5 steps for rewriting your investment commentary

Investment commentary authors often know the markets well, but lack writing and editing expertise. After all, they’re earning big bucks to manage money, not to write. You don’t want me to run your portfolio, but I’ve learned some lessons about how to edit investment commentary. I’ve edited and written commentary for a diverse group of clients.

My experience has inspired this list of steps for anyone who’d like to edit investment commentary or other articles.

5 steps for rewriting your investment commentary inforgraphic

Step 1. Analyze overall structure

Before you dig into the details of your commentary, look at its overall structure. Your analysis may lead you to delete or move entire sections to make the structure more reader-friendly.

First, identify the main themes of your commentary. You may decide after a quick reading that your themes are something like the following:

  1. This was a volatile quarter, due mainly to disappointing corporate earnings and instability in the Middle East.
  2. Corporate earnings are likely to recover for three reasons.
  3. Instability in the Middle East will continue and here’s how it affects our investing.
  4. Here’s why these six stocks are the portfolio’s biggest winners or losers for the quarter.

If a simple read-through doesn’t identify your main themes, you can try mind mapping your commentary’s content. I sometimes use mapping when editing complex client documents. Mapping gives me a bird’s eye perspective that helps me spot clustering of ideas that form themes. For more on mapping, please see my book Financial Blogging: How to Write Powerful Posts That Attract Clients.

Once you’ve identified the themes, delete any paragraphs that aren’t relevant. Also, move your paragraphs so your argument builds in a logical order.

Step 2. Provide guideposts for your readers

Once you’ve identified your commentary’s themes, you can make it easy for your readers to absorb them. Three key tools are your title, introduction, and headings. Each of these components should manage your readers’ expectations.

Titles should communicate your main topic. Simply writing “Third Quarter Review” isn’t enough. It doesn’t distinguish this quarter’s review from all that preceded it. Nor does it distinguish your review from your competitors’. At a minimum, name your main topic in your subject line. For example, “Third Quarter Rocked by Earnings and Middle East Conflict.”

As for your introduction, I believe it should say exactly what you’ll cover. This lets your readers quickly assess whether your commentary interests them.

Next, use your headings as milestones for your commentary. Express your opinion or conclusion, if possible. For example, instead of using “corporate earnings” as your heading, consider something like “corporate earnings disappoint, but rebound likely.”

Step 3. Work within paragraphs

Once you’ve completed your “big picture” edits, dig into your individual paragraphs. Strong topic sentences will ensure that today’s busy readers can skim what you read, using their quick scan to zero in on the content that most interests them.

A strong topic sentence covers the paragraph’s main point. Everything that follows in a specific paragraph should relate to the topic sentence. If not, then cut it. This isn’t the only correct way to write, but it’s the best way to write for online readers and readers suffering from information overload.

For more on this topic, read my blog post about the first-sentence check.

Step 4. Examine your individual sentences

The next step is to make what professionals call “line edits.” This means correcting and improving your sentences for grammar, punctuation, vocabulary choices, and other issues in your writing style.

Working down to small items from “big picture” items is efficient. It means that you don’t waste time improving your word choices in a sentence or paragraph that you ultimately cut from your draft.

Step 5. Proofread and check statistics

Once you’ve completed your editing, it’s time to proofread. I’ve blogged in “5 proofreading tips for quarterly investment reports” about my best proofreading tips. Also, check the accuracy of your statistics, such as index returns. If possible, get someone else to proofread your work. After you’ve lived with a document for awhile, it becomes hard to spot errors that would smack you in the face on a first reading.

 

 

If you follow these five steps, you’ll attract more readers. That’s your goal, right?

Nice analogy about large caps vs. small caps

I like this analogy from “A Rough Ride on the Risk Curve” from The Wall Street Journal:

“Because of their deep balance sheets and diversified businesses, large caps can often ride out storms like cruise liners, while small caps are tossed about like sailboats.”

A powerful analogy can persuade your audience when dry, rational arguments fail.

On the other hand, a bad analogy can send your reader astray. That’s what happened to me with a “lollipop” hike.

Note: these analogies are from some years ago, but they’re still powerful. The cruise liner analogy appeared in The Wall Street Journal on Nov. 26, 2007.

