One of my biggest pet hates is business jargon.
Words that sound fancy but make no sense whatsoever.
For example, what’s a bear market? Stalls that sell live grizzlies?
And how about a dead cat bounce? A trampoline centre for deceased felines?
When you write, you want to do so as clearly as possible, with no room for ambiguity or confusion.
Here are 15 of the most confusing investment terms:
1) ETF – stands for exchange-traded fund, which is essentially a fund that trades on exchanges, generally tracking a specific index. While stocks are just one instrument, an ETF consists of diversified investments such as stocks, commodities, bonds, and other securities, which are known as holdings. ETFs are often less volatile than individual stocks, meaning your investment shouldn’t swing in value as much, however, there is still a risk in loss of value.
2) IPO – stands for initial public offering. This is when a private company becomes public by selling its shares on a stock exchange. Companies often issue an IPO to raise capital to fund growth initiatives, raise their public profile or to pay off debts.
3) Broker – is an individual or firm that acts as a middleman between an investor and a securities exchange. They enable trades between individuals or companies and may provide investors with research, investment plans and market intelligence.
4) Arbitrage – defined in the Cambridge Dictionary as ‘the method on the stock exchange of buying something in one place and selling it in another place at the same time, in order to make a profit from the difference in price in the two places’.
5) ADR – is an American depositary receipt for foreign companies that are listed on US stock exchanges. An ADR is a form of equity security, offering US investors the opportunity to gain investment exposure to non-US stocks without the complex task of dealing with foreign stock markets. Many large companies based outside of America list their shares on the US exchanges using ADRs.
6) Bear market – is defined by a prolonged drop in asset prices. Typically, a bear market happens when a broad market index falls by 20% or more from its most recent high. It’s believed that the term originates with pioneer bearskin traders. As the traders hoped to buy the fur from trappers at a lower price than what they’d sold it for, bears became associated with a declining market.
7) Bull market – is the opposing term to bear market. Bull market refers to a period when the price of an asset or security rises continuously by 20% after two declines of 20% each.
8) To the moon – often used by stocks and cryptocurrency traders, the phrase ‘to the moon’ essentially means the price of an asset is continuously growing.
9) Dividend yield – is a financial ratio that tells you the percentage of a company’s share price that it pays out in dividends each year. Some investors, such as retirees, rely on dividends for their income, meaning the dividend yield of their portfolio could have a meaningful effect on their personal finances.
10) Dead cat bounce – is a temporary recovery in share prices after a substantial fall, caused by speculators buying in order to cover their positions. Derived from the famous Wall Street phrase “even a dead cat will bounce if it falls from a great height”, dead cat bounce is now applied to any case where there’s a brief resurgence after a severe decline. You may also hear this referred to as a sucker rally.
11) Tanking – means that a stock has encountered a poor quarterly performance, leading to a price decline shortly after. If someone says their assets are tanking, it means they aren’t performing very well.
12) Averaging down – investors use this term when their investment decisions go against them. Averaging down involves buying more shares after they fall in price, lowering the average cost of all the shares held, in the effort to add value to their portfolio.
13) Whales – is a nickname given to investors who have the potential to manipulate the market. A whale can be an individual or company with enough money or power to influence the price of a stock. These individuals usually make huge investments, with their actions causing a huge splash.
14) Day Trading – is a strategy which involves buying and selling shares or stocks within the same day with the intent of profiting from price movements. For example, a day trader may open a new position of a stock at 9am, then close that same position at 2pm. These traders rarely hold positions overnight.
15) Margin Account – involves borrowing funds from your broker-dealer to purchase securities, using the account as collateral. You will also be required to pay a periodic interest rate to the broker. A margin account can increase your purchasing power, however it can also expose you to greater losses.
- Need to put your key message into simple, clearly-written English? Give me a call on +44 (0)7949 590213 or email firstname.lastname@example.org
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