Big words make your readers work harder to grasp your message. This is particularly true of jargon, such as “duration,” unless your piece is strictly for investment professionals.
Below are some words to avoid when communicating with regular folks. Most of them are financial jargon. Others—like “mitigate“—are unnecessarily long or confusing. Replace jargon and long words with shorter, less technical words that pack more punch. They also make it easier for readers to absorb your message.
- Accommodative monetary policy
- Active share
- Basis points
- Beat, when used as a noun to refer to beating analyst forecasts
- Constructive, as in “we are constructive on small-cap stocks”
- Efficient frontier
- Ex-, as in “ex-Japan”
- Expected return
- Flight to quality
- Inverted yield curve
- Kurtosis and other statistical terms
- Levered names
- Pricing power
- Reversion to the mean
- Risk assets
- Risk on/risk off
- Risks to the upside
- Sharpe ratio
- Spread product—a Google Alert on “spread product” yielded results related to margarine and Vegemite
On a related note, don’t use acronyms without first defining them. This means words such as AUM, CAGR, CAPM, CLO, DOL, EBITDA, EPS, LIBOR, MBS, MLP, TTM, YOY, and YTD. It’s often best to avoid acronyms completely. I’ve discussed this in “How to capitalize financial acronyms.”
If you’re writing an educational piece for regular folks
It’s okay, even admirable, to educate your regular Jane or Joe investors about complex financial concepts.
When you write to explain technical vocabulary, make sure you:
- Define your terms using plain language. You can introduce the technical terms and then define them using the techniques in “Plain language: Let’s get parenthetical.”
- Mention the WIIFM (what’s in it for me) so readers know why they should slog through the explanation.
- Explain the benefits of the complex financial concept for regular folks. For example, don’t use a multi-billion dollar pension fund as your key example unless your readers are participants in a similar plan.
- Use analogies, where possible, because they’ll stick in your readers’ minds better than dry explanations.
Must you bore sophisticates?
You may worry that your content will bore sophisticated readers if you go easy on technical vocabulary. No, you won’t. Not if you do it right.
Read “How to make one quarterly letter fit clients at different levels of sophistication” for my take on how to keep everybody happy.
If you’re communicating with other investment professionals
Some jargon is okay if your communications go exclusively to other investment professionals. In that context, jargon can act as a kind of shorthand. For example, “basis points” can be used in a way that’s more precise than “percent.” “Spread product” is more concise than the definition of “spread product.”
However, if you’re targeting institutional investors, don’t assume that they’re all sophisticated consumers of investment content. An investment committee, for example, can include less sophisticated members.
Still, there’s no need to make your professional communications overly complex or wordy.
Your suggestions for words to avoid?
If you can suggest words to avoid in your investment communications, please share them in the comments.
Updates: I updated this on April 6, 2017, to add words suggested by my readers.
Image courtesy of Sira Anamwong at FreeDigitalPhotos.net