Investment commentary topic: ETF controversy

Are you tired of only discussing recent market developments in your investment commentary? Look to your professional reading for ideas, as I suggest in my webinar, “How to Write Investment Commentary People Will Read.” A topic leaped out at me when I read the CFA Institute’s Financial Analysts Journal (FAJ) from 2021’s first quarter.

The title of “Levered and Inverse Exchange-Trade Products: Blessing or Curse?” (summary available, but subscription required to read the entire article) lays out the topic clearly. The authors say in their summary: “levered and inverse products are not, and cannot be, effective investment management tools.”

If this is a topic that interests you, as well as your clients and prospects, there are several approaches you can take.

3 ways you can use a Financial Analysts Journal article for investment commentary

Approach #1. Run with the topic on your own.

If you know this topic well, you may be able to opine at length off the top of your head. Go for it, if that’s what your clients expect and enjoy. The FAJ article has served its purpose if it only identifies a new topic for you.

A variation on this approach is to simply explain what levered and inverse ETFs are. If you’re writing for an audience of retail investors, they may never have heard of them or may not understand what they are. They’ll need a plain-English explanation. Of course, before you dig into the details, explain why your readers should care that these funds exist.

Approach #2. Use this article to bolster your case against these ETFs.

The authors discuss how “the most important problem with geared (levered) and inverse funds is that most of them are expected to collapse.” As part of this, they review these ETFs’ history and performance. There’s likely to be some information you can use to make your case against these ETFs.

The degree of detail that you go into will depend on your audience. Sophisticated institutional investors will understand (and be interested in) more details and technical information than your typical retail investor.

When you quote—or use statistics from—this FAJ article, refer to it as the source. That’s only fair. Plus, mentioning a reputable source like the FAJ will enhance your credibility.

I explain one approach to this kind of article in “Financial blogging tip: opinion + summary.”

Approach #3. Argue against the article’s conclusion.

If you think the article’s conclusion is wrong, say why. Is there a big hole in the authors’ arguments? Or perhaps you think the authors too quickly dismiss these ETFs’ value as what even they admit is “an inexpensive, convenient, highly levered, and limited-liability means for profiting from a directional price view.”

If your firm isn’t a creator of such ETFs, visit the websites of the creator firms. They’re bound to have helpful information.

If you disagree with the article, you may not want to refer to the article in your commentary. However, if your clients have read the article, mentioning it shows that you don’t ignore all information that disagrees with you. That’s good. You can also rebut specific points, while referring to areas where you agree.

Bonus investment commentary topics

Two of the other articles in this issue of the FAJ also struck me as potential sparks for your investment commentary:

  • Should Mutual Fund Investors Time Volatility?” —Volatility is a timely topic. You don’t necessarily need to go into the details of the authors’ thesis. You can see where the topic takes you.
  • Reports of Value’s Death May Be Greatly Exaggerated”—This is a topic close to the hearts of value investors who’ve been suffering for years as growth has outperformed. You may not agree with the take of Research Affiliates’ Rob Arnott and his coauthors. However, they raise questions worth considering. For example:
    • “Was value merely lucky in the past, or is it now arbitraged away by its own popularity?”
    • “Have structural changes in the economy made the value factor newly irrelevant?”
    • “What to expect from value?”

The FAJ’s other two articles could serve as fodder for some commentary, but their appeal is more limited. This blog post discusses the three articles that I think have the broadest possible appeal.

YOUR ideas?

Have you read something that could spur interesting investment commentary? Please comment.

Prepare clients for market volatility

Prepare your clients for the fact that their portfolios will experience periods of disappointing performance. I often share this advice in my presentations on “How to Write Investment Commentary People Will Read,” but I’m always seeking more specifics on how to do this. At the NAPFA Spring 2019 Conference, I picked up practical ideas for how financial advisors can achieve this.

Financial plan as source of certainty

In “Improving Investor Behavior Through Behavior Coaching,” Jay Mooreland of the Behavioral Finance Network touched briefly on how financial advisors can prepare investors for volatility. He suggested focusing on the financial plan as a source of certainty.

Talk less about performance, and more about the plan, he urged the audience. “Remind them that your plan accounts for this volatility,” he said. After all, as he said, we can’t control market volatility, the economy, or politics. We can, however, control our investment strategy and our behavior and our reactions. In fact, you can coach clients to view volatility as their friend. That’s because it gives people an opportunity to “buy low.”

