We acknowledge and thank the FMA, Dr Karena Kelly and Brook Taurua Grant, the RBNZ and the Māori Dictionary for their research which helped us with te Reo Māori kupu for this glossary.

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Active, or active investment strategy

Hohe

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.

Allocation

Toha, or tohatoha

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.

American Depositary Receipt (ADR)

Some stock symbols are followed by '- ADR’, indicating they are American Depositary Receipts (ADRs). 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.

Analyst

An analyst is a financial professional who looks at publicly listed companies on share markets and makes a decision about whether their stocks are worth investing in, sometimes giving them ratings and sharing them on a website or with the media. 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, or ratings

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.

AGM, or annual general meeting

Each year shareholders meet with company directors and executives to hear updates about the company’s performance, finances and future operations. An AGM 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.

Assets, and asset classes

Rawa or rironga & momo rawa

An asset is defined as anything that holds monetary value. Anything owned by you or owed to you - your car, your phone, the $20 you loaned Rachel - is an asset. An asset class is a group of investments that share similar properties, behaviours 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.

AUA, or assets under administration

Assets under administration (AUA) 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.

AUM, or assets under management

Assets under management (AUM) 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.

ASX, or Australian Securities Exchange

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.

Auto-invest

Auto-invest 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, or bps

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.

Bear market

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.

Blue chip, or blue chip company

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.

Block

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

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).

Bonds

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.

Book-building process, or bookbuilding process

Tukanga hanga pukapuka

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.

Broker

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).

Broker sponsored

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 a sponsoring broker and the CHESS subregister here.

Brokerage

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.

Bull market

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

Karioi (long term)

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.

Buy order, or market order

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.

Capital

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.

Capital gain

Painga

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.

CBOE, or Chicago Board Options Exchange

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.

CHESS subregister

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 here.

Class A, Class B, Class C, and dual-class companies

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.

Clearinghouse, or clearing house

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 transactionsfor multiple parties.

Commodity

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.

Company

Pakihi

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, or compounding returns, or compounding interest

Tipu or tupu

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'.

Corporate actions

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. They can range from dividends and stock splits to mergers and acquisitions. Some corporate actions are voluntary, which means shareholders are asked to vote on them. An example is when a company invites shareholders to sell their shares back to the company at a specific price. Others are mandatory, meaning they happen automatically without shareholders voting on them. An example is stock splits, where the company’s board of directors (not the shareholders) approves the action to divide a stock into more shares.

Cryptocurrency, crypto

Cryptocurrency 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.

CSN, or common shareholder number

A common shareholder number (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.

Custodian

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

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.

Day trading

Hokohoko rā

Day trading is the act of buying and selling shares frequently. While some professionals have experience in day trading, the term day trading can also refer to retail investors who buy shares in companies to sell them quickly for what they hope is a profit. Learn more about day trading.

Derivative

A derivative is a financial contract with a value that depends on or is derived from an underlying 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, OTC derivatives are not, which means they can carry more risk.

Digital ledger, or ledger

Pukapuka tuhi

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.

Direct listing

Rārangi tika

A direct listing is an alternative 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 the middle-agent, like underwriters. 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 to ensure shares sell. Companies like Palantir (PLTR), Roblox (RBLX), and Coinbase (COIN) went public in the US with a direct listing.

Diversification

Whakakanorautanga or whakakanorau

Diversification is having multiple investments, such as shares in companies and exchange traded funds (ETFs) to limit impact of any one failing, and potentially lower investing risk. While the companies listed on the US share markets are usually billion-dollar behemoths, there's always a chance they may fail. But chances of all of them failing at once is unlikely. Learn more about diversification.

Dividends

Hua tūtanga pakihi or moni whiwhi or moni hua

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.

Dividend yield

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.

Dollar-cost averaging

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.

Dow Jones, or Dow Jones & Company

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.

Dow Jones Industrial Average (DJIA)

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.

Dual-listing

Dual-listing refers to a company trading their stock on two or more share markets, such as on both the NYSE and the ASX. A company with a dual-listing benefits from reaching more investors over wider time periods, and access to more liquidity and capital. 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.

Earnings

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.

EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortisation

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. EDITDA can be used to assess a company’s operating performance.

Effective date, or listing date

Rā whakarārangi

The effective date, or listing date, is the day a stock exchange lists the shares and when trading in a public market commences after an IPO. This happens once shares have been allocated (and usually once they’ve been paid for) and includes the exchange having given a company the stamp of approval to have their shares listed on a share market. To do this, the exchange has made sure a company can abide by all the exchange’s rules. On this date, the total number of shares is confirmed along with the listing price, and any investor, including retail investors, can buy shares in the company on the share market (even if you missed out on an allocation in the IPO).

Encryption, encrypted

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.

EPS, or earnings per share

Moni mo ia hea

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.

