Posts

Financial writer’s clinic: fact vs. interpretation

Fact or interpretation, which should you place first in your article, commentary, or blog post? You’ll find a useful model in Justin Wolfers’ “A Better Gauge Shows Steady, Dull Growth,” which appeared in The New York Times.

Which is more intriguing?

Let’s compare your reactions to two sentences from Wolfers’ article.

  1. The Bureau of Economic Analysis on Friday revised the nation’s gross domestic product to a new estimate that it contracted by 0.7 percent in the first three months of the year from its initial guess that the economy grew over the winter at an annual rate of 0.2 percent.
  2. The government reckons that the American economy shrank over the winter, but no one really believes it.

Ask yourself these questions:

  • Which sentence is more intriguing and more revealing of the writer’s opinion?
  • Which sentence is easier to absorb, in terms of writing style and content?

To me, it’s clear that #2, the author’s interpretation of the data, wins as the answer to both questions.

When #2 is the introductory sentence, it snares readers’ attention and sets them up to absorb the GDP information presented in #1. This is how Wolfers starts his article, as you see in the image.

New_York_Times_article_053015-249

Unfortunately, too many financial writers drone on and on about the facts before they get to the interpretation. As a result, they fail to attract readers. Also, they quickly lose the readers who start to scan their articles.

I’m not saying you should never start an article with a fact. That works sometimes, especially when it’s a startling fact. In any case, it’s good to quickly mention your interpretation or give the reader a reason to care about your topic.

“The Upshot” as a model

Wolfers’ article appeared as one of the columns in The New York Times’ “The Upshot” columns of news analysis. If you read the columns, you’ll get more ideas for structuring your articles.

For example, Wolfers’ articles is structured as follows:

  1. Author’s interpretation of the topic
  2. Specific data point
  3. Criticism of how the data is calculated
  4. Suggestion of alternative data
  5. More criticism of the data
  6. What all of this information means for how we view the economy

Can you see how you might apply this approach to your next article, blog post, or investment commentary?

Are financial predictions too risky for investment commentary writers?

Is it a bad idea to make predictions in your investment commentary because clients will slam you when you’re wrong? Whenever you make predictions, you run the risk of being wrong. But being wrong isn’t a problem, in my mind, if your prediction reflects good thinking.

Lesson from my winning prediction

Accurate predictions alone don’t make you seem smart. I remember the time I was forced to participate in a betting pool with members of an investment policy committee. I had to guess where a certain number—probably the 10-year Treasury rate—would be one quarter later.

Guess what! I won. However, it wasn’t knowledge of Federal Reserve policy or the economy that inspired my winning bet. It was that I deliberately picked a rate 25 basis points (0.25%) lower than any other committee member’s bet.

Did I respect the losers less after I won my bet? No. They had well thought-out ideas about the factors driving bond yields. As a result, I continued to think highly of them.

The lesson is that smart people can and will be wrong. After all, look at any major investment firm’s quarterly predictions of statistics such as the fed funds rate, gross domestic product (GDP) growth, or the consumer price index. Most of the time they are wrong. Heck, the federal government revises its GDP numbers as new data comes in.

Why you should make predictions

Investment commentary that only reports facts is often boring. Plus, unless you’re pumping out commentary instantaneously, you’re not telling your readers anything they couldn’t already learn online or in The Wall Street Journal. They have no reason to read your factual, unopinionated commentary.

Keeping your clients interested isn’t the only reason to make predictions—or, at a minimum, express opinions. When you support your predictions with carefully reasoned arguments, you give clients insights into your firm’s thought processes. That’s valuable.

Imagine, for example, that you predict that the Federal Open Market Committee will boost its fed funds target later in the year. By itself, that’s not so interesting. What makes it valuable is why you think that’s true and what you recommend based on that prediction.

Unexpected events—war, natural disasters and the like—can sabotage your predictions. However, they may only delay your predictions coming true. Clients will find comfort in the soundness of your thinking.

What if you’re repeatedly wrong?

Repeatedly making big predictions that don’t pan out can bring client criticism and even defections. But sometimes the strength of your convictions means you must stick with them to remain true to your investment philosophy and process, as well as for the good of your clients.

For example, some asset management firms shunned dot-com stocks during their heyday, predicting a price collapse that ultimately occurred. The clients who stuck with them benefited over the long run.

My suggestions for your financial predictions

I have some suggestions for you.

  1. Don’t make flashy predictions simply to attract attention. One day, or even one month, of fame on social media or in the news isn’t worthwhile.
  2. Do make predictions that are grounded in careful analysis. You need to be able to explain predictions.
  3. Explain your predictions. Help your readers to understand why you made your predictions and why the predictions are important for client portfolios.

Whenever possible, relate what you write to its impact on client portfolios. For example, if you foresee a rebound in the Russian ruble, explain how this might affect sectors your portfolios hold or avoid.

  1. Hedge when necessary. To keep the Securities and Exchange Commission happy, you can’t guarantee anything. Use language such as “we believe” to make it clear you’re expressing an opinion.

Hedging language also helps readers grasp that you understand there are factors that can derail the most likely scenario. You’re not pigheaded. You consider the relevant factors.

  1. Use personality if you lack opinions. If you lack provocative opinions, but you want people to read your commentary, use your personality. Writing in a distinctive style and tailoring your content to your clients’ unique needs can help you get attention from your target audience.

What about YOU?

I’m interested in learning from you. How do you balance the benefits of expressing your opinions vs. the risks of being wrong? Please comment.

 

Image courtesy of Salvatore Vuono at FreeDigitalPhotos.net

How to capture investment client questions when you lack access?