Pre-commitment plan

Mooreland suggested creating a “pre-commitment plan.” Tell your clients you understand that it’s difficult to buy during volatility. That’s why you have clients commit in advance that if the market falls X%, they’ll move Y% into stocks. You can make plans for multiple levels of market declines. “From a behavioral standpoint, it can be powerful,” said Mooreland.

Mooreland also showed two market performance graphs that reinforced why investors shouldn’t let short-term volatility upset them. If you fell asleep on September 1, 2018, and woke up on Easter Sunday, 2019, the market would be at roughly the same level. That investor wouldn’t have experienced volatility.

The perception of volatility is a function of how often you look at the market, said Mooreland. The more often you look, the more often you’ll see what is ultimately a good investment look bad.

Use your communications to reduce the volatility and stress that your clients feel. Both you and your clients will benefit.

Avoid guarantees

Of course, don’t promise that the financial plan will protect clients from harm in any scenario. You know how the SEC feels about guarantees. Still, there’s plenty that you can do within the constraints imposed by the regulators.

Can “find and replace” prevent quarterly commentary errors?

Most people who write quarterly commentary struggle a bit with errors and typos. I wrote about some of my struggles (and solutions) in “Investment commentary numbers: How to get them right.” As I mentioned in that post, I once made a bad mistake, naming the wrong quarter in my employer’s quarterly commentary. That post prompted a reader to email me with his solution for commentary errors.

Find-and-replace solution

My reader starts his quarterly report by copying and pasting the previous quarter’s report. After updating the numbers, he uses his word processor’s find-and-replace function to update the name of the quarter. For example, he searches for “third quarter,” and then has the software replace it with “fourth quarter.”

This is a great solution for a short, structured quarterly report. In this case, the name of the recently ended quarter will always fall in the same place. This means the find-and-replace solution should function perfectly.

Use caution

If you write a more open-ended quarterly report, you should use the find-and-replace solution cautiously. Why? Because your text for the current quarter may also refer to significant events of the previous quarter.

Using auto-replace to substitute, for example, “fourth quarter” for “third quarter” could result in a sentence like the following: “Unlike in the fourth quarter, small-cap stocks performed well in the fourth quarter.” Oops! You don’t want that to happen.

To catch that kind of error, reading the text out loud is probably the most effective technique.

Your suggestions for catching commentary errors?

I always learn from your comments and suggestions. Please keep sending them to me.

My best tip for improving your investment commentary

Improving your investment commentary is typically the goal when you hire me to edit or rewrite your quarterly client letters or other commentary. Some of what I do is hard for me to teach you. But one of my most powerful tips is easy for you to implement. My best tip for improving your investment commentary is to add headings to it.

Headings 101: Add visual cues

I’ve worked with several clients whose commentary consisted simply of one paragraph after another. That’s manageable if we’re talking about a two-page client letter that follows the same format quarter after quarter. However, if it’s a seven-page document, that leaves your readers clueless about where to look for which content.

Today’s busy readers often skim documents looking for specific content. Headings as simple as “The Economy,” “Stocks,” “Bonds,” and “Portfolio Positioning” can ease their search. That makes them more likely to engage with what you’ve written.

Headings 201: Convey a message

You can get more mileage out of your headings by making them convey a message. For example, instead of simply writing “Bonds,” write “Bonds: Fed rate hike likely to depress Treasuries.”

With the addition of just seven words, you’ve boosted your readers’ understanding of your views. That’s true even if they never read another word of your commentary. That’s the kind of ROI an investment professional should love.

More tips for improving your investment commentary

To learn more about improving your investment commentary, check out my on-demand webinar, “How to Write Investment Commentary People Will Read.”

Investment commentary–5 ways to outsource

Market and portfolio performance commentary is an important part of communications strategy for most investment and wealth managers. But sometimes writing that commentary becomes a drag on the firm’s employees. Or perhaps the firm realizes that its employees are better at strategy and portfolio management than writing. If this describes your firm, it may be time for you to outsource your investment commentary.

I see five main models for commentary outsourcing, depending on the kind of commentary you need. These vary in terms of how much control you give up over the content and the process.