Equity, equities

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.

Equity market

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.

ETF, or exchange traded fund

Tahua or tahua taurima

An exchange traded fund (ETF) is a pre-filled basket with a variety of investments in it, such as companies, gold, bonds and property. As with KiwiSaver, your money gets spread across a bunch of investments in a single purchase. Because they deliver diversification, ETFs have been a popular method of investing.

An ETF that follows an index on Hatch is the S&P 500, which is a basket of the 500 largest companies on the US share markets. Investing in one of the S&P 500 ETFs means you spread your money across some of the world’s most recognisable brands. The S&P 500 has returned a historical average of 10% per year.

With Hatch, you can become a shareholder in more than 1,900 ETFs.

Exchange

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.

Expense ratio

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.

FIN, or faster identification number

A faster identification number (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 instrument, instrument

Financial 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.

Foreign investment funds (FIF)

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.

Form S-1, or registration statement

Puka S-1, or rehitatanga tauākī

For IPOs in the US, the S-1 is also known as a registration statement. It must by law include any material information about the company so potential investors can understand what the company does, why it is issuing shares through an IPO, the state of the company's finances (and debts), 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 IPO-ing. In other countries this might be called the Prospectus. The company must provide financial statements as part of these documents.

Fractional shares

Hautau

A fraction of a share is part of a full share of a company's stock, or exchange traded fund (ETF). Fractional investing means investor can buy portions of shares instead of buying whole shares - which can cost more than US$500,000. 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

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, gain

Painga

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

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 any investor can buy shares in the company on the share market that shares are listed on.

Gross domestic product

Gross Domestic Product (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.

Hedge fund

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

Hedging is an investment strategy that aims to reduce risk by taking an offsetting position in another asset. Think of it as insurance for your investments, where 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.

HN, or holder number

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.

HIN, or holder identification number

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 here.

Holding, or shareholding

Puri

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.

Index

Kuputohu

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.

Index fund

Tahua or tahua taurima

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.

Indicative price

Utu tohu

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.

Inflation

Tāmi ahumoni

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.

Instrument, financial instrument

Financial Instruments are assets that are traded, like securities, commodities or indexes. 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.

Invest, investing

Haumi 

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.

Investment

Haumitanga or haumitanga tūmau

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.

Investor

Kaiwhakarato moni or kaituku moni

An investor is a person or group that puts money into an investment with the hope of making a profit through capital gains, returns or income, like dividends or rent. Investors can be individuals, companies, mutual funds, 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.

Institutional investors

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.

IPO, or initial public offering

An Initial Public Offering (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. Want to know more? Learn more about how IPOs work and how to do your research.

Issue price, or offering price

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 share market supply and demand and how share prices are calculated.

Issuer

Pakihi

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

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.

Ledger, or digital ledger

Pukapuka tuhi

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

Kawenga or taumahatanga

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.

Liquidity

‍Liquidity means how simply and quickly an asset or security can be converted to cash 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

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

Listing, or being listed

Whakarārangi

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.

Listing date, or effective date

Rā whakarārangi

The listing date, or effective date, is the day a stock exchange lists the shares and when trading in a public market commences after an IPO. This happens once shares have been allocated (and usually once they’ve been paid for) and includes the exchange having given a company the stamp of approval to have their shares listed on a share market. To do this, the exchange has made sure a company can abide by all the exchange’s rules. On this date, the total number of shares is confirmed along with the listing price, and any investor, including retail investors, can buy shares in the company on the share market (even if you missed out on an allocation in the IPO).

Lock-up period, or lockup period

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.

London Stock Exchange

The London Stock Exchange (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 chipstocks listed on the LSE, including Tesco, Vodafone, Barclays, BP and Rolls Royce.

Losses, loss

Hēhē

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.

Market capitalisation, or market cap

A company’s market cap is their total dollar market value or their worth as determined by the share market and investment professionals. A company’s share price and how many outstanding shares dictates their current value: Share price x number of shares = market cap (value of the company).

Market order, buy order

A buy order or a market order is an instruction by an investor to a broker to buy or sell shares, bonds, or other assets at the best available price in the current financial market. 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 the purchaser sees when submitting a buy order may differ from the actual final price of the order due to after hours market movements that occur even when a market is officially closed.

Minimum subscription

Ohaurunga iti

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.

Money market fund

Tahua or tahua taurima

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.

Mutual fund

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.

Nasdaq

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

Net asset value (NAV)

Net Asset Value (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 loss

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.

New York Stock Exchange, or NYSE

The New York Stock Exchange (NYSE) dates back to 1792 and is the world’s largest share market. 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.

Opening share price

The opening 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.

Options

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.

OTC markets, or over-the-counter market

Over-the-counter (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.

