubles and then it rises by say 90% then later on falls back to your cost or below, you may never make a gain. Alan Clarke www.bondsandshares.co.nz