Finance Jargon and the New Investor

When entering the world of investing, the terminology you’re confronted with can be confusing and daunting. It’s no wonder many people save their cash rather than invest it as they believe it’s more complicated than it actually is. However, with True Potential Investor you’re in good hands. Over the coming weeks we’re going to release several jargon busting blog posts to help you along your investing path. But to help us do that, we’ve spoken to one of our investors, Gillian Keith, to find out her view on the terminology used with investing.

When you first decided to invest directly, were you deterred at all by the jargon used?

Although I do find it intimidating to embark into unfamiliar territory, True Potential Investor is geared towards people like me, and the clear, helpful layout of the website helped me to access the information I needed to make my investment decision. Any jargon I didn’t understand, I simply looked up, and that helped me to feel more confident.

How did you initially learn about the basic terminology needed for self-directed investing?

My investing vocabulary has built up bit by bit over the years. I have learned most by doing bits of simple research as I go along. For example, my first stock market investment was a ‘Tracker ISA’, which follows the FTSE100. Just by finding out the definition of those two terms gave me a good picture of how my investment would work. I have done this kind of self-teaching all along, and gradually I have built up my investment knowledge.

Before investing, did you know the difference between a portfolio and a fund?

Yes, I knew the difference. But we use the word portfolio in many contexts and in many industries, so that’s not such a hard one! It seems a very obvious name for a group or a ‘bundle’ of investments. If one thinks of the word fund more simply as meaning ‘account’, it’s easier to imagine a collection of accounts making up a larger group, or portfolio.

If you read about diversification within a fund, would you fully understand the meaning behind it?

Again, it’s a matter of common sense and comparing the word to its other meanings and uses. We encounter diversification everywhere – in our workforces, in the number of types of a certain product and suppliers stocked by a supermarket, or even in the way forests are planted with different species. It makes perfect sense that a fund would have a sampling of products in order to spread risk and have the best chance of success. I guess it’s the same concept as not putting all your eggs in one basket!

Do you believe it is important for self-directed investors to be aware of the jargon used in investing? Why? Why not?

Yes, it’s important. You don’t have to know every term in the book, but if you want to take more responsibility for the growth and security of your own money, it goes without saying that you should have a reasonable awareness of how the process works. Thankfully, with all the information available to us online, it’s not that hard to learn!

Not being fully aware of the jargon used in investing shouldn’t be a deterrent. We understand that the terminology used can be confusing, which is why we partnered with the Open University to offer free access to our three personal finance courses as well as blog posts to educate our clients on matters they may not understand fully. We hope that these materials will be helpful, however if you find you need further information, please contact our team via the live chat button below.