The Glossary

Some stock symbols are followed by '- ADR’, indicating they are American Depositary Receipts (ADRs), or ngā Rihīti Moni a Amerikana. An ADR is a certificate issued by a US depositary bank and is generated when the bank buys shares in a non-US company and repackages them for investors to buy on a US market. Each ADR share represents a specific number of shares in a company. Learn more about ADRs.

Each year shareholders meet with company directors and executives to hear updates about the company’s performance, finances and future operations. An AGM, or Hui ahu whānui ā-tau, is a forum to ask questions, and to vote on key decisions, such as board elections, and review financial reports. In corporate governance, AGMs are important for maintaining transparency, open communication and shareholder engagement.

The Australian Securities Exchange (ASX), based in Sydney in Australia, consistently ranks among the top global stock exchanges. It is the combined Australian Stock Exchange and Sydney Futures Exchange, which merged in 2006, and is a share market, clearinghouse and payments facilitator. Read more about The ASX 200: Australia’s main stock market index.

Assets under administration (AUA), or rawa i raro i te whakahaere, refers to the total value of assets that a financial institution looks after for clients. These assets are owned by the clients themselves, not the institution. The institution provides services like accounting, tax reporting, infrastructure, and custody for the assets. Unlike assets under management (AUM), where the institution actively manages the investments, AUA doesn’t involve making investment decisions. AUA fees are calculated as a percentage of the amount of money the institution administers for their clients, so, the more money invested, the higher the fees.

Assets under management (AUM), or rawa i raro i te whakahaere, represent the total market value of investments managed by an individual or financial institution on behalf of their clients. AUM includes stocks, bonds, real estate, and other assets. It’s a key metric to assess the size and success of investment firms. Higher AUM can indicate trust and experience. AUM is useful for investors in helping them understand the scope and reliability of a fund or investment manager. Many investment products charge management fees as a percentage of AUM. For financial advisors and portfolio managers, fees are usually based on a percentage of their customer’s personal assets under management. This means that fees can be higher if the company manages a larger AUM, as the fee charged is a proportion of the company’s total assets that are being managed.

An active investment strategy is when investment firms or investors try to beat an index using research, forecasting and experience of companies and share markets to make decisions. Clients may pay fees for this expertise, or frequent trading. Some supporters believe that when the share markets dip, active management may limit impacts because of active decision making by real people as opposed to passive funds that simply track the market down.

To learn, study, advise, instruct or teach.

Whakataukī:

He kai kei aku ringa — There is food at the end of my hands

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When applications for shares are received for an IPO, the listing company and their advisers work out how many shares applicants may receive and at what price - called an allocation. An IPO might be ‘oversubscribed’, meaning there are more applications than there are shares available to be allocated. If so, people hoping to invest in an IPO may receive less than, or none, of the shares they applied for.

An analyst, or kaitātari, is a financial professional who reviews publicly listed companies on share markets and decides whether their stock is worth investing in, sometimes giving them ratings. Analysts read a company’s financial statements, listen to their quarterly earnings calls, and may talk with a company’s management or largest customers. Their analyses can help investors make informed decisions about whether to buy, sell, or hold securities like shares.

Analyst ratings, ratings, or ngā waitohu kaitātari, are the findings made by analysts about the value of a company’s stock. Ratings can help investors decide whether to buy, sell, or hold an asset, like a company shares. Analysts look at financial performance, industry trends, and a company’s management. Ratings can range from ‘buy’, ‘sell’ or ‘hold’, which may help investors make their investment decisions.

The future.

Whakataukī:

‍Ko ngā pae tawhiti whaia kia tata, ko ngā pae tata, whakamaua kia tina — The potential for tomorrow depends on what we do today

An asset is defined as anything that holds monetary value. Anything owned or owed is an asset. An asset class is a group of investments that share similar properties or regulatory requirements. Stocks, real estate, cash and cryptocurrency are types of asset class. Investing in multiple asset classes is a common way for investors to diversify their portfolio.

Auto-invest, or haumi aunoa, is a set and forget investment strategy where investors can set up an automatic buy order that's placed at the same time every week, fortnight, month or quarter. The invested money can help grow a diversified portfolio without an investor needing to make continuous decisions on what companies, ETFs or REITs to invest in. It’s a hands-off investment approach that can be a straightforward and efficient way to grow a portfolio over time. Read more about setting up auto-invest here.

