Do You Speak Financial Jargon-ese?
I have a funny relationship with financial lingo. On the one hand, I love all the colorful terms traders and financial types use to spice up their everyday speech. (Option trading alone has its own treasure trove of lingo – much of it pretty racy, actually. Check out the strategy names on www.optionsplaybook.com and you’ll see right away what I mean.) On the other hand, though, I hate when abstruse language goes too far, clouding the issue for investors and giving advisors a linguistic shield to hide behind.
It’s in this mixed spirit that I give you CNBC’s guide to financial jargon your advisor may throw at you. My "favorite" of this collection? The “Law of Large Numbers.” Sounds like a grand, eternal rule of finance, doesn’t it? Actually it’s a CYA clause for your advisor explaining his or her lackluster returns on your capital. Here’s how CNBC defines it: “Simply put, it posits that beating large numbers — say, large numbers of investors (or other fund managers) — is very difficult to achieve. Put another way, it’s rare that your adviser will outperform the general market.” Hmm: if that’s true, then why exactly does it make sense to pay those heft advisory fees, year after year?
On a lighter note, I’m also a fan of the Financial Advice Generator, which randomizes a bunch of buzzwords into a scintillatingly opaque tip. This calculator also works for wine-related jargon and political-speak – could come in handy this election season!
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