The Glossary

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.

A gift, contribution or donation given in kind as a show of reciprocity, support or thanks for generosity shown. Some iwi and hapū use whakaaro or kohi, due to thoughts around tapu and the longer form word takoha.

Whakataukī: 

Ahakoa he iti he pounamu — Although it is small, it is greenstone

Glossary. 

Whakataukī: 

Whāia te mātauranga hei oranga mō koutou — Seek after learning for the sake of your wellbeing

A listed investment company (LIC) buys a mix of different investments, such as stocks, bonds and property, and is publicly listed on the ASX where everyday investors can buy or sell shares in them. Like exchange traded funds, LICs enable investors to diversify their portfolio and potentially lower risk. LICs are managed by professional fund managers who charge a fee for managing the investments. They differ from listed investment trusts (LITs) because they’re structured like companies and issue shares, while an LIT is structured as a trust and issues units. Because LICs are listed on the share markets, they can be simpler to buy than mutual funds. There are more than 100 LICs and LITs on the ASX. Learn more about LICs and LITs.

The London Stock Exchange, or LSE, is the largest stock exchange in the UK and Europe. One of the world’s oldest stock exchanges, it was founded in London in 1895. In 1973 it merged with several provincial exchanges, including the Edinburgh exchange, to form the LSE. More than 1,300 companies from 60 different countries list on the LSE with a combined market cap of around US$4.861 trillion. These include Toyota (Japan), General Electric (US), and Rio Tinto (Australia). The FTSE 100 Share Index, or ‘Footsie’, includes 100 top blue chip stocks listed on the LSE, including Tesco, Vodafone, Barclays, BP and Rolls Royce. Read more about the FTSE 100

Large-cap (large capitalisation) companies have a market capitalisation (total dollar value) of around US$10 billion or more. They're typically well-established, industry-leading global companies with a significant market presence. Some are also blue chip companies, such as Apple (AAPL),  Microsoft (MSFT), and Johnson & Johnson (JNJ). 

Characteristics of large-cap companies are:

• Stability: Generally stable and less volatile than mid-cap and small-cap companies because most have been on the share markets for several decades, and have multiple revenue streams
• Dividends: Pay regular dividends, making them an option for income-focused investors‍
• Lower growth potential: May have lower growth potential compared to mid-cap and small-cap companies because they are already well-established (i.e. no longer in the growth phase of business; however Big Tech companies continue to innovate, so continue to grow revenue)

A ledger, or digital 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.

Liabilities are what a company owes to others. These can include loans, unpaid bills, mortgages, debts or other financial responsibilities. They fall under:

• Current or short-term or near-term liabilities: What’s owed as part of usual business operations within a year - such as monthly bills, short-term debt, expenses, wages, and dividends due to be paid to investors
• Non-current or long-term liabilities: What’s owed that are listed on a company’s balance sheet that aren’t due for more than a year. These can be sizeable and include things like deferred taxes, payroll, and retirement funds

Looking at a company’s liabilities is important for understanding whether they are in good financial health now and into the future.

Limit orders give investors some control over the price they buy and sell shares compared to market orders, and can be used to buy or sell shares at a lower price than they're currently trading at. To create a limit order, an investor enters the exact number of shares at the price they want to pay (buy), or receive (sell). The order will be completed for buyers, if the market price matches or goes lower; and for sellers, if the market price matches, or goes higher. Understand the differences between market and limit orders.

Liquidity, or liquid, means how simply and quickly an asset or security, such as shares, can be converted to cash funds without negatively affecting its market price. High liquidity means an asset can be quickly turned into cash without impacting its value, while low liquidity means an asset can’t easily be converted to cash without affecting its value. Money is the most liquid of assets, while tangible items - like houses - are less liquid. Investors value liquidity because it provides flexibility and reduces the risk of significant price fluctuations. There are two main types of liquidity:

• Market liquidity: Where assets can be bought and sold at stable, transparent prices
• Accounting liquidity: Assesses whether there’s enough available cash to pay off debts

The US share markets are considered the most liquid in the world because of their size and the volume of shares traded. For example, on 9 Jan 2020, around 28 million Telsa shares changed hands, compare that with the 100,000 or so Air New Zealand shares that were bought and sold over the same period.

