Authorised Financial Adviser (AFA): AFA is not a qualification. From 1 July 2011 New Zealand’s adviser regulatory regime requires those offering investment planning services or personalised financial advice on category 1 (investment) products to be registered with the Financial Markets Authority (FMA)). AFA financial advisers must also comply with the “Code of Professional Conduct regulations for Authorised Financial Advisers”. The public can search the advisers register on line.

The Australian and New Zealand Institute of Insurance and Finance (ANZIIF): The leading provider of education, training and professional development services for the insurance and financial services industry in Australia, New Zealand and the Asia Pacific region.

Benchmark: The standard by which an investment is compared against to evaluate performance.

Certified Financial Planner CM (CFPCM): A Certified Financial Planner is recognised internationally as the highest credential for financial planning. In New Zealand it is awarded by the Institute of Financial Advisers (IFA) after completion of initial and ongoing certification requirements.

Dollar-Cost Averaging (DCA): The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low and fewer shares are bought when prices are high. Also referred to as a "constant dollar plan".

DCA Explanation:Eventually, the average cost per share of the security will become smaller and smaller. Dollar-cost averaging lessens the risk of investing a large amount in a single investment at the wrong time. For example, you decide to purchase $100 worth of XYZ each month for three months. In January, XYZ is worth $33, so you buy three shares. In February, XYZ is worth $25, so you buy four additional shares. Finally, in March, XYZ is worth $20, so you buy five shares. In total, you purchased 12 shares for an average price of approximately $25 each. Kiwi Saver effectively employs this same DCA principle when investors make regular monthly contributions.

Excess Return: The return in excess relative to its benchmark.

Funds Under Management (FUM): The total amount of money managed by an asset management firm.

Financial Markets Authority (FMA): The government agency in New Zealand responsible for financial regulation.

High Water Mark: The highest net asset value (NAV) reached to date. If the NAV of a fund falls below this highest peak value, no performance fee will be payable to the investment manager until this level is exceeded.

Hurdle Rate: The minimum rate of return an investment must achieve before a performance fee can be charged.

Index: A statistical measure of change in an economy or securities market. In the case of financial markets, an index is an imaginary portfolio of securiteis (bonds, property or shares) representing a particular market or a portion of it. Each index has its own calculation methodology and is usually expressed in terms of a change from a base value. Thus, the percentage change is more important than the actual numeric value. Stock and bond market indexes are used to construct index mutual funds and exchange-traded funds (ETFs) whose portfolios mirror the components of the index.

Index explanation: The Standard & Poor's 500 is one of the world's best known share market indexes, it tracks the share performance of the top 500 listed companies in the USA and is the most commonly used benchmark for the stock/equity market. Another local prominent indices is the NZX 50 a measure of performance of the top 50 New Zealand listed companies by market capitalisation. Because, technically, you can't actually invest in an index, index mutual funds and exchange-traded funds (based on indexes) allow investors to invest in securities representing broad market segments and/or the total market. These index tracker funds are generally cheaper than actively managed funds because there is no active management and no underlying company visits. However they will track the market down as well as up.

Indirect Cost Ratio (ICR): The ratio of indirect costs to the total investment of a particular fund. It expresses the expenses incurred by a fund as a percentage of its average net asset value through a year. Expenses include the MER, expense recoveries, performance fees and other costs.

Information Ration: The ratio calculating relative reward to relative risk.

Institute of Financial Advisers (IFA): The main professional body for financial advisers in New Zealand, creating a community of professionals offering advice on financial matters governed by a code of ethics, practice standards and rules.

Management Expense Ratio (MER): A measure of what it costs to operate a managed investment fund expressed as a percentage of a fund’s net asset value.

Sharpe Ratio: The ratio of risk adjusted performance, measuring excess reward for the extra risk taken.

Performance Fees: A fee that may be charged by the investment manager in excess of the ongoing management fee. There is often a hurdle rate and/or high water mark requirement before this fee is payable.

Personal Financial Goal Posts: This term relates to financial planning and draws on an analogy with goal posts in sport. A Certified Financial Planner CM  can work with you to determine your goals, and then consider alternative strategies and their risks to best help you achieve them.

An example of financial goal posts; I want to be:

* Mortgage (debt) free, and

* Financially independent, by age 66

Registered Financial Advisers (RFAs): Are exempt from the code and can only offer financial advice on category 2 products (i.e. less complex products such as insurance only and bank term deposits).

Standard Deviation:The variability of the monthly returns of the fund.

Tracking Error: A measure of how closely a portfolio follows an index to which it is benchmarked.