Jargon buster: financial phrases simplified for you

JUST SA’S weekly jargon buster aims to give simple, plain English explanations for typical words and phrases used in the financial industry, in particular, words relating to guaranteed life annuities and living annuities.

This week, we look at the letter: I Source: Just Retirement SA, info@justsa. co.za.

The jargon buster is intended for information purposes only. It should not be regarded as advice as defined in the Financial Advisory and Intermediary Services Act 37 of 2002, or any form of advice in respect of the policy, retirement, tax, legal or other professional service whatsoever. You are encouraged to seek advice from an authorised financial adviser or to independently decide what financial product is appropriate for you based upon your own judgement and understanding of your financial needs.

Just Retirement Life (South Africa) Limited is a licensed life company, regulated by the Prudential Authority of the South African Reserve Bank and the Financial Sector Conduct Authority as an authorised financial services provider (FSP number 46423).

Inflation

Inflation describes the average increase in the price of goods and services. It is viewed over a set period, such as a month or year. If the inflation rate is 5%, for example, a loaf of bread that cost R10 last year would cost R10.50 this year. The purchasing power of money decreases over time, affecting the cost of goods and services. This is why long-term investments need to factor in the impact of inflation over time.

Investment risk

When you make an investment, there is a risk of losing money. For most investments, the outcome is uncertain. An investment is considered to be “safer” when there is a higher chance of getting your money back.

Conversely, when something is considered to have a high investment risk, there is a possibility that you may not get back all the money you invest. Risk and return are linked and usually the higher the risk, the higher the potential return.

FOLLOW OUR WEEKLY JARGON BUSTER TO HELP YOU UNDERSTAND A WORD OR PHRASE YOU MIGHT NOT KNOW