Financial Glossary

Diversification

A basic rule of sound investing is to spread your money over a range of different investments – known as diversification. It's like the old saying: “Don't put all your eggs in the one basket”.

At SSFS you get the benefits of diversification at all levels of the investment process from multiple asset classes; multiple managers and multiple stocks and securities. Our investment process seeks to ensure that overall volatility – the ups and downs of investment returns over time - is lowered and long-term investment returns are more consistent for our clients

Having a diversified selection of investments also avoids the pitfalls of trying to time the market. History shows that different types of investments, and investment managers, perform better than others at different times for different reasons.

Your financial planner will help you develop a plan that's right for your individual circumstance and suggest a range of investments that suit you lifestyle goals.

Risk

Put simply, risk is the possibility of loss to your investment. Risk is inherent in all investments, in varying degrees. To forgo risk is to forgo the possibility of a return on your investment.

There are compelling reasons to embrace investment risk. You may wish to protect your investments from being eroded by inflation, or you may wish to have enough money to live comfortably during retirement. To achieve these goals, you must include a certain amount of growth or risk in your investment strategy. There are other alternatives to increasing risk, such as changing your objectives. These alternatives may be explored with your financial planner.

Currency

Movements in foreign exchange rates can significantly impact the value of international investments. All other things being equal, an increase in the Australian Dollar reduces the value of an overseas investment; while a decrease in the Australian Dollar increases the value of an overseas investment.

Currency hedging is used to protect the value of international investments from currency fluctuations. Hedging is a strategy that involves locking in the value of the Australian Dollar, over a certain period, so that the value of international investments is protected from currency movements.