GLOSSARY

Gross yield

Dividends plus any franking credits attached, shown as a percentage of the last sale price of securities.

Downside protection

The use of an option or other hedging instrument in order to limit or reduce losses in the case of a decline in the value of the underlying security. Downside protection often involves the purchase of an option to hedge a long position.

Diversification

Allocating capital to a variety of investments in order to reduce exposure to any one particular asset or risk, with the aim of reducing the total risk of your investment portfolio.

Dividend yield

Dividends shown as a percentage of the last sale price of securities.

Dividend traps

Stocks are referred to as ‘dividend traps’ when their dividend disappoints expectations (often based on last year’s dividend) and their share price subsequently falls.

Dividend run up

This is a phenomenon where share prices on average outperform (relative to the market) in the period leading up to their dividend ex-date.