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Why You Should Avoid Jargon in Investment Commentaries

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Why You Should Avoid Jargon in Investment Commentaries

Sometimes jargon is useful, and can be used as an efficient way for investment professionals to discuss obscure and complex topics with precision.
 

More often though, jargon is used as a mental and verbal shortcut. Instead of thinking about what we really mean and using clear and unambiguous language to say it, we use jargon, even when talking to non-specialists – in this case, an average investor.

At its worst, the result can be incomprehensible writing.

For example, here are a few jargon terms that often pop up in quarterly and MRFP commentaries, along with some ways to avoid using them:

Alpha
 

Instead of “negative alpha,” it’s easier for the average reader to understand that “the fund underperformed relative to the benchmark.”

Bottom-up
 

When describing this kind of investment style, try “focusing on a specific company, rather than an industry or economy.” Likewise, don’t assume that your reader will understand “momentum” without explanation.

Fundamentals
 

Instead of discussing “the company’s strong fundamentals,” try “the strength of the company’s financial statements and management team.”

Headwinds
 

This term is popular in the investment industry, but try “challenges” instead – or better yet, name the particular challenges you mean. Similarly, instead of “tailwinds,” try a term such as “favourable conditions.”

So are we saying you should never use technical terms in your writing? No, of course not. But think hard about what you’re trying to say and the best way to say it.

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Sometimes only a technical term will do. If that’s the case, define it clearly up front. For example, you will probably have to discuss duration when writing about fixed income funds, so explain that it is a measure of the interest-rate sensitivity of a bond.

Your writing will be livelier and more readable if you use technical terms sparingly.

Sometimes it takes a few more words to say what you really mean, but getting the point across clearly is worth it.

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