When a share has low liquidity, it's at higher-risk for price manipulation (someone can come in and place large orders in rapid succession to inflate the price and then sell off everything). Historically, this behaviour has been seen with penny stocks, which is one of the reasons why you won't see many share prices lower than US$1 on the US share markets.

Understanding an asset’s liquidity - such as company stock - is important for making informed investment decisions.

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.

Listing is when a company’s IPO shares become available to buy and sell via a share market or stock exchange. A company goes from private ownership to public ownership by listing on a share market through an Initial Public Offering (IPO) a direct listing or a SPAC.

A lock-up period is when founders and some early investors and company employees are restricted from selling their shares after an IPO lasting usually between 90-180 days. The goal of a lock-up period is to avoid flooding the share markets with too many shares in a company and causing the share price to drop due to oversupply. Once the lock-up period ends and all restrictions are lifted, investors can sell or buy as many shares as they choose and that are available.

Losses in financial markets, bonds, shares, or real estate investments refer to negative financial outcomes. These occur when the value of an asset decreases, resulting in lower capital gains or investment returns. For example, falling stock prices or property values leads to losses for investors and property owners. These financial setbacks can impact an individual’s net worth and overall financial health.

The Magnificent 7, or Mag 7, are a group of seven high-performing, trillion-dollar tech companies listed on US share market the Nasdaq. They are Google parent Alphabet (GOOGL, GOOG ), Amazon (AMZN), Apple (AAPL), Facebook and Instagram parent, Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA). The term was first used in 2023 by Bank of America analyst Michael Hartnett to describe the Big Tech stocks that had boosted the S&P 500's 70% rally, starting in late 2022. Mag 7 takes its name from the 1960's Western film, The Magnificent Seven (remade in 2016 starring Denzel Washington and Chris Pratt). As indicated by Hartnett, these Big Tech stocks have had a significant influence on the global economy due to their size, growth, consistency, product market share, innovation and scalability.

To have perseverance, determination, persistence and dedication.

Whakataukī: 

I orea te tuatara ka patu ki waho — A problem is solved by continuing to find solutions

Market cap, or market capitalisation, is a company’s total dollar market value. This is their worth as determined by the share markets. A company’s share price and how many outstanding shares calculates their current value, which is: Share price x number of shares = market cap (value of the company).

Market cap categories

• Large-cap: US$10 billion or more
• Mid-cap: Between US$2 billion and US$10 billion
• Small-cap: Between US$300 million and US$2 billion

A diversified portfolio may include a mix of large-cap, mid-cap, and small-cap stocks or index funds to help balance risk and and potential gains.

A market order or buy 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.

Mergers and acquisitions (M&A) refer to two companies combining. In an acquisition, one company buys another outright, while a merger creates a new combined legal entity under one corporate name. M&A deals can be valued by comparing similar companies in an industry. M&A activities can also include acquisition of major assets, tender offers for stock, or even hostile takeovers. Not all M&A transactions succeed.

Mid-cap refers to companies with a market capitalisation (total dollar market value; also called market cap) of between US$2 billion and US$10 billion. Mid-cap companies sit between large-cap companies, valued at US$10+ billion, and small-cap companies, valued at between US$300 million and US$2 billion. Market cap is set by the share market, calculated by multiplying the company's current share price by its total number of outstanding shares. Examples of mid-cap companies on the US share markets the NYSE and the Nasdaq include Tinder and Hinge’s parent company, Match Group (MTCH), The Gap (GAP), Play-Doh and Nerf Gunmaker, Hasbro (HAS), and SentinelOne (S).

Mid-cap companies have three main characteristics

• Growth potential: Because they're often in the expansion phase of their business cycle
• Stability: They tend to be more stable than small-cap companies but offer higher growth potential compared to large-cap companies‍

Some investors prefer mid-cap stocks because of the potential balance between growth and stability.

The minimum subscription is the lowest amount of IPO shares investors need to buy for an IPO to complete successfully, which is typically 90%. If the 90% threshold isn’t met, the company returns the money from the orders placed. This situation is considered an undersubscribed IPO. While it’s not common, it could be due to poor promotion, or share market or economic conditions at the time.

There are three stages of money laundering where money gained through illegal activities is ‘cleaned’; placement, layering, and integration. 

