What Does Financial Jargon Mean?

Confused by acronyms? Befuddled by investment lingo? Read our guide that explains the most commonly used investing terms

Adam Zoll 11 February, 2014 | 2:44PM

Novice investors are often thrown for a loop by some of the jargon investing professionals use, so much so that it can feel almost like listening to a foreign language. In some cases investment industry jargon is used as short-hand for complex concepts – such as when a professional mentions MPT, an acronym for Modern Portfolio Theory, a sophisticated investment approach aimed at optimising a group of holdings to balance performance and risk. In other cases jargon is simply used as a synonym for more commonly used verbiage – why the financial-services industry prefers the term "equities" to the more colloquial "stocks" seems more a matter of convention than anything else.

There's no Rosetta Stone edition that translates financial industry-speak to English (at least, not yet), but the following glossary is a start. Of course, this is just the tip of the iceberg, and new investing terms come into vogue all the time. But at a minimum, the terms defined below should help those who are new to investing or who sometimes are left scratching their heads after reading a fund manager's quarterly message.

Active/passive investment: Differing approaches to managing a fund's basket of securities, also known as its portfolio. Picking individual securities based on a strategy is considered active while building a portfolio based on an index is considered passive.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Adam Zoll  is an assistant site editor with Morningstar.com, the sister site of Morningstar.co.uk.

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