Basis points (bps) are a common way in finance to express small percentages. One basis point equals 0.01%, so 100 basis points equal 1%. It’s a handy unit for discussing changes in interest rates, fees, or investment returns. For example, if a bond yield increases by 50 bps, it went up by 0.50%. Investors and analysts use basis points to communicate and analyse even the smallest percentage changes in financial metrics.

A bear market occurs when a share market experiences a sustained period of share price declines, typically around two months or more. Like a financial winter, everything seems to cool down. Bear markets are cyclical - lasting a few weeks to a couple of months; or long-term - stretching for years or even decades. It's characterised by:

• Negative investor sentiment: fear and uncertainty prevail
• Economic downturns: a slow economy or a recession may cause stock prices to fall

Bear and bull market cycles are a normal part of share markets.

A block is a digital container for storing encrypted information that joins with other blocks form a blockchain, a secure, unalterable, permanent record that keeps track of transactions or data. Each block contains details about recent transactions that haven’t been verified. Once these transactions are validated, the block is sealed, and a new one is created for each new transaction.  

Blockchain is a shared digital ledger that stores data. Unlike conventional databases that are centralised, blockchain is decentralised. Once a singular block is filled, it's linked to the previous one, forming a blockchain that can’t be altered. Blockchain technology is used in cryptocurrency systems to keep a secure and decentralised record of transactions. Blockchain is also used in supply chain management, smart contracts, decentralised finance (DeFi) and non-fungible tokens (NFTs).

Blue chip refers to a well-established, financially stable company that has a long track record of success and reliability. Blue chip companies are leaders in their industries, often paying consistent dividends. Examples include 3M, Apple, Berkshire Hathaway, Coca-Cola, JPMorgan Chase, Microsoft, and Johnson & Johnson.

Bonds are a type of asset class. A bond is a loan to a borrower that pays investors a specific percentage return over a set time frame. When you buy bonds, you are essentially loaning your money to a government or company - a bond issuer - for a specific amount of time that they will use for a specific purpose. Learn more about bonds.

The book-building process is how the final issue or offer price for an IPO is decided based on demand and price that institutional investors indicate they’re willing to pay for each of the company’s shares. If investors want to buy into a company’s IPO, the issue price might be at the higher end of the price band or above it. If investors show less interest, the issue price might be at the lower end or below it.

A broker is an individual, and a brokerage is a firm with multiple brokers. The term 'broker' is often used to describe both. A broker or brokerage acts as a middle agent between an investor and a securities exchange. In financial markets, brokers (or brokerages) make trades - buying and selling assets -based on customer requests. They may also provide other financial or management services, like market analysis or investment advice. There are two main types of broker:

• Full-service brokers: Offer a range of services, including making trades and providing investment advice. Morgan Stanley, Goldman Sachs, Bank of America and Merrill Lynch are full-service brokers.
• Discount brokers: These lower fee brokers made trades for clients but typically do not provide investment advice. They focus on cost-effective trading. Some well-known discount brokers include Fidelity Investments, TD Ameritrade and Tastyworks

In the US, full-service brokers register as financial advisors with FINRA or the SEC, in Australia they register with Australian Securities and Investments Commission (ASIC), and in New Zealand, they register with the NZX or the Financial Markets Authority (FMA).

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A broker sponsored arrangement refers to an agreement between a shareholder and licensed share broker (the sponsoring broker) or a settlement agent, where ASX-listed shares are held on the CHESS subregister and allocated a HIN. The CHESS subregister is maintained by ASX Settlement and is one of two ways a shareholder is identified as the legal owner of their portfolio of holdings - the other is an issuer sponsored subregister, which is typically maintained by the listing company that issued the shares, usually through an appointed share registry. The sponsoring broker manages securities transfers to and from an investor’s CHESS holdings, based on the shareholder’s instructions and under the terms of their sponsorship agreement. Read more about the CHESS subregister here.

A brokerage is a financial firm, or middle agent, that buys and sells shares in companies, foreign money, and other assets for their customers. They're sometimes referred to as a 'broker'. They charge fees for their services. Charles Schwab, Vanguard, JP Morgan, Fidelity Investments and E*TRADE are all brokerages.

A bull market is a period of rising stock prices - like a charging bull pushing the market upward - often described as ‘bullish’. During a bull market, investors feel optimistic, and stock prices generally trend upward. Specifically, securities prices rise by 20% or more from previous lows. It’s usually a time of economic growth and positive sentiment. Key characteristics of a bull market include:

• Positive investor sentiment: Investors feel confident and hopeful; they expect further gains and are willing to invest
• Economic expansion: A strong economy drives stock prices higher; companies may thrive, leading to increased profits
• Rising individual securities: Company stocks across various sectors may see significant growth over sustained periods

Bull and bear market cycles are a normal part of share markets.