• Placement — Criminals find financial companies, pakihi, industries or professions lacking processes that flag suspicious activity or transactions, such as weak identity checks, or not asking for an income source. Their illegally gained funds are then introduced into a financial system, such as depositing small amounts into a financial account, buying assets, like shares, or using cash-intensive businesses, such as laundromats, or drop-in gyms .
• Layering — The criminal tries to disguise the source of the illegally obtained money by buying and selling assets, and moving it through a complex series of financial transactions, like wire transfers, currency exchanges, and buying expensive items, like boats and cars. 
• Integration — Now that the money is 'clean', it’s reintroduced into the economy through activities like investing in legitimate businesses, or buying property. 

Read more about how money laundering could affect you.

A money market fund is a type of mutual fund that spreads money across lower-risk investments, such as cash, or cash equivalent securities, certificates of deposit, or US Treasury securities. These funds are managed by fund managers and backed by investment fund companies with the goal of keeping the value of the money stable. Learn more about money market funds.

A mutual fund is an investment where money is pooled together to buy a mix of assets, including equities, stocks, bonds and other securities. A mutual fund investment portfolio is managed by a fund manager. By investing in mutual funds, people diversify their investments, which can help reduce risk. Investors earn returns based on the fund’s performance minus fees and expenses. Unlike exchange traded funds and LICs that are traded on a stock exchange, mutual funds must be bought directly from the financial company that manages them.

To be confident, capable, bold, brave and have endurance.

Whakataukī:

Kaua e mate wheke mate ururoa — Don't die like a octopus, die like a hammerhead shark

Knowledge, wisdom, understanding, comprehension, insight, knowledgeable person, expert, expertise.

Whakataukī: 

Whaowhia te kete mātauranga — Fill the basket of knowledge

The New York Stock Exchange (NYSE) dates back to 1792 and is the world’s largest share market. It lists many blue chip companies and global brands, including American Express, Coca-Cola, Disney, IBM, and Johnson & Johnson. The total value of the companies listed on it is higher than the Nasdaq, Tokyo and London share markets combined. Like the Nasdaq, the NYSE is owned by a public company, Intercontinental Exchange (ICE). Learn about the NYSE.

The Nasdaq is a US share market that formed in 1971 and has been entirely electronic from day one. Most tech companies are listed on the Nasdaq. This includes Apple, Facebook, Microsoft, Amazon, Google, Tesla and NVIDIA. Like the NYSE, the Nasdaq is a public company, Nasdaq OMX Group (NDAQ). Learn more about the Nasdaq.

Net Asset Value, or NAV, is the value of the shares in a fund, such as an ETF or a mutual fund. NAV is calculated at the end of each trading day, as:

NAV = total asset value - total liability / total # shares outstanding

NAV as a financial metric helps investors understand the fund’s value and performance.

Net income (NI) also known as net profit or net earnings, is a company’s ‘bottom line’ (because it’s usually found at the bottom of an income statement). It’s the total amount of profit a company makes after all expenses, taxes, and costs have been subtracted from its total revenue. 

Net income formula:

NI is a key indicator of a company's financial health and profitability.

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When a company spends more money than it earns, it has a net loss. When a company’s total expenses are higher than a company’s income or revenue, they make a loss. In business, a net loss means a company isn’t making enough profit to cover their expenses. When a company in growth reinvests their profit in the business, they may report a net loss. If net losses continue and a company is unable to make a profit, this may indicate that the business is in trouble.

Net worth is the total value of an individual’s or company’s assets (everything owned that’s of monetary value, such as cash, investments, property, and personal belongings), minus their liabilities (debts and financial obligations, such as loans, mortgages, and credit card balances). 

Net worth formula:

Net worth provides a snapshot of financial health at a specific point in time. 