5 ways to outsource investment commentary

Option 1: Completely surrender control of your investment commentary

If investing isn’t a core part of your firm’s expertise, you may not feel the need to express insights specific to your firm or your portfolios. In this case, you can simply buy ready-to-use commentary or commission a trusted financial writer to create the market recap and outlook that goes to your clients.

Buying commentary from a provider who sells the same text to multiple clients is likely to be easy on your budget.

Alternatively, there are writers—not me—who specialize in writing marketing commentary based on their own research. Both the content providers and the writers may allow you to customize their content. Before you edit or slap your name on their content, check the terms of your agreement with the provider.

Option 2: Hire someone to write interview-based market commentary

When you have distinctive, well developed views and the evidence to back them up, then this is a good option for you. Firms that struggle to find time to generate commentary also find this helpful, in my experience.

To ease your quarterly crunch, schedule your interview prior to the quarter’s end. I usually suggest seven to 10 days prior, so you have a good sense of how the quarter is shaping up.

Involve your key decision-makers in the interview. Sometimes that means only your investment strategist. Other times that may mean your investment policy committee, or one person who’s an expert on stocks and another who’s an expert on bonds. A good interviewer will give you questions to mull over prior to your call. This will help to find your commentary’s focus.

Here are some sample questions for your interviewer:

  • What is the most important message you want readers to take away from your commentary?
  • How did your clients’ portfolios perform relative to the market—and why?
  • What factors most influenced the market during the period? Do you expect their influence to continue?
  • Are there a few statistics that you’d like to highlight?
  • How have you adjusted your portfolios during the period under discussion and do you anticipate more changes?

Above all, it’s helpful to focus on how the information in your commentary affects your clients’ portfolios. After all, that’s their biggest concern.

After the interview, your writer will digest the information to create an outline or draft for your review. She will highlight questions or data gaps that she’d like you to fill. Then it’s your turn to provide the missing information and give feedback.

If multiple people give feedback, I suggest that you consolidate it in one document, with Microsoft Word’s “Track Changes” turned on. “Track Changes” will help your writer identify text to be proofed for grammar and related issues. If two of the evaluators disagree on a substantive issue, please reconcile your views before you forward your document to the writer.

What if significant new data comes in between the time of your interview and when you’re giving feedback to your writer? I ran into that with congressional negotiations over the sequester in 2012. One option is to discuss potential scenarios at the time of your interview, so your writer is prepared. Another option is to jot down your take on the news as part of your feedback to the writer, who can smooth out the words to make them more compelling, clear, and concise. Another possibility is to request a brief update call with your writer. Prior to that call, it’s helpful if you can send her some bullet points with your take on the news, so she can focus her questions to make the most efficient use of your time.

This interview-driven approach isn’t right for everyone. If your commentary typically changes significantly between the first and final drafts—or if it relies heavily on data that comes in late—you’re more likely to find option 3 more helpful.

Option 3: Hire an editor for your commentary

For investment professionals at some firms, putting their ideas into writing is a useful exercise. It helps them to discover their opinions and collect the supporting evidence. This is a form of writing to learn, as writing expert William Zinsser discusses in his book, Writing to Learn: How to Write – and Think – Clearly About Any Subject at All.

However, the folks who generate this commentary become so engrossed in the details that they may find it difficult to edit themselves. It’s hard to get distance from material when you’re immersed in it. Plus, a financial education usually doesn’t include intensive training in copyediting or in understanding the reader’s perspective.

One of the most valuable things that an editor can do is to reframe and reorganize the flow of your information. For example, she can expand on the WIIFM—“What’s in it for me”—of the content. She can also improve logical flow of the piece, and apply my first-sentence-check test.

Other valuable functions that your editor can perform include adding informative headings, streamlining text, and checking grammar and punctuation issues. Headings make it easier for skimmers to absorb your opinions and perhaps even be drawn into the details of your commentary. Sentences that average 14 to 22 words and lack distracting errors also help with reader comprehension and retention.

Option 4: Hire a writer for attribution-driven performance commentary

In contrast with market commentary, attribution-driven performance commentary is specific to your firm’s funds or portfolios. Mutual funds’ annual and semiannual reports also fall into this category.