Buy and hold is a ‘lazy smart’ approach to investing. The definition is in the name; you buy shares and hold (own) them for the long term. A buy and hold strategy gives investors the potential to benefit from compounding growth.

A buy order or a market order is the most straightforward way to buy and sell shares. It’s an instruction by an investor to a broker to buy or sell shares, bonds, or other assets at the best price currently available on the stock exchange. A market order is the default choice for buying and selling for most investors most of the time. When a market order is placed, the trade happens immediately at the current market price (or when the share market is next open). The price when an investors submits a buy order may differ slightly from the final price of the order due to after hours market movements, which occur when a market is officially closed.

The Chicago Board Options Exchange, known as CBOE, or Cboe Options Exchange, is the world’s largest options exchange. Founded in 1973, CBOE provides a platform for investors to buy and sell options, which are financial derivatives that give buyers/sellers the right to buy or sell an asset at a predetermined price without being obligated to complete the trade. The CBOE is home to the CBOE Volatility Index (VIX), a widely used indicator of market volatility. It offers trading across multiple asset classes and regions, including options, futures, equities, ETFs, and volatility products.

The CHESS subregister is maintained by ASX Settlement and is one of two ways a shareholder can be identified as the legal owner of their shares. To be registered on CHESS, a shareholder needs a signed sponsorship agreement with a sponsoring broker, which is typically their broker or a settlement agent. A shareholder’s sponsoring broker manages securities transfers to and from an investor’s CHESS holdings, based on the shareholder’s instructions and under the terms of their sponsorship agreement. Read more about the CHESS subregister.

A common shareholder number, or CSN, is a 9-digit identifying number issued by the NZX for shareholders - found at the top of formal NZX documents. A CSN is unique to each shareholder, and shows they’re the legal owner of their shares. Some shareholders may have more than one CSN, but not every NZX investor has a CSN (this may depend on the brokerage); some may have an HN (holder number) if they bought shares through an investing platform rather than through a broker, and possibly a FIN (faster identification number). A CSN and an HN have similar purposes but are not quite the same. Both are unique identifiers used by the NZX. The CSN is common to the NZX, and distinguishes one investor’s holdings from another’s, while the HN specifically identifies a shareholder as the owner of a portfolio of securities. When an NZX shareholder wants to transfer their NZX listed shares to a different platform, they may need a CSN. Learn more about common shareholder numbers (CSN) on MoneyHub.

Capital is resources, like money, that companies use to invest or spend. It also includes assets used to generate income or value, such as equipment or real estate. Capital is needed to start a business and to buy assets, such as computers or machinery, to pay for operations, like staff payroll, and to invest in opportunities to grow the business. Companies raise capital in rounds, pitching for money from venture capitalists, angel investors, institutional investors, individuals and investment firms. After a series of capital raising rounds, a company may raise more capital by going public on the share markets through an IPO. An individual’s capital may include personal savings, loans, cryptocurrency, investments from individuals or institutions, dividends, or business profit.

A capital gain is the profit earned from selling an asset, such as stocks, real estate, or other investments, at a higher value than it cost to buy. It’s the positive difference between the selling price and the initial cost. Capital gains can be either short-term (held for less than a year) or long-term (held for more than a year). They are usually subject to being taxed, often with different rates for short-term and long-term gains.

A company can create two classes of shares that have different voting rights for shareholders. These dual-class companies typically have Class A and Class B shares. For example, Berkshire Hathaway’s stock has Class A (BRK.A) shares, costing around US$610,000 (at the time of writing) and Class B shares (BRK.B) - the ‘Baby Berkshires’ - costing around US$300. The Class B shares are aimed to be more accessible for investors who want to own whole shares rather than fractional shares. Investors who own Class B shares may not get voting rights, but they do receive dividends. Learn more about Class A, Class B and dual-class companies.

A clearinghouse is a financial institution that acts as a middle agent for buyers and sellers in financial markets such as share markets. They make sure transactions, such as trades, are completed smoothly. The clearinghouse validates trades, settles accounts, collects margin payments, regulates asset delivery, and reports trading data. The National Securities Clearing Corporation (NSCC) is the main clearinghouse for securities transactions in the US. In the futures market, clearinghouses are important for providing security and efficiency by handling multiple transactions for multiple parties.