Over-the-counter markets, or OTC, refers to the markets that list more than 12,000 securities, which can include stocks, ETFs (exchange traded funds), ADRs (American Depository Receipts), bonds, commodities, cryptocurrency, penny stocks, or derivatives. OTC markets are decentralised, as opposed to centralised exchanges like the NYSE and Nasdaq, but most still meet SEC regulations. Companies may choose to list on an OTC market if they don’t meet the requirements of other exchanges - such as trading volumes, shareholder numbers, or reporting requirements - or when they can’t meet the listing fees - which in June 2024 sat around US$250,000 to list on the NYSE, and up to US$173,500 on the Nasdaq. The OTC markets are electronic only, and trades occur directly between two parties, typically with no intermediaries (such as brokerages or brokers), but many still use stock tickers like traditional exchanges. OTC Markets Group (OTCM) operates a public market for some over-the-counter securities - some that go on to list on the NYSE and Nasdaq. Three main OTC exchanges include:

• Best Market (OTCQX): Credible companies that meet high financial and reporting standards
• Venture Market (OTCQB): Younger companies in growth mode that meet lenient financial guidelines‍
• Pink Sheets: Considered the riskiest of all, this OTC market is known for trading volatile penny stocks that were made famous by The Wolf of Wall Street. This market is prone to fraud, shell companies and a lack of financial or company transparency.

An offer document, or prospectus, must be filed with the relevant stock exchange and be made publicly available, along with the S-1 for listing in the US, before a company can list shares for sale on a share market. Before investing in a company, investors can use this document to conduct their due diligence - looking at the company's assets, liabilities, financial performance, risk factors, and commercial potential for growth. The prospectus is updated before the listing date when the IPO price and number of shares are determined through the IPO process.

The prospectus includes information, such as how much money the CEO stands to make when the company makes their public debut, how much money a company intends to raise in their IPO, and what the company plans to do with the money (such as for growth or to pay off debt). It also includes information about a company’s competitors, and importantly, it’s the first time the world gets to take a look at the company’s total financial picture.

The offering price, or issue 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 opening share price is the initial cost of one share in a company when it’s first listed on a share market. It’s often different from the offering price of an IPO, which is the price of shares before the company is listed on a share market.

Operating margin measures the proportion of a company's revenue that remains after paying for their costs, such as wages and raw materials. It’s shown as a percentage and indicates how efficiently a company is managing their operations. The formula is:

• Operating income: This is the profit earned from a company's core business operations, excluding deductions for interest and taxes
• Revenue: This is the total income generated from sales of goods or services

A higher operating margin suggests that a company is more efficient at controlling their costs and generating a profit. A lower margin indicates they may be struggling with high operating expenses relative to revenue. 

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Options refers to financial contracts - called derivatives - that mean buyers have the right, but are not obligated, to buy or sell an underlying asset - such as stock, ETFs, commodities, indexes, interest rates, foreign currencies, or bonds - at a pre-agreed price and on a specified date. This is different from futures, where the buyer must buy the asset at the agreed price and date. There are two option types:

• Calls: Give the buyer the right to buy the asset at a specific price on or before a specific date without being obliged to complete the purchase
• Puts: Give the seller the right to sell the asset at a specific price on or before a specific date without being obliged to complete the sell.

Oversubscribed is when investors have requested more shares in a company during an IPO than there are available, meaning demand exceeds supply. An oversubscribed IPO means investors are keen to buy the company's shares, often leading to a higher IPO share price or more shares offered for sale. This is opposite to an undersubscribed IPO.

Passive usually refers to a passive investment strategy, which means an investment team or fund manager isn't making active investment decisions to try to beat an index. Instead, in a passive strategy, they endeavour to replicate the performance of an index. Because there's no human expertise involved, passive ETFs usually have lower fees. Fans of passive investing point to evidence that in the long run, it's unusual for an actively managed fund to beat an index and they prefer the low fees.

Pattern day trading (PDT) is like day trading but is governed by specific FINRA rules. PDT is when an investor buys and sells any stock 4 times within 5 consecutive trading days. To be allowed to do this by their broker or broker-dealer, an investor must have a minimum asset value of US$25,000 (cash and/or securities) in their brokerage account. When an investor is recorded as a PDT, they can make unlimited day trades. The US$25,000 requirement is a FINRA standard minimum equity. It acts as a cushion in a pattern day trader’s account to cover trades that haven’t settled (completed). It's necessary because day trading is considered risky for both the trader and their brokerage. 

Day trading is buying and selling the same shares or other securities such as options and currencies within the same trading day (during US share markets opening and closing). A person who trades this way is called a day trader. Day trading often used interchangeably with the term intraday trading. Day trading can also be used to describe frequent trading, such as buying and selling the same shares within a trading week. Typically, the aim of day trading is to benefit from stock movements and volatility hoping to make a capital gain quickly, which has not always proven to be successful for some day traders. Read more about pattern day trading and FINRA requirements.

