Getting to know your investment terms

LEARNING CURVE: DECODING FINANCIAL LANGUAGE IS TO YOUR BENEFIT

Being financially fit takes us a step closer towards being savvy and responsible with our money.

One of the best ways to make your money work for you is to invest it wisely, but many of us are simply too afraid to take the plunge or else don’t know where to invest because of a lack of financial education.

Investing terms – like anything

else related to financial education – requires extensive research and time to study in order for you to get fully immersed and understand them. Here are some investment terms explained, related to index funds.

Index funds

Index funds are passively-managed unit trusts that track indices by holding the physical assets of the indices they track. These are traded like shares on a stock exchange. Index funds may track one or more domestic or international equity, bond, property, commodity and money market indices. You can manage your index fund through a registered financial advisor or robo-advisor.

Index fund portfolios

Portfolios are discretionary managed portfolio products that track the market by investing in a basket of low-cost index funds. These baskets represent domestic and international money market, fixed income, property and equity indices, according to an asset allocation model that is risk adjusted.

Tax-free (TFSA) savings account

A TFSA is an effective way to save for your goals, because any interest, dividends or capital gains will be free of tax. A TFSA may contain one or more selected passively-managed index funds that track indices by holding the physical assets of the indices they track. These are traded like shares on a stock exchange.

Retirement annuity (RA)

RAs are low-cost, penalty-free investment products that you can get through your financial advisor, which track the market according to pension fund regulations. This is achieved by investing in a basket of low-cost index funds which represent domestic and international money market, fixed income, property and equity indices.

Preservation fund

Preservation funds are lowcost, penalty-free investment products which preserve pension fund assets when one changes jobs. They track the market according to pension fund regula- tions. This is achieved by investing in a basket of low-cost index funds which represent domestic and international money market, fixed income, property and equity indices.

Living annuity

Living annuities let you choose and switch between low-cost, penalty-free, risk-adjusted index portfolios. These track the market by investing in a basket of lowcost index funds which represent domestic and international money market, fixed income, property and equity indices according to an asset allocation model that is risk adjusted. Beneficiaries nominated by you receive the residual value, free of any estate duty, on the death of the annuitant.

You can get these products through a registered financial advisor or through digital robo-advisor platforms.