A commodity is a basic raw material, product or service that can be traded, usually in large volumes. In finance, commodities refer to widely available and traded items like metals, energy resources, agricultural and animal products, and include copper, gold, zinc, silver, coffee, cocoa, sugar, dairy and oil. Commodities are subject to supply and demand dynamics, and play a crucial role in global markets.

A company is a legal entity usually formed to operate a business. Some companies are worth a lot of money (think billions or trillions), so their ownership is split into shares. When a company goes public, their shares become available for investors to buy and sell through the share markets. To invest in a public company, investors can buy their stock, or an exchange traded fund (ETF) that includes the company.

Compounding growth is where investors can earn returns on their returns, aka interest on their interest. This exponential growth is like a snowball effect, rolling through the years, potentially picking up returns on returns. Learn more about this 'eighth wonder of the world'.

Constituents, sometimes called components or members, are the individual companies whose stock makes up an index. The total value of the index depends on how all the constituents’ stock prices change. For example, the S&P 500 index includes 500 of the largest market cap companies in the US, and their combined constituents’ performance can be used to show trends in American consumer sentiment and the overall share markets.

A corporate action in investing refers to any event initiated by a company's management that brings about a significant change to the company’s securities and affects its stakeholders, such as creditors and shareholders. These actions can impact stock prices, liquidity, and overall company performance. There are two types of corporate actions: voluntary and mandatory.

Voluntary corporate actions: Require a response from the investor - such as a vote for or against where investors may need to respond online or over the phone. Examples include:

• Equity tender offers
• Bond tender offers
• Exchange offers
• Rights offers
• Consent solicitations

Mandatory corporate actions: Don’t require any action from the investor as participation is obligatory, meaning the company’s board of directors (not the shareholders) approves the action. Examples include:

• Spin-offs
• Stock splits (both forward and reverse)
• Mergers and acquisitions
• Name or trading symbol changes‍
• Dividend distributions

Cryptocurrency, or crypto, is a decentralised digital currency based on blockchain technology. Unlike traditional currencies like the US Dollar or the NZ Dollar, cryptocurrencies aren’t controlled by a central authority like a central bank. Instead, crypto relies on a network of users over the internet. People can use crypto to buy goods and services, but many people invest in them as if they were stocks or precious metals. Investors can consider cryptocurrencies as alternative investments due to their potential for high returns, but many acknowledge crypto’s volatility and lack of regulation. The first cryptocurrency was Bitcoin, introduced by Satoshi Nakamoto in 2008. Other well-known cryptocurrencies include Ethereum and Ripple.

A custodian is financial institution, bank or brokerage responsible for managing and safeguarding assets on behalf of investors. They ensure the proper handling of securities, cash, and other investments and play an important role in maintaining the integrity and security of financial markets. Learn more about custodial investing.

Custody means the safekeeping of financial assets by a financial institution, such as a bank or investment firm, called a custodian. These assets can include stocks, bonds, and other securities. Custodians not only safeguard these assets but also handle administrative tasks, settlement of transactions, and compliance with regulations. Depositary banks that offer ADRs (American Depository Receipts) also charge custodial fees. This is to cover the registration, compliance and record-keeping services that come with listing foreign shares as ADRs.

Day trading is the act of buying and selling shares frequently. It's often used interchangeably with the term intraday trading, which refers to trading within one day, between the share markets opening and closing. While some professionals have experience in day trading, the term day trading can also refer to investors who buy shares in companies to sell them quickly - think day, week or month - for what they hope is a profit. Learn more about day trading.

Delisting occurs when a stock is removed from a stock exchange. It can happen either voluntarily, when a company chooses to leave the exchange, or involuntarily, when the exchange forces the company to delist. Some reasons for delisting are the company is no longer operating, is reducing costs or decision-making time for management teams, is merging with another public or private company, no longer meets the exchange’s listing requirements, is moving from being publicly-owned to privately-owned, or has declared bankruptcy. Investors who do not sell their shares before the delisting date will still be shareholders in the company, and the shares may be moved onto the OTC markets. Read more about delisting and shares on Hatch.

A derivative is a financial contract with a value that depends on an asset, group of assets, or an index. These contracts can be traded on stock exchanges or over-the-counter (OTC). Derivatives are used to access multiple share markets and can be used for managing risk, hedging, or speculative reasons. They come in different types, including futures, options, swaps and forwards. While exchange-traded derivatives are regulated and standardised, some OTC derivatives are not, which means they can carry more risk.