A poison pill is a defence tactic used by companies to prevent a hostile takeover from a person, people or another company whose aim is to take control of a company without board approval. If someone buys 15% or more of a company’s shares, the poison pill can activate, meaning other shareholders could get a discount on new shares, which would dilute the acquirer’s holding in the company, and therefore their ability to take control of it. Courts recognise poison pills as a valid defence against hostile takeovers.

The combined holdings owned by an investor, which is all the company shares and exchange traded funds (ETFs) they own, is called a share portfolio. In its wider context, a portfolio may also include all their other investments, such as real estate, bonds and more.

The price range, or indicative price, 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.

The p/e ratio is a metric that compares the share price to the earnings per share. It can be used with other metrics to show a company’s performance over time, or compare companies in the same industry.

Priced in is a term used to describe a stock's price. It means that the market has already adjusted for the probable impact of positive or negative news affecting a company. For example, when upcoming events or expectations are widely known, they may already be reflected in a stock price. So if investors anticipate a company’s positive earnings, the stock price may already be higher and reflect this expectation. Similarly, if investors expect a company to report negative earnings - losses - the stock price may have already dropped and be priced in. Understand more about how share prices are calculated.

When a company goes public, they list their shares on the primary market where institutional investors, like hedge funds, investment banks and venture capitalists can buy them during the IPO period. After it’s public, anyone can buy and sell shares through a secondary market, known as a share market or stock exchange, such as the Nasdaq or the NYSE.

Profit is the money left after paying expenses. In a company's earnings, there are three main types of profit to look for:

• Gross profit: Remaining money after paying for goods or services a company sells
• Operating profit: What remains after a company also pays operating costs, such as rent, electricity, phones, Wi-Fi and, in some cases, employees or contractors
• Net profit: The final figure that represents what a company made after deducting all costs, debts, and taxes. In other words, net profit is what a company gets to keep.

Investors look at a company’s profit to decide whether it has been successful in the quarter, where:

• Gross profit shows the capability of the company to make money
• Operating profit indicates that that company is making money
• Net profit reveals how much money remains in the hands of the company after taxes and costs

A prospectus, or offer document, must be filed with the relevant stock exchange and be made publicly available, along with the S-1 for listing in the US, before a company can list shares for sale on a share market. Before investing in a company, investors can use this document to conduct their due diligence - looking at the company's assets, liabilities, financial performance, risk factors, and commercial potential for growth. The prospectus is updated before the listing date when the IPO price and number of shares are determined through the IPO process.

The prospectus includes information, such as how much money the CEO stands to make when the company makes their public debut, how much money a company intends to raise in their IPO, and what the company plans to do with the money (such as for growth or to pay off debt). It also includes information about a company’s competitors, and importantly, it’s the first time the world gets to take a look at the company’s total financial picture.

A public company, or publicly traded company, is a company listed on a stock exchange or the OTC markets. Ownership of the company’s stock is divided into shares. Public companies publish annual reports have higher levels of reporting, regulations, and public scrutiny compared to private companies, including being required to disclose financial information about their operations, including revenue, profit and net loss. Going public is another way of saying a company is going through an initial public offering (IPO). It’s a less formal term to describe how a company is moving from private ownership - owned by their founders, financial backers, and employees - to public ownership, where anyone can buy shares in the company on a share market.

Exchange rate, FX.

Investments, emergency fund, savings, nest egg.

Tino kai, tino ora te kōpū — Those who have the produce of their labour stored up will never want for anything
- Whakataukī 

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A quarter is three months in a company’s earnings calendar that measures one quarter of the financial year. Companies listed on the share markets are required to prepare and make public their quarterly earnings reports. Quarters are numbered Q1, Q2, Q3 and Q4, often with the year, eg. Q1 2023. The fiscal year runs from 1 January to 31 December, and fiscal quarters measure Q1 Jan-Mar, Q2 Apr-Jun, Q3 Jul-Sept, Q4 Oct-Dec. Not all companies operate on the fiscal year.

In the US, a quiet period is when the company going through an IPO to list on a share market must be quiet about the business. This is mandated by the SEC and often covers the dates between when documents are filed with the SEC and 40 days after the listing date. The aim is to enable the SEC to review and verify the information they’ve been given, and protect investors by ensuring the company doesn’t falsely inflate their value leading up to the listing date.

