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
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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.

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About Author

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