A digital ledger, or ledger, is a digital record that keeps track of all transactions or data. It’s a secure, unalterable list where everyone who looks through it can see what happened and when. When people talk about blockchain as being a digital ledger, they mean it’s a detailed digital notebook that stores all the important information.

A direct listing is a way for companies to list shares on a share market without going through an IPO. In a direct listing, the only shares listed are already owned by the company's founders, financial backers and employees. Unlike IPOs, no new shares are created. Direct listings can cut out middle agents, like underwriters, to save money. A direct listing allows existing investors and employees to sell their shares without new shares being issued and diluting existing shareholders. Without underwriters, there is no safety net. Companies like Palantir (PLTR), Roblox (RBLX), and Coinbase (COIN) have gone public in the US with a direct listing.

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Diversification lowers risk by spreading money over multiple investments to limit impact if one fails. In the share markets, investors may buy shares in many companies or exchange traded funds (ETF). Learn more about diversification.

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to stock price. Aka, the dividend payment per share divided by the current stock price. A higher dividend yield can be appealing, but investors need to consider a company’s financial health and stock price movement. Mature, blue chip companies, and those in utility and consumer staple industries often have relatively higher dividend yields. Read which companies, ETFs and REITs pay the best dividends.

Profitable companies can decide to share their profits with shareholders and pay them out in a dividend. If you invest in companies that pay dividends, dividends will be paid into your Hatch account in USD, ready to re-invest. Learn more about dividends.

Dollar-cost averaging is an investment strategy that can help lower the amount you pay for your investments and manage risk when you’re buying shares in a company or exchange-traded fund (ETF). In simple terms, dollar-cost averaging is when you invest the same amount of money in a company or fund at regular intervals over a period of time. This strategy takes the guesswork out of monitoring daily share prices to calculate the best time to buy and the amount to pay. Learn more about dollar-cost averaging.

The Dow Jones Industrial Average (DJIA), often referred to as ‘the Dow’, is an index that tracks daily share price movements of 30 large US companies listed on the Nasdaq and the New York Stock Exchange (NYSE) across a range of sectors of the economy. It’s generally considered a benchmark for the health of the stock market and the US economy. The DJIA is a price-weighted index, meaning that higher-priced stocks have a greater impact on its movement, rather than market cap, which is the total dollar value of a company as decided by the share market. The DJIA, or ‘the Dow’ is often reported in financial news and is used by investors and analysts to assess market trends and sentiment. Read about the history and controversy of the Dow.

The Dow Jones & Company is one of the world’s largest financial media companies and has been owned by Rupert Murdoch's News Corporation since 2007. It was founded in 1882 by Charles Dow, Edward Jones and Charles Bergstresser to simplify financial news. Charles Henry Dow developed the Dow Jones Industrial Average (DJIA), which originally contained just 12 American companies. Dow Jones also founded The Wall Street Journal in 1889, and own it today, along with Barron’s Group, and provides data and intelligence solutions. Learn more about Dow Jones and the DJIA.

Dual-listed companies are public companies that are listed on two stock exchanges. The benefit of being on two exchanges means companies can increase their global or market exposure to investors, and gain access to more liquidity and capital, while being able to support their home country’s economy. More than 50 of New Zealand’s largest companies are dual-listed on both the NZX and the ASX. These dual-listed companies include Air NZ, Kathmandu, NZME, Chorus, Briscoe Group, Fonterra, and Spark NZ.

Some companies outside the US list on an American exchange through an ADR (American Depositary Receipt). A example is Australian resources company BHP (BHP), which lists on the ASX and the NYSE as an ADR.

EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortisation. It shows how much money a business generates from its core operations before including factors such as interest and taxes. EBITDA can be used to assess a company’s operating performance.

Earnings is the amount of profit a company makes each quarter. Essentially, it’s revenue with costs taken out, like operating expenses, sale costs and taxes. Analysts look at earnings to assess a stock’s value, often called ‘analyst expectations’. Earnings are important for investors and analysts to understand a company’s financial health, how stable it is, and whether their stock is over- or undervalued. In other words, whether it’s underpriced, overpriced, or about right. A company may choose to reinvest their earnings into growing their business, paying off debt, or they could be paid to shareholders as dividends.

