Allocation
Redemption Yield
See Yield.
Rediscount Rate
A repurchase or buy-back rate, set by the Reserve Bank (RBA) and changed from time to time in line with market rates. The RBA will rediscount or buy back Treasury Notes with a maturity date of less than 90 days; in times of tight liquidity authorised dealers and banks can generate cash by rediscounting notes.
Redraw Facility
A redraw facility allows you to make additional repayments on your mortgage, and then have access to the additional repayments if you need to. Make sure you understand the conditions attached to the redraw facility that can include a minimum amount and a fee every time you use it.
Refinancing
The practice by a company of retiring existing securities by the issue of new securities to save interest costs, consolidate debt or lengthen maturities, or some combination of these three goals.
Reflation
Restoration of deflated prices to a desirable level. When Governments reflate, additional money is printed, adding to the supply of money in circulation.
Registered Traders
Market makers in the Exchange Traded Options market.
Registry
An accounting firm or other organisation engaged to issue shares authorised by a company.
Regression Analysis
A statistical technique used to measure the impact (eg. on a share price) of a change in one or more variable factors.
Regulated Superannuation Fund
A superannuation fund which falls under the regulatory ambit of the SIS Legislation. A fund becomes a regulated superannuation fund when it elects to adopt a corporate trustee structure, or when its principal activity is the provision of age pensions to its members. Although not compulsory, the transition to a regulated fund is necessary to achieve complying fund status and to be eligible for concessional taxation treatment.
Reinsurance
The taking out of insurance to protect against risks to which the insurance company is not prepared to be exposed.
Relevant Interest
A legal status applying to some share investors under the Corporations Law. A person has relevant interest in a share if he/she has the power to either exercise or control the voting right or power to dispose of or control the disposal of that share.
Repatriation of Surplus
The payment of surplus from a Defined Benefit superannuation fund to the employer or sponsor of the fund. The circumstances in which repatriation of surplus may occur are usually set out in the Fund's Trust Deed, and are subject to certain provisions of the SIS Legislation (eg. a requirement that the Fund's members be given at least three months' notice of the return of surplus to the employer).
Replication
See Index Fund.
Repurchase Agreement
(`Repo') An agreement under which authorised dealers in the short-term money market transfer securities to the Reserve Bank in exchange for cash, on the basis that the transaction will be reversed at a later date on agreed terms. The transaction can also occur in the opposite fashion (reverse repo). The main purpose of these arrangements is to allow the Reserve Bank to manage liquidity in the money market.
Reserve Bank of Australia (RBA)
Australia's central bank; came into being in 1959 when the central banking activities of the Commonwealth Bank of Australia were transferred to the new entity. The RBA's role combines that of guardian of the financial system and confidant to the Federal Government. It has responsibility for the banking system and authorised dealers, as well as overseeing the activities of Australia's financial markets.
Reserve Currency
a) A country's foreign exchange account held by the Central Bank for the facilitation of the payments and receipts denominated in foreign currencies; b) A currency or commodity held as a safe haven, usually in US dollars and/or gold.
Reserves
a) The proportion of a company's profit not distributed to shareholders as dividends; b) An account kept aside by the trustees of a superannuation fund to cover declines in asset values or investment returns.
Resource Shares
Shares of companies engaged in mining, energy and commodity related activities, as opposed to Industrial Shares. These shares are classified as the Resource Sector in the All Ordinaries Index.
Retail Investment Products
Investment funds that are structured to accept investments from individuals. These funds are pooled and invested by an investment manager. A number of different types of funds exist aimed at meeting the investment requirements of individuals. (Opposite of Wholesale Investment Products).
Retirement Savings Account (RSA)
A proposed vehicle for superannuation savings, akin to a bank account, which could be selected by employees as an alternative to conventional superannuation funds. At the time of going to print (April 1996), the details of RSAs had not been finalised by the new Coalition Government. However, it is expected that they will be targeted particularly at part-time and casual workers who may be disadvantaged by the fee structure of conventional superannuation funds.
Return
The amount of money received annually from an investment, usually expressed as a percentage.
Return if Exercised
The estimated rate of return an option seller will gain as a percentage of the outlay in the event of it being exercised.