The components of this commentary may include:

  • Your portfolio’s returns versus the benchmarks for the relevant periods
  • Attribution analysis—for stock funds, this would include the impact of sector allocations, stock selection, and possibly the cash position
  • Discussion of specific holdings that contributed to or detracted from performance relative to the benchmark
  • Optional: market commentary, transactions during the relevant period, and investment strategy

Some companies provide all of the necessary data directly to their writer, while others incorporate research or portfolio manager interviews conducted by the writer.

Option 5: Commissioning a critique for the DIY commentary writer

Some firms can boost the quality of their commentary simply by implementing suggestions they receive from a one-time critique of their writing. A writer-editor who’s familiar with commentaries can identify your commentary’s strengths and weaknesses, and provide guidelines for improvements.

For an assessment of your current commentary or newsletter, you can hire me to critique one example of your work or to coach you.

 

What’s next for you?

If you’re rethinking your firm’s approach to your commentaries, contact me to learn how I can help.

 

Disclosure: If you click on the Amazon link in this post and then buy something, I will receive a small commission. I only link to books in which I find some value for my blog’s readers.
Note: I am re-publishing this post in 2018 because it remains relevant. I edited this piece on Dec. 21, 2014 to correct some typos.

 

Bond market commentary rewrite

The best bond market commentary is written so its writing style doesn’t interfere with readers’ understanding of the content.

Here’s a screen shot of some bond market commentary that I received via email in November. It could use some help. (By the way, I’m not out to embarrass anybody. Before I started critiquing this piece, I googled the text to make sure the author couldn’t be identified easily.) Let’s analyze and rewrite this piece.

bond market commentary

 
 
 
 
 
 
 
 
 
 
 
 

What’s good and bad?

One good thing about this commentary is that it was published promptly after the end of the quarter. Most commentary takes days if not weeks to get published. The speedy production cycle probably meant the author didn’t have lots of time to process his or her ideas. Nor was there much time for editing or proofreading. It’s not easy to pump out clean commentary under these circumstances.

Let’s look at the commentary’s weaknesses.

  1. It lumps together a bunch of sentences that don’t stick to a single theme. It jumps around chronologically, going from September to August to October to second quarter to June to September to October. The subject-matter progression is a little better organized, going from credit to risk assets to the Fed to the VIX. However, these subjects shouldn’t all be in one paragraph because the author doesn’t write about them in relation to each other.
  2. The paragraph lacks a topic sentence that says why all of these items are grouped together.
  3. The paragraph is dense and intimidating.
  4. It’s confusing that the paragraph writes about October as if it’s in the future, saying “The Fed will also start gradually unwinding its balance sheet in October.” Did the person mean to write “November”?
  5. It’s strange to start the Fed section with old news from June. it’s better to start the section in the present, as you’ll see in the rewrite below.
  6. The paragraph has grammatical errors. Credit doesn’t trade to “their tightest levels.” It should be “its tightest levels.” “The proposed Trump’s tax reform” should be “Trump’s proposed tax reform.” It’s a little light on commas for my taste.
  7. The paragraph has a spelling error. “Geopolitical” is one word.

Note: I give a pass to this commentary for using technical language, such as “credit,” “risk assets,” and “FOMC” because this commentary is aimed at practitioners. It’s fine to write in the language of your audience. In fact, it’s appropriate, as long as you don’t expect regular folks to understand you.

My thoughts about how to rewrite this piece

The main change I’d make to this piece is to reformat it. I think this piece was intended to provide some quick information without building a bigger argument, so I’m not writing an introduction or strong topic sentences. I am, however, adding bullet points and headings.

I don’t follow the bond market closely so I may make some factual errors in my rewrite.

I raise some questions about the content in red text.

My bond market commentary rewrite

Third quarter 2018 review

  • Corporate credit spreads: Corporate credit spreads tightened into September, after widening a little in August due to geopolitical tensions. Since the September sell-off, largely triggered by North Korea/US tensions, credit traded back to its tightest levels [tightest since when?] into the end of the third quarter.
  • Bond market fundamentals: Fundamentals have remained solid from a free-cash-flow perspective, as second-quarter earnings mostly exceeded analyst expectations with technology sector showing the strongest earnings growth. Rising oil prices improved profitability and credit metrics in the energy sector. However, non-financial leverage continued to rise, which is a negative.
  • Risk assets: The market’s expectations for Trump’s tax reform proposal contributed to positive returns for the S&P 500 index and other risk assets.
  • Fed policy: The fed funds rate is currently between 1% to 1.25%, following the Fed’s raising rates in June for the second time this year. The market-implied probability of a December rate hike increased from 25% in the first week of September to 70% as of the quarter’s end. The Fed is expected to start gradually unwinding its balance sheet in [what month or time period?].
  • VIX: The VIX has mostly remained subdued, with market volatility remaining low for most of the quarter.