EPS is calculated by dividing a company’s earnings by the number of common shares available to trade. A high EPS can indicate greater profitability and income to support the company’s future growth. However, some companies reinvest earnings straight back into the business, while others might pay out those earnings as dividends. A low EPS may mean a company is less likely to give shareholders a slice of the profits as dividends.

The listing date, or effective date, is the day a stock exchange lists shares and when trading in a public market commences after an IPO. This happens once shares have been allocated - usually once they’ve been paid for - and includes the share market having approved a company to list their shares there. To do this, the exchange has made sure a company can follow all its rules and the company has paid the listing fees. On this date, the total number of shares is confirmed along with the listing price, and any investor, including retail investors, can buy the company's stock on the share market.

Encryption is the process of encoding information into a secret code to prevent access by people who are not authorised. It turns readable data - called ‘plaintext’ - into scrambled text - called ‘ciphertext’. Only authorised people or groups can decode ciphertext back into plaintext. Encryption keeps data safe and private, and is used in blockchain technology, as well as message services like Whatsapp.

The equity market, also known as the stock market, is where shares of publicly traded companies are bought and sold. It’s a place where investors can become partial owners of companies by purchasing company stocks. Companies use equity markets to raise money, called capital, by issuing shares, usually through an IPO, and for investors to trade the shares. Equity markets are the building blocks of the global financial system, where supply and demand determine stock prices.

Equity refers to ownership in a company or an asset. It’s the total dollar value of a company or asset, minus any debts. In the share markets, equity means an investor owns shares in a company. Equity holders, that’s shareholders, usually have voting rights at annual general meetings (AGMs) (except if they own a different class of share) and may receive dividends.

An exchange is a marketplace where buyers and sellers trade assets, like stocks, bonds, commodities, or currencies, like cryptocurrencies. Exchanges are essentially the platform for transparent and efficient transactions. Some well-known stock exchanges include the New York Stock Exchange (NYSE), the Nasdaq, Cboe, London Stock Exchange (LSE), the ASX and the NZX. For cryptocurrencies, exchanges including Binance, Coinbase and Kraken, enable users to buy, sell, and trade digital currencies. Exchanges play an important role in financial markets because they are highly regulated, which ensures fair and orderly transactions.

An exchange traded fund (ETF) is a basket of investments that can include companies, gold, bonds and property. Many KiwiSaver funds invest in ETFs because they help diversify an investment portfolio. Some ETFs follow an index, such as the S&P 500, which includes the 500 largest companies listed on the US share markets including many of the world’s most recognisable brands. Read more about exchange traded funds.

The expense ratio measures the costs of managing an investment fund, such as a mutual fund or an exchange traded fund (ETF). It represents the percentage of assets deducted annually to cover the fund’s expenses, like management fees, admin and operational costs. Investors usually prefer a lower expense ratio because it means more of their investment goes towards potential returns.

A faster identification number, or FIN, is a 4-digit number somewhat similar to a PIN on a bank card. It’s automatically assigned and issued by the NZX, sent by post, and identifies each shareholder as the holder of specific shares. A FIN is generated when an investor buys shares using their CSN or HN. A broker will ask for an investor’s FIN when they buy or sell shares on their behalf; it gives them authority to access their holdings. A broker doesn't keep a FIN after each transaction is settled. Learn more about holder numbers (HN) on MoneyHub.

Financial instruments, or instruments, are assets that are traded, like securities, commodities, or indexes. Essentially, an instrument is the building block for a derivative. Stocks, bonds, and options are all examples of financial instruments. Instruments are investments that can help individuals, businesses, and governments to raise capital, manage risk, and transfer assets.

There are special tax rules for Kiwi investors who have invested more than $50,000 NZD in Foreign Investment Funds (FIF), including shares in companies listed on foreign share markets, a foreign unit trust such as foreign mutual funds, overseas superannuation schemes, and life insurance policies through an overseas provider. FIFs use a specific tax calculation to determine taxable income. FIF tax rules only apply if your initial investment cost goes above $50,000 NZD at any point in the tax year. Spouses with joint holdings have a $100,000 NZD threshold. Understand the FIF tax rules here.

For IPOs in the US, the S-1, also known as a registration statement, must by law include any material information about the company. This is so potential investors can understand what the company does, why it is issuing shares through an IPO, the state of the company's finances - including revenue, profit and debt -and what type of ownership structure is being offered. This document must be filed with the US Securities and Exchange Commission (SEC) before a company can list shares for sale on the US share markets. There are other ‘S’ versions as well, depending on the type of company going public. In other countries, this might be called a prospectus. The company must provide financial statements as part of these documents.