Real Estate Investment Trusts, or REITs, enable investors to invest in property through a company - called a REIT - that finances, owns, or operates real estate that generates income. REITs can include cell towers, data centres, commercial and residential property, such as warehouses, retail centres and malls. One of the world’s largest REITs, is ProLogis, which provides warehouses for companies that need shedloads of floor space, such as Amazon, Walmart and DHL.

REITs have special tax status in the US. Their status means they're exempt from paying corporate income tax but must pass on 90% of their profits as dividends to shareholders- some of these can be as high as a nearly 30% dividend yield. This means REITs can suit investors seeking to generate income while they hold shares over the long term. Historically, REITs have been one of the top asset classes in times of high inflation because over time, rents typically rise to help offset this increase. Learn more about REITs.

To be in difficulty, troubled, or have debt.

Whakataukī: 

He rā ki tua — Better times are coming

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Ratings, or analyst ratings, 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.

Rebalancing refers to index going through a periodic adjustment of an index’s companies, called constituents or components. Rebalancing involves moving (higher or lower), or adding or removing constituent stocks within an index, such as the S&P 500. This keeps the index relevant and reliable. For example, if an index tracks the tech sector, a rebalance may remove companies that have shifted away from tech, or adding new tech firms. The S&P 500 is rebalanced quarterly, but it may be rebalanced mid-way through a quarter if companies have been impacted by mergers and acquisitions, bankruptcies, or delisting from an exchange, which affect a company’s value.

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 retail investor, or everyday investor, is a person - as opposed to an investment firm - who puts money into an investment, such as shares listed on the share markets. They typically do this hoping to make a personal profit through capital gains, returns, or gain an income from dividends. 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.

Between 2019 and 2021, more than 10% of Kiwis started investing shares for the first time. Here are media articles from the time:

• Stuff: What kind of share market investor are you?
• Stuff: What's next for retail investors?

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Return on Assets, or ROA, is an efficiency measure that shows how efficiently a company uses their assets to generate profit. It’s calculated by dividing a company's net income by their total assets, and is shown as a percentage. 

ROA formula:

ROA shows how profitable a company is relative to their total assets. A high ROA means the company is more efficient at converting their investments into net income. A lower ROA means a company could improve.

Return on equity, or ROE, is a way to understand a company's performance. ROE measures a companies’ capability to generate profits from shareholders' equity. It’s calculated by dividing the company's net income (NI) by shareholder equity and is shown as a percentage. 

ROR formula:​

ROE can help investors see how effectively a company is using their assets to grow profits. For example, a high ROE may mean that a company is more efficient at generating profits from its equity financing. 

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Returns are the profit or loss that comes from an investment, such as a stock, or exchange traded fund (ETF). Returns help investors research shares and funds, and understand the performance of their investments.

There are two main types of returns:

• Capital gains: Profit made from selling a stock at a higher price than the purchase price
• Dividends: Payments made by a company to their shareholders, when a company has made a profit. 

Revenue is the total income generated by a public company from its business activities during each quarter. This figure is reported in the company's quarterly earnings reports, and includes all sales and other income sources before any expenses are deducted (such as for operations or debt). Revenue is an important indicator of a company's financial performance, and it’s closely monitored by investors and analysts to show whether a company is growing and is profitable.

Risk, or risky, refers to the likelihood that investments may fluctuate - known as share price volatility - which is the short term up and down movement of share values in the share market. Volatility in the share markets is considered usual, so investors need to manage their emotions around risk and volatility. Day trading is considered very risky.

RoR, or rate of return, shows how profitable an investment has been over a set period (including income from dividends). RoR helps investors see how their investments are performing, and can be used to compare against other investments (and doesn’t require a set time period). RoR can help with investors’ decisions to buy, hold or sell their investments.

The RoR formula is:

Example: If you invested US$1,000 in a stock, and after one year, the stock's value increased to U$1,200, and you received US$50 in dividends (income), the RoR would be 25%:

A roadshow refers to sales presentations the company delivers to large institutional investors before an IPO when they list publicly on a share market. The company's leadership team - the issuer - holds a series of meetings with potential investors to generate interest in their IPO.