Rho
The ratio of the change in an option price to a change in interest rates.
Rights Issue
An offer made to a holder of an existing security to purchase new securities issued by the same company at a discount to the existing market, and able to be exercised within a relatively short (30-60 days) time span.
Risk
In its simplest sense, risk is the variability of returns. Investments with greater inherent risk must promise higher expected yields if investors are to be attracted to them. Risk can take many forms, but a major one is Valuation Risk paying too much for an asset. (See also Currency Risk, Exchange Risk, Exposure Risk, Market Risk, Operations Risk, Political Risk, Volatility).
Risk Aversion
The tendency to require a relatively high return in order to compensate for risk, or uncertainty, in the result. Risk averse investors will tend to settle for a relatively low-risk portfolio, where the return is more predictable.
Risk Aversion Factor
An expression of the degree of incremental return an investor requires to assume an additional unit of risk (or, conversely, the degree of additional risk the investor is prepared to assume to achieve a certain level of return). (See also Capital Asset Pricing Model).
Risk Capital
Another term for Venture Capital, or, alternatively, capital which an investor is prepared to lose if an investment fails.
Risk-Free Asset
An investment with no chance of default, and a known or certain rate of return. Typically in Australia the 90 day Treasury Note is used as a risk-free standard.
Risk-Free Rate of Return
A theoretical return that is earned with perfect certainty; it is without risk. In Australia, the risk-free return is approximated by reference to 90 day Treasury Note yields.
Risk Management
The monitoring and controlling of various risk factors in an investment portfolio with the aim of minimising volatility of investment returns.
Risk Premium
The extra yield over the risk free rate demanded by investors to compensate them for holding a riskier asset. This is an extremely important concept in relation to setting a long-term asset mix. (See Equity Risk Premium).
Risk-Return Spectrum
A concept used to illustrate that, in a rational marketplace, higher anticipated rewards are accompanied by incremental increases in risk (measured as the standard deviation of returns). The left end of the spectrum represents the lowest risk investments typically short-term government securities. Moving to the right on the spectrum, each incremental increase in expected return is accompanied by an incremental increase in risk. (See Efficient Frontier and accompanying illustration).
Risk Weighting
The assignment of percentage weightings to different forms of investments, reflecting their greater or lesser risks, for the purposes of calculating the capital adequacy standard to be observed by banks eg. the risk weighting for residential lending is currently set at 50%, while for commercial lending it is 100%.
Rollover
a) In relation to superannuation, the transfer of an eligible termination payment into an approved deposit fund, deferred annuity or superannuation fund prior to retirement in order to defer or (if the rollover remains in place until at least minimum retirement age) avoid the requirement to pay lump sum tax; b) In relation to banking, the renewal of a loan or extension of a deposit at defined intervals, normally including a revision of the interest rate charged or paid.
Rollover Payment Notification
A form which must be completed to notify the Tax Office and the former employer that an eligible termination payment is being rolled over.
Round Turn
A completed transaction in the futures market involving both a purchase and a subsequent sale or a sale followed by a liquidated purchase.
Royalty
Payment incorporated in the good or service's price which is paid to the owner of an asset (good or service) as compensation for its use.
RSA
Abbreviation for Retirement Savings Account.
R-Squared
The percentage of a portfolio's total return explained by market movements.
Rule of 72
A convenient technique for either mental or pencil-and-paper estimation of compound interest rates derived from the fact that a 7.2% return per year is the interest rate that will double the value of an investment in ten years. Hence, 'years to double' an investment with a given annual rate of return can be estimated by dividing the rate of return into 72. For example, if an investment's annual return is six percent, its value will double in approximately 12 years (72 divided by six); if an investment's annual return is nine percent, its value will double in approximately eight years (72 divided by nine). Similarly, the rate of return that will double the value of an investment in a given number of years can be estimated by dividing the number of `years to double' into 72. For example, the value of an investment will double in six years if the annual rate of return is approximately 12%.
Running Yield
See Yield.
A, B,
C, D, E,
F, G, H,
I, J, K,
L, M, N,
O, P, Q,
R, S, T, U,
V, W, X,
Y, Z.
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