A fractional share is part of a full share of a company's stock, or exchange traded fund (ETF). Fractional investing means investors can buy portions of shares instead of buying whole shares - which can cost more than US$600,000. Fractional shares don't come with some full share shareholder benefits, such as voting rights, but investors may receive dividends. Learn more about fractional shares.

Futures are financial contracts that require a buyer to purchase an asset or a seller to sell an asset at a predetermined future date and price. These contracts are standardised and traded on exchanges. Futures are used for hedging or speculation, and they can include commodities - like oil, gold and coffee - financial instruments, or other assets. For example, a corn farmer might use futures to lock in a specific price for selling their corn, while a bread manufacturer might use them to secure a specific price for buying wheat.

Gains, sometimes called capital gains, refer to the profits or returns earned from an investment, such as from owning shares, bonds or real estate. When an investment increases in value, it generates gains for the investor. These can come from dividends, compounding growth, or selling an asset at a higher price than its original cost. Gains are a key goal for investors seeking to grow their wealth over time.

Going public is another way of saying a company is going through an initial public offering (IPO) It’s a more colloquial term to describe how a company is transitioning from private ownership - owned by their founders, financial backers and employees - to public ownership, where the company is listed, any investor can buy shares in the company on the share market that shares are listed on.

Gross Domestic Product, or GDP, measures the value of goods and services of a country during a set time frame, such as every quarter. GDP shows how a country’s economy is tracking - whether it’s slowing or growing. Policymakers, investors, and businesses use GDP to understand a country’s economic health and growth or decline, and make decisions based on it. GDP can be calculated in several ways:

• Production approach: The combined value of all the goods and services produced by a country
• Expenditure approach: How consumers, businesses and the government are spending and investing, and includes net exports (the difference between exports and imports) and shows a country’s economic size and growth
• Income approach: Adds up the income earned by households, businesses and the government’s tax revenue

Aotearoa NZ uses the production and expenditure approaches to determine GDP. Read about how GDP is used to declare a recession.

A holder identification number (HIN) identifies a shareholder as the legal owner of their entire portfolio of ASX holdings on the CHESS subregister. The same HIN is used for all of the shareholders’ shares registered on CHESS. Read more about the CHESS subregister.

A holder number (HN) is a unique identifying number assigned to investors who buy shares on the NZX through an investing platform rather than a broker. It specifically identifies each shareholder as the owner of a particular portfolio of securities or shares. Companies listing on the NZX may choose to issue shares through ComputerShare or Link Market Services, so an investor’s HN is specific to one of these registries. Shareholders with investments across both registries - as with a CSN - may have more than one HN. An HN and a CSN have similar purposes but are not quite the same. Both are unique identifiers used by the NZX. The HN specifically identifies a shareholder as the owner of a portfolio of securities, while the CSN is common to the NZX, and distinguishes one investor’s holdings from another’s. Learn more about holder numbers (HN) on MoneyHub.

A hedge fund is an investment pool managed by active fund managers that use a range of investment strategies aiming for high returns. Unlike mutual funds, hedge funds can invest in a mix of assets, including stocks, bonds, derivatives and real estate. They often use leverage and short-selling investing techniques. Wealthy investors and financial institutions often use hedge fund managers hoping to generate profits regardless of whether share markets are going up or down - that is, whether it’s a bear market or a bull market.

Hedging is an investment strategy that aims to reduce risk by taking an offsetting position in another asset. So if one investment has a sudden price change, hedging may help to lessen the impact. A hedge fund might use derivatives to offset potential losses in stocks. Or if an investor holds stocks and thinks there may be a market downturn ahead, they might use hedging techniques, such as options or futures, to minimise their potential losses. The goal of hedging is to achieve stable returns, regardless of share market or economic conditions. While hedging can provide a safety net, it can be complex and costly.

The total number of shares an investor owns in a company or ETF is referred to as a shareholding or holding. The combined shareholdings, which is all the shares they own, is their portfolio. Investors with shareholdings are shareholders.

A hostile takeover is when a person, people, or a company tries to take control of a company without the approval of their management or board. It is an aggressive form of mergers and acquisitions. The acquiring person, people or company seeks to own more than 50% of the target company’s voting shares, which means they have controlling ownership of company decisions. This can occur if the targeted company is undervalued, or if activist shareholders want changes to the direction of the company. Methods for a hostile takeover include tender offers - buying shares at a premium - and proxy fights - replacing current management. To defend against hostile takeovers, companies may use strategies like differential voting rights, employee stock ownership programs, or poison pills. Read about a failed attempt at the hostile takeover of Disney.