 

If you’d like to read some well-written fixed-income commentary, check out the links in my post on “Who are the fixed-income commentary winners–and why?

 

One investment manager’s approach to writing commentary

Writers tailor their processes to their needs. Leslie J. Lammers, CFA, of Riverstone Advisors, shared her process with me after reading my post, “A case against writing outlines.” Lammers has used this process to write almost 100 quarterly letters.

 

My approach to writing investment commentary

By Leslie J. Lammers, CFA

Here is my process:  do the research, hone in on your central points, put butt in chair, attach fingers to key board, go to the zone.

To write a letter that communicates, you have to have a view and have conviction in that view. If your view is not clear to you, do more research.  Read as widely as you can across the financial world.

If you are writing quarterly, start collecting articles at the beginning of the last month of the quarter. Sign up to receive pieces from various sources. Read Bob Johnson on Morningstar, read Cramer, sign up for Cam Hui on his own site, find some people you like on Seeking Alpha, sign up for Economy.com to read Mark Zandi and others on that site. The Bank Credit Analyst is also excellent.

Find some comments you believe in and build your view from there if you don’t already know what it is.

When you sit down to write, picture your average client and write to them as though they are sitting across the desk from you.

Art helps clients grasp the concept and retain it. You can easily find a graphic artist on ifreelance.com or other websites. Here is an example of one we had done.

If proper English usage is not your strong suit, pay an editor.  If you have a college near you, you can find someone who edits student papers.  Or use a freelancer website to find an editor.

You must write with conviction.  Adopt an attitude of “sometimes wrong—never in doubt.”

 

If you’re looking for great investment or wealth management commentary, you may find some in “Who are the fixed-income commentary winners–and why?”,Wealth manager blogs that my readers like,” or “Market commentary with wit and wisdom.” These lists were compiled with suggestions from my readers.

Given Lammers’ emphasis on writing with conviction, you may also enjoy “Are financial predictions too risky for investment commentary writers?

Words to avoid in your investment communications with regular folks

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
  • Alpha
  • Barbell
  • Basis points
  • Beat, when used as a noun to refer to beating analyst forecasts
  • Bet
  • Conditional value at risk (CVAR)
  • Constructive, as in “we are constructive on small-cap stocks”
  • Contango
  • Convexity
  • CorrectionCorrection means something different to individuals than to investment professionals
  • De-gross
  • Disseminate
  • Downside deviation
  • Drawdown
  • Duration
  • Ecosystem
  • Efficient frontier
  • Ex-, as in “ex-Japan”
  • Expected return
  • Exposure
  • Flight to quality
  • Headwinds/tailwinds
  • Inverted yield curve
  • Kurtosis and other statistical terms (copula, eigenvectors, semi-deviation, subadditivity, etc.)
  • Leverage
  • Levered names
  • Liquidity
  • Long/short
  • Mean-variance optimization
  • Mitigate
  • Modern Portfolio Theory
  • Monte Carlo analysis
  • Orthogonal, which apparently is used to mean “uncorrelated,” although that doesn’t appear in the dictionary definition of the word
  • Pricing power
  • Rerate
  • Reversion to the mean
  • Risk assets
  • Risk on/risk off
  • Risk premium
  • Risks to the upside
  • Secular
  • Sharpe ratio
  • Size up
  • Spanning a broad risk/return spectrum
  • Spread product—a Google Alert on “spread product” yielded results related to margarine and Vegemite
  • Stack ranking
  • Tranche
  • Value at risk (VAR)
  • Value traps

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, and Dec. 20, 2019 to add words suggested by my readers. I also updated on Dec. 16 and Dec. 23, 2019; Jan. 2, 2020; and Jan 29, 2021. I appreciate the support of my readers. Thank you!

Image courtesy of Sira Anamwong at FreeDigitalPhotos.net