Do You Speak Financial Jargon-ese?

bigdog posted on 10/25/12 at 10:47 AM

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 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!

Be good,
Don Montanaro
TradeKing CEO

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Posted by bigdog on 10/25/12 at 10:47 AM


spshapiro posted October 26, 2012 (11:45PM)

As you may have recognized by now, I am much fascinated by the use of language. It particularly disturbs me to see how it is used to obfuscate or deceive. It seems to me that if you are an adult speaker of a language, or even a child who is a native speaker, then if you find yourself in a situation where you don’t understand what another speaker is saying, the safest assumption that you can make is that the other is trying to get over on you.

Now, I’m not against looking up something you don’t understand, but I’m aware that many just assume that the other is far more the expert in the area, and they just assent to whatever is said to them on the basis of the other’s expertise. It is quite easy to wind up getting screwed flowing this path.

I have seen this in many different areas in my life experience, frequently in relation to things in the legal or medical arena. Frankly just because someone has gone to school for many years is no reason to assume that they know what they are talking about, or more likely, aren’t stating the case in a self serving manner.

This is not a phenomena only located in the professional arena. I have felt that it is ridiculous that girls are not given training in shop, and boys don’t learn sewing and cooking. You may never use these skills in your adult life, but you are much less likely to be ‘taken’ if you have some knowledge of the area.

The point here is simple. If the only reason that you are doing something is because this trusted authority tells you should do it, you are liable to get hurt. If you can’t explain what you are doing, and why to a third party, then you shouldn’t be doing it.

spshapiro posted October 27, 2012 (08:26AM)

I just reread what I wrote last night, and I meant to say "following this path" not flowing. Can I blame it on the drugs, no, I'm just a lousy editor.

bigdog posted October 29, 2012 (04:42PM)

Couldn't agree more, Spshapiro. Jargon definitely functions as a badge of belonging (or not) to a private club. I'm not wild about how some "experts" in financial services use that language to intimidate or confuse clients. That's why we encourage our folks to use the phrase, "I don't know" and welcome it whenever a client asks for a clarification. (I posted about our "I Don't Know" philosophy way back in the early days of my blog.) As my dad always says: there are no stupid questions except the ones you don't ask!
Meanwhile, if you're enjoying the tongue-in-cheek aspects of jargon, you might get a kick out of this satirical dictionary of business slang:

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