We believe a glossary is key for any client trying to navigate through the range of complex terms and jargon in our industry.
Our most frequently defined terms are defined below but if there's something you think we should add, please contact us.
A bond is said to exhibit negative convexity when its price rises less for a downward move in yield than its price declines for an equal upward move in yield.
The purchase of an investment using borrowed funds, where the interest on the borrowing exceeds the income derived from the investment. For tax purposes, this negative net income can be offset against income gained from other sources. Negative gearing is most often associated with purchases of investment real estate, but can also apply in the case of shares or managed investments.
Net Asset Value (NAV)
The market value of assets less the net present value (NPV) of any liabilities.
Net Present Value (NPV)
A method used in evaluating investments whereby all future cash flows are first discounted at a given discount rate and then added. An investment is acceptable if the NPV is positive.
Nominal amount or value
The value stated on the face of a security.
Nominal interest rate/nominal rate of return
The rate of interest or return before adjustment for inflation.
A security that is less sensitive to movements in the business cycle than a cyclical stock. For example, the performance of a utility company may be little impacted by an upturn or a downturn in the economic cycle. See also cyclical stock.
Loans on which the borrower is not making interest payments or repaying any of the original capital.