The S&P 500 Index a market cap-weighted index, meaning that the companies that make up the index are some of the largest listed on the US share markets. To get on the S&P 500 index, a company must be publicly traded in the United States, meaning there American depositary receipts (ADRs) aren’t included on it. Companies also need to meet requirements for liquidity and have positive earnings for four consecutive quarters, including the most recent quarter. At the time of writing, there are currently 503 securities listed in the S&P 500. This is because it includes three dual-class companies, Alphabet Class A (GOOGL), Class B (GOOG), Fox Corporation Class A (FOXA), Class B (FOX), and News Corp Class A (NWSA), Class B (NWS). The S&P 500 is rebalanced quarterly, in March, June, September and December. This means that the 500 companies on the index are reviewed four times a year to see if they still meet the criteria. Learn more about the S&P 500.

S&P Global Ratings, which is colloquially referred to as 'S&P’, is an abbreviation of Standard & Poor’s, the name the credit rating agency (CRA) was called from 1941 until 2016. S&P is an American CRA based in Manhattan and is part of S&P Global. S&P provides independent credit ratings for various financial instruments, such as stocks, bonds and commodities, and their financial analyses can help investors make informed decisions. Learn more about the S&P 500 index.

The US Securities and Exchange Commission (SEC) is the regulator for the US share markets. The SEC is an independent government agency that aims to protect investors, maintain fair, orderly and efficient markets, and helps facilitate companies’ access to capital. Part of their job is to oversee the process of companies going public through an IPO and making sure they follow the rules.

Another way a company can list their shares on a share market is through a special purpose acquisition company (SPAC). A SPAC is essentially a shell company, or a ‘blank cheque’ company, set up by investors with the sole purpose of raising money on the share markets to merge with a private company and take it public. SPACs can be popular options to list on the share markets because they’re much faster and less complex than a typical IPO process. Companies like Rocket Lab (RKLB), Lucid (LCID) and Enovix (ENVX) have gone public in the US with a SPAC. Read more about SPACs.

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.

Savings is typically money stored in a bank account, ideally to earn interest but with ‘minimal returns’. Savings are considered one of the lowest risk places to store money, but low risk may mean low returns. Read more about saving vs investing.

A secondary offering is the sale of shares held by early investors of a company that has already gone through an Initial Public Offering (IPO) to list on a share market. This may happen alongside an IPO as an additional secondary transaction. Usually, the company doesn’t receive any cash or issue new shares. Instead, investors buy and sell shares directly from each other.

The legal definition varies between countries, but broadly speaking, a security is a tradable financial asset that holds monetary value, such as stocks, bonds and options.

Settlement, or settled, is when shares have been paid for and the cash received, completing a trade. It may take up to two business days after a trade is made for any cash payment to enter or leave an investing account. Settlement of a trade means that a buyer is required to pay for their trade and a seller is required to transfer their shares.

A share refers to a single unit of ownership in a company or exchange traded fund (ETF). Think of the total value of a company as a pie, and each share is a slice of that pie. Because companies often have high market caps, one person rarely owns the whole thing. So they are broken up into shares: Share price x number of shares = value of the company. While some companies are privately held, owned by founders, financial backers and employees, once a company goes public, anyone can buy and sell their shares in the company through the share markets. Shares are not the same as stocks, but the terms are often used interchangeably.

A share market, or stock exchange, is where buyers - called investors - and sellers trade company stocks, exchange traded funds (ETFs) and REITs. When a company goes public, it’s usually to raise capital (or pay debt), and investors have an opportunity to potentially see gains in their profits. Publicly listed companies have shares traded on stock exchanges like the New York Stock Exchange (NYSE) and Nasdaq. While share prices can be influenced by many internal and external factors affecting a company, stock market trends can show the health of a country’s economy, as well as investor sentiment.

The share price is the price you pay for one share (aka one unit of a company’s stock or ETF). A company’s share price can go up and down depending on many things, from the loss of key staff members to a company being the first to fly to space. To calculate the market cap (or total value) of a company, use this equation: Share price x number of shares = value of the company. Learn more about how share prices are calculated.

Shareholders are people or organisations that own shares in a company or exchange traded fund (ETF). Shareholders have a shareholding, meaning they are part-owners of the company.