APA Savings & Investments (LIA, Ireland) flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Real return

Nominal return minus the inflation rate. It shows the change in purchasing power and lets you compare a savings rate against rising prices.

Compound interest formula

A = P(1 + r/n)^(nt), where P is principal, r the annual rate, n the compounding periods per year and t the number of years.

Rule of 72

Estimates doubling time by dividing 72 by the annual percentage return. At 6% a year, money roughly doubles in about 12 years.

Simple interest

Interest calculated only on the original principal, using I = P × r × t. Interest is not reinvested, so growth is linear.

Gross versus net return

Gross return is before tax and charges; net return is what the investor keeps after deductions such as DIRT and fund charges.

DIRT

Deposit Interest Retention Tax, deducted at source on interest earned on Irish deposit accounts. It reduces the net return on savings.

Annual management charge

A percentage fee deducted from a fund's value each year. It reduces net return roughly one-for-one and compounds against the investor.

Diversification

Spreading money across assets, sectors or regions so that one poor performer does not dominate the outcome. It lowers asset-specific risk.

Systematic risk

Market-wide risk affecting all assets, such as recession or interest-rate shifts. It cannot be removed by diversifying within a portfolio.

Unsystematic risk

Risk specific to one company or sector. Holding a spread of assets reduces this type of risk without lowering expected return.

Risk–return relationship

The principle that higher expected returns generally require accepting more volatility, less liquidity or greater uncertainty of capital.

Investment time horizon

The period before the money is needed. Longer horizons can tolerate more volatility; short horizons favour capital-secure savings products.

Liquidity

How quickly an asset converts to cash without significant loss of value. Deposits are highly liquid; property and some funds are not.

Equity investment

Buying shares, giving part-ownership of a company. Returns come from dividends and price growth, with capital at risk.

Government bond

A loan to the state paying a fixed coupon and repaying face value at maturity. Prices fall when market interest rates rise.

Unit-linked fund

An investment pooling money into units whose value moves with underlying assets. The investor bears the investment risk.

Deposit account

A savings account with a bank or similar institution paying interest. Capital is generally secure and access is usually immediate.

Inflation erosion

The fall in the real value of cash savings when prices rise faster than the interest rate paid on the deposit.

Regular saver

An account where fixed amounts are lodged monthly, often at a higher rate. Interest accrues on each instalment from its deposit date.

Credit union structure

A member-owned, not-for-profit cooperative. Members share a common bond and are both savers and potential borrowers.

Common bond

The shared link qualifying people for membership of a credit union, such as a workplace, locality or community association.

Deposit guarantee limit

Irish deposit protection covers eligible deposits up to €100,000 per depositor per institution, including credit union savings.

Credit union dividend

A return on members' shares declared at the annual general meeting from surplus. It is not guaranteed and varies year to year.

Loan-to-savings ratio

The maximum a member may borrow expressed as a multiple of their shares. Each credit union sets its own limit in lending policy.

Reducing balance interest

Loan interest charged on the outstanding balance rather than the original amount, so repayments lower the interest charged over time.

Credit union reserves

Accumulated surplus held as a statutory buffer against losses. The required level is set as a percentage of the union's assets.

Pledged shares

Member savings committed as security against a loan. They normally cannot be withdrawn until the loan is repaid.

Credit union loan

Borrowing from a member-owned cooperative, typically repaid in fixed instalments with interest on the reducing balance.

Credit union AGM

The annual general meeting where members receive accounts, elect directors and vote on the dividend and other resolutions.

Board of directors

Voluntary members elected by the membership to govern the credit union, set policy and oversee management and compliance.

Credit union surplus

Income from loans and investments less running costs and reserve transfers. It funds the dividend and supports member services.

Share withdrawal

A member redeeming their savings from the credit union. Access may be limited while shares secure a loan or notice terms apply.