Like most highly specialized industries, financial services has a unique set of words and phrases that mean little to people outside of the industry.
That’s essentially the definition of industry jargon, and it isn’t always a bad thing. For example, when you’re writing or speaking to other professionals within your industry, those industry-specific words and phrases can sometimes be the fastest and most effective ways to communicate.
But when you’re sharing information with anyone who doesn’t work in financial services, including investors, industry jargon can be confusing at best and completely meaningless at worst. Here, we’ve chosen five terms to avoid when writing for investors.
To people outside financial services, headwinds and tailwinds are something they experience when they’re on an airplane. When they fly west, they have to deal with headwinds, so their flight takes longer. When they fly east, they benefit from tailwinds, so their flight is a bit quicker.
Hmm… that must mean that headwinds are bad and tailwinds are good, right? Usually, but your reader had to make a lot of connections before they could figure out what you were trying to say. Why not say “challenges” or “benefits” if that’s what you mean? Better yet, be specific and explain exactly what challenges or benefits you’re talking about.
Be specific and explain exactly what challenges or benefits you’re talking about.
This is another term that takes on an entirely different meaning outside of the financial world. It generally means the opposite of spiritual or religious. If that’s what you’re writing about, “secular” is absolutely the right word to use. If not, the term you’re probably looking for is “long term.” To avoid any confusion, keep it simple.
3. Upside potential/downside risk
For people who don’t have in-depth knowledge of banking and investments, these terms lack any meaning.
We understand that it’s much simpler to write “upside potential” than it is to explain that you expect a certain stock price to increase over the short term and to tell your readers why. But if your audience doesn’t understand what you’re writing about, why write it at all? We would say the exact same thing about the term “downside risk.”
If your audience doesn’t understand what you’re writing about, why write it at all?
4. Alpha and beta
When an investor reads about a fund’s performance, they typically care how that fund performed relative to a benchmark index. If a fund had higher returns than the index, just say so. There’s no reason to throw the word “alpha” in there.
The word “beta” is a bit different, because it has a very specific meaning when you’re talking capital asset pricing models, and there’s no other word that quite works. If you have to use “beta” in that context, consider defining it for investors.
However, we find that “beta” is often used to mean risk or volatility in general. If that’s what you mean, either of those words would be a much better choice.
5. Underlying fundamentals
This one makes our list because it can mean so many things that it becomes almost meaningless to investors. If you’re writing about a certain company, are you focusing on its revenues, earnings, assets, liabilities or all of the above? The defining “fundamentals” of a given sector could range from pricing structure to regulatory issues to supply versus demand.
The term gets even fuzzier when you’re talking about the underlying fundamentals of a broad market. Avoid this term completely and explain exactly what factors you’re concerned about or encouraged by.
This list is far from complete, but it’s a good place to start if you’re looking to make your writing more investor-friendly.
Looking to make your investment commentaries more accessible to investors? Contact us at 416.925.1700, 1.844.243.1830 or firstname.lastname@example.org.