An Initial Public Offering, or IPO, is the process of a company moving from private ownership - owned by their founders, financial backers and employees - to a public company, where the shares are listed on a share market for anyone to buy and sell. It’s sometimes also referred to as going public. Learn more about how IPOs work and how to research shares.

These are passive funds (including exchange traded funds, or ETFs) that aim to track or mimic an index. Companies like Vanguard and BlackRock have created ETFs that both track the same S&P 500 index.

An index is a categorised list of investments, such as 'the largest 500 companies on the US share markets', or 'the 10 companies with the highest dividends on the NZX'. These lists are created and managed by credit rating agencies such as S&P Global Ratings, and investment managers often use these indexes a benchmark to compare their performance.

The indicative price, or price range, is an estimated price range given to potential investors of an IPO to give them an idea of the final price they’ll likely pay for shares. It’s set by both the company and the underwriter. It’s not guaranteed that the final price will be in this range; it’s meant as a guide only for potential investors. Indicative price is different to opening price, and offering price.

Inflation is the rise in prices of goods and services over time. When inflation climbs, it can reduce consumer purchasing power, meaning money buys less that year than it did in the previous year.

Example:

If you had around $3 in November 2015 you could buy 2 litres of milk. In March 2024, that same $3 would buy you less milk, or you’d have needed nearly $4 to buy the same 2 litres of milk.

The most common way to measure inflation in New Zealand is through indexes like the Consumer Price Index (CPI) and the Wholesale Price Index (WPI). Inflation can be viewed as both positive and negative. People who have assets like property or commodities, may like a little inflation because it may increase the value of their assets. But when inflation rises extremely high in a short period of time, it can topple an economy. This happened in Venezuela in 2018 when hyperinflation reached over 1,000,000% per month, which caused the country’s economy to collapse. Read how to be money smart when inflation climbs.

Institutional investors are the large investors who regularly participate in share markets, and are typically trading on behalf of their clients or customers – think big banks, fund managers, government and pension funds, wealth adviser groups and similar. During an IPO, institutional investors are approached by a company’s advisers to determine demand. In some IPOs, retail investors and individual investors also get a chance to participate. After the IPO, shares become available to all investors through the share markets.

Financial instruments, or instruments, are assets that are traded, like securities, commodities, or indexes. Essentially, an instrument is the building block for a derivative. Stocks, bonds, and options are all examples of financial instruments. Instruments are investments that can help individuals, businesses, and governments to raise capital, manage risk, and transfer assets.

Investing is buying assets and securities, such as shares or property, that investors hope can increase in value over time and provide returns like income, dividends, rent or capital gains. Investing can also be about spending time or money to improve your own life or the lives of others. Learn more about investing and how it’s different from saving.

An investment is having financial resources, like money, in assets, such as shares, bonds, real estate, options or businesses, typically aiming to make a profit over time. Before making any investment decision, investors assess risks, potential returns, and market conditions.

An investor is a person or group that puts money into an investment - aka invests - with the hope of making a profit through capital gains, returns or income, like dividends or rent. Investors can be individuals, companies, mutual funds, institutional investors, or investment firms investing in shares, bonds, real estate or businesses. Their decisions are influenced by factors like risk tolerance, investment goals and market conditions. Successful investors do thorough research, keep informed about economic and share market trends, and strategically manage their portfolios.

The issue price, or offering price, is the final IPO share price that people who have received an allocation pay to receive shares as part of the company’s IPO. The final share price is usually not confirmed until the very last moment once the book-building process is complete. It might be different to the indicative price and is different again to the opening price. Learn more about how share prices are calculated.

The issuer is the company going public in an Initial Public Offering (IPO) which is issuing - aka ‘offering’ - shares to be bought and sold by investors in the share markets.

Issuer sponsored shares on the ASX have a securityholder reference number (SRN), which identifies the shareholder as the legal owner - the Australian equivalent to New Zealand’s holder number (HN). The issuer sponsored subregister is typically maintained by the company that issues the shares - usually through an appointed share registry. So while a shareholder will have just one holder identification number (HIN) for their entire portfolio for broker sponsored shares, they’ll have a different SRN for each holding for their issuer sponsored securities.