Oversubscribed

Kua ohaurunga 

An IPO is oversubscribed when investors have requested more shares in a company than there are available - where 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, or passive investment strategy

Hāngū

A passive investment strategy means the investment team isn't making active investment decisions to try to beat an index; instead they spend their time replicating 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 the index, and they prefer the low fees.

Portfolio

Huinga haumitanga

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.

Price-to-Earnings (p/e) ratio

The p/e ratio is a metric that compares the share price to the earnings per share. The p/e ratio can be particularly useful when combined with other metrics for comparing similar companies working within the same industries, or the same company’s performance over a specific period of time. Like all metrics, p/e ratio is only useful when you use it within a wider context alongside other types of analysis.

Priced in

‍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.

Primary market

Maakete tuatahi

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 marke or stock exchange, such as the Nasdaq or the NYSE.

Price range

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.

Profit

Huamoni or moni hua

Profit is the money left after paying business expenses. There are three main types of profit to look for in company earnings:

• 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 cost

Prospectus, or offer document

The prospectus must be filed with the relevant exchange and be made public, 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.

Public, or going public

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 anyone can buy shares in the company through the share market it’s listed on.

Public company

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 anyone can buy shares in the company on a share market.

Quarter, and fiscal quarters

Hauwhā, or hau whā

A quarter is three months in a company’s calendar that measures one-quarter of the financial year. Companies listed on the share markets are required to prepare 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.

Quiet period

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.

Ratings, analyst ratings

Ratings, or analyst ratings, are the findings made by financial experts, or 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

Rebalancing refers to index rebalancing, which is the periodic adjustment of an index’s companies, called constituents or components. Rebalancing involves moving (higher or lower), or adding or removing component stocks within an index, like 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 during a quarter when company mergers, acquisitions, bankruptcies, or delistings from an exchange affect a company’s value.

Recession NZ

Timunga taiōhanga Aotearoa

A recession, or technical recession in New Zealand is two or more consecutive quarters of significant negative or slowing economic activity as indicated by gross domestic product (GDP). This typically refers to the production approach to GDP, which tallies the value of the goods and services produced in New Zealand. Changes in GDP reveal insights about the general health of the country’s economy. Recession is a normal part of the economic cycle, which fluctuates between expansion (growth) and contraction (recession) and can occur every 5-10 years. Learn more about recession.

Recession US

Timunga taiōhanga Te Hononga o Amerika, Te Unaititi Teiti, Ngā Whenua Tōpū o Amerika

A recession in the US uses more complex formulas than in New Zealand. Like NZ, a US recession is a significant downturn in economic activity over two or more consecutive quarters of negative gross domestic product (GDP). But US GDP also works in combination with other indicators, which may include nonfarm payrolls, industrial production, and retail sales.

REIT, or REITs

Real Estate Investment Trusts known as REITs are similar to ETFs and enable investors to invest in property through a company (REIT) that finances, owns, or operates real estate that generates income (without the hassles that come with being a landlord!). REITs can include cell towers, data centres, commercial and residential property like warehouses, retail centres and malls. One of the world’s largest REITs, for example, is ProLogis, providers of warehouses for companies that need shedloads of floor space, like Amazon, Walmart and DHL.

REITs have special tax status in the US meaning they avoid paying corporate income tax and that they must pass on 90% of their profits as dividends to shareholders, which can be as high as nearly 30% dividend yield. This means REITs may 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.

Retail investor, or everyday investor

Kaiwhakarato moni or kaituku moni

A retail investor is a person who puts money into an investment, like shares listed on the share markets, hoping to make a profit through capital gains, returns or income, like 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?
• The Spinoff: Understanding investing series

Returns

Paremata or hua or hua ahumoni or tōpūtanga hua more

A return is the money made on your investments over time. With shares, you can make returns in two ways:

• Selling your shares for a higher share price than you bought them for
• Through dividends.

Through the potential of compounding growth investors who own shares in companies and exchange traded funds (ETFs) for years or decades may see their investments grow in value over time.

Risk

Tūraru

Risk refers to the chance investments might 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 typical, and investors need to manage their emotions around risk and volatility.  

Roadshow

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.

S&P, S&P Global Ratings

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.

Savings

Pūtea penapena

Savings are typically money set aside after bills and spending needs are met, typically stored in a bank account, ideally to earn interest but with ‘minimal returns’. Savings are considered one of the lowest risk places to store your money,but low risk may mean low reward. Read more about saving vs investing.

Secondary offering

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.

Securities

Punga

The legal definition varies between countries, but broadly speaking, a security is a tradable financial asset that holds value, like stocks, bonds or options.

SEC, or Securities and Exchange Commission

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.

Share

Tūtanga pakihi or hea

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.

Shareholder

Whaipānga or kaipupuri hea

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.

Shareholding, or holding

Puri

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.

Shareholder benefits

People own shares hoping that as the company grows their share values grow alongside. Shareholders that own shares in a company or ETF that pays their shareholders dividends, may also receive regular cash payments when the company shares profits with their owners. Shareholders are invited to attend company AGMs, vote on their future decisions and leadership, and potentially influence how a company is run. Some companies have additional benefits for shareholders - the perks of being an owner.

Share market, or stock exchange

Maakete tūtanga pakihi or hea

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 gain 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.

Share price

Utu hoko tūtanga pakihi or hea

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.

SPAC, or special purpose acquisition company

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.

SRN, or securityholder reference number

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.

Stock

Despite how they are used in everyday conversation, a stock is not the same as a share. A stock represents ownership in a company as a whole (‘I own a company’s stock’), whereas a share is a unit of a stock (‘I own five shares in a company’s stock’). Does the difference matter? We don’t think so.

Stock exchange, or share market

Maakete tūtanga pakihi or hea

A stock exchange, or share market, 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 gain 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.

Street name

When an asset, like a share, is held in ‘street name’, it means your brokerage or custodian holds it for you. The name on the certificate belongs to the broker, but you still own the securities. This setup can make trading easier for some investors, and ensures compliance with rules. For example, brokerages and custodians are typically audited every year.

Stock symbol, or stock ticker, or ticker

A stock symbol or ticker is a series of 1-5 letters, or an abbreviation, that represents a company or ETF’s stock listed on a share market. They were introduced in November 1867, around the time of ticker tape machines, and were based on a ‘tick’ that shows movement of shares prices going up or down. They made trading across America more accurate and efficient using a shortened version of a company name. Today, some tickers are quirky and inventive, such as: Petco’s Health and Wellness Company’s WOOF, Harley-Davidson’s HOG, Cheesecake Factory CAKE, Dave & Buster's Entertainment’s PLAY, Gorilla Technology Group’s GRRR, Pacer US Small Cap Cash Cows CALF, Steven Madden’s SHOO, Southwest Airlines’ LUV, and Olympic Steel’s ZEUS. Learn more about the history of stock tickers here.

Trade, or order

Hoko

In financial markets, a trade is buying or selling securities, commodities, or derivatives. On a share market like the NYSE or Nasdaq, a trade is when an investor sells shares to another investor. With Hatch, you can place four types of orders:

• Market order - Buying and selling shares in real-time (or when the markets next open)
• Auto-invest - A market order will be placed on your behalf at the frequency you choose, such as ‘the 21st of every month’ or every fortnight, month, quarter, etc
• Limit order - Enter the exact number of shares and price wanted to buy or sell shares; if the share price isn't reached, the order will not be completed
• Stop-loss orders and stop-buy orders - Instructions to sell shares if they drop in value to a certain price, called the stop price

Undersubscribed

Kāre i ohaurunga 

The minimum subscription is the lowest amount of IPO shares investors need to buy for a company’s IPO to complete successfully and list on a share market - typically 90%. If the threshold isn’t met for a minimum subscription, it’s considered an undersubscribed IPO - where supply is greater than demand. While it’s not common, the company returns the money from the orders placed. An undersubscribed IPO can be due to poor promotion, overpricing, or share market or economic conditions at the time. It can also be referred to as underbooking. This contrasts with an oversubscribed IPO.

Underwriter

Kaiwhakaoati

Underwriters are investment banks like Morgan Stanley or JP Morgan that work closely with companies to manage the end-to-end IPO process. They help decide the initial offering price, promote the IPO in a roadshow and distribute shares to investors. They reduce the company’s risks during the IPO process by agreeing to assume the risk of buying all or a portion of the shares to be issued in the IPO and then selling those to the public at the IPO price. But of course, they command big fees for doing so.

Volatility, or volatile

Volatility refers to how much the price of an asset, such as a stock or cryptocurrency, can go up or down in value. When an asset is considered volatile, its price can change rapidly in either direction. Investors often consider volatility when making decisions about buying or selling assets. High volatility can mean higher risk but also potentially higher returns.

Year-to-date, or YTD (for calendar year)

Year-to-date, or YTD, refers to the time from the beginning of the current calendar year up to the current date, usually from 1 January up to today. YTD provides a snapshot of progress so far in the year. It’s useful for looking at business trends, comparing how stocks are tracking against other stocks or their own stocks performance one year ago - that is have they gone up or down - and calculating things like returns and a company’s market cap.

Year-over-year, or YOY, or YoY

Year-over-year, or YOY, compares performance of a stock, ETF or REIT today with the previous year, that is, 12 months ago. Analysts and companies commonly use YOY comparisons to look at growth or declines, trends, and to understand whether a company’s or ETF’s strategy or decisions have been successful. Understanding year-over-year changes is valuable for investors who want to understand performance and progress of an investment over time.