Investment commentary writers who lack direct access to clients may struggle to understand what’s on those clients’ minds. This makes it difficult for the writers to address those clients’ concerns in their commentary. What can you do in this situation?

I have some potential solutions to this challenge, which came up in a Q&A session for my presentation on “How to Write Investment Commentary People Will Read.”

1. Ask for feedback from the people with client contact

“What questions are your clients asking you?” This is a great question to ask the people who enjoy direct contact with the investor who use your company’s products or services. Open-ended questions like this may uncover totally new areas of interest and concern.

On the other hand, the question may be too vague to spark a memory among individuals who don’t routinely note client questions. Try asking more specific questions, such as what are your clients asking you about

  • Where to invest
  • Investments that worry them
  • Asset allocation
  • The economy
  • The effect of new taxes

When you get more specific, consider focusing on timely topics and your firm’s topical strengths.

2. Demonstrate the value of sharing information with you

What if the people in the middle aren’t communicative? A participant in one of my investment commentary programs said, “we ask our financial advisors but they won’t tell us.”

First, asking more specific questions, as I suggest above, may spur better responses.

Second, consider recruiting one person with client contact who can serve as an example of the value of sharing information. I imagine that you can find one person who’ll agree to help, especially when they understand that they’re not one of many people whom you’re asking for help. After all, they may have assumed that other people were feeding information to you.

Warning: If you take this approach, you should commit to following through on writing about at least one of your contact’s topics even if the client questions don’t seem worthy of incorporation in your next commentary.

For example, a client may ask a complex question about an investment strategy that accounts for a minuscule portion of your assets. Unless you can tie the answer to broader themes, it’s probably not worthy of incorporation in your commentary. However, the question rates an answer via phone or email. If the answer potentially has broader applications, you can share in on your website or a Q&A document.

Assuming you turn up a great client question, incorporate it in your commentary and give credit to the person who reported the question, assuming it’s okay with the reporter. Good behavior is contagious, as Chip Heath says in Switch. If you highlight and reward good behavior, more should follow.

3. Find opportunities to hear directly from clients

If you can sit in meetings with individual clients, that’s great. If that’s not possible, then look for opportunities to listen in group settings.

For example, you may send a strategist or asset class specialist to speak at events attended by users of your firm’s products or services. Ask if you can send a second person to attend the event. Observers can record client questions. They can also observe what parts of the presentation most intrigue or perplex the audience. That’s valuable information.

YOUR suggestions?

If you’ve successfully tackled this challenge, I’d like to hear from you. Please share your solution.

 

Image courtesy of sakhorn38 at FreeDigitalPhotos.net

Can YOU simplify investment commentary better than this?

I am not perfect. I don’t have all of the answers for how to best simplify the complex sentences that abound in investment commentary and related publications. However, we would all benefit if the smart investment professionals could communicate more clearly and economically.

To spur conversation, I’m posting some before-and-after versions of sentences inspired by what I’ve read in online and printed investment pieces. Most of my tweaks are minor. They don’t dramatically ratchet up the sentences’ effectiveness. However, their simplicity means that they demonstrate techniques that would be easy for anyone to implement.

If you’re trying to improve your writing skills, I hope you’ll find some inspiration. If you’re a veteran writer or editor, perhaps you can suggest better alternatives.

Investment writing before-and-after examples

Example 1

Before: An important point to make is that rising interest rates do not necessarily have a negative impact for bond investors as often perceived.
After: Contrary to what many think, rising interest rates don’t necessarily hurt bond investors.
Note: “Show, don’t tell” is standard writing advice. Instead of saying that something is important, convey its significance simply and quickly.

Example 2

Before: What are the things that matter most to members of the portfolio management team?
After: What matters most to the portfolio management team?
Note: Deleting unnecessary words makes it easier for readers to grasp your message. The “after” version might be simplified further to “What matters most to the portfolio managers?” or even, depending on context, “What matters most to the portfolio?”

Example 3

Before: The Fed’s statement will be illustrative in highlighting the Fed’s future plans.
After: The Fed’s statement will highlight its plans.
Note: This is one of several examples showing how replacing forms of the verb “to be” strengthens your sentences. Also, “illustrative” and “future” aren’t necessary in this sentence. Readers grasp them from the context.

Example 4

Before: Bank of America has a sound capital position and a management team that is well-regarded.
After: Bank of America has a sound capital position and a well regarded management team.
Note: Converting phrases such as “that is well regarded” into adjectives can streamline your sentences. Just don’t pile up too many adjectives in a row. You’ll overwhelm your readers. Some adjectives are valuable. However, I like what Mark Twain said about them: “When you catch an adjective, kill it. No, I don’t mean utterly, but kill most of them—then the rest will be valuable. They weaken when they are close together. They give strength when they are far apart.” 

Example 5

Before: One third of S&P 500 earnings are derived from foreign sales.
After: One-third of S&P 500 earnings come from foreign sales.
Note: This is another example of how you can streamline sentences by eliminating forms of “to be.”

Example 6

Before: Our current expectation is that foreign bond buying will prevent longer-term rates from increasing significantly in 2015.
After: We expect that longer-term rates will not increase significantly in 2015, due to foreign bond buying.
Note:  Using “I” or “we” will enliven “to be” phrases like the “before” version of this sentence. I also suggest that you put the most important part of your sentence in the beginning. I thought the writer’s interest rate expectations were more important than the foreign bond buying.

Example 7

Before: This technique improved returns without a dramatic increase in risk.
After: This technique improved returns without dramatically increasing risk.
Note: Verbs are more powerful than nouns.

Your thoughts?

I welcome your thoughts about how to improve these sample sentences or how to improve investment-related writing in general. Please comment.

Update on July 2, 2015: Oops, I edited the title of this post after realizing that it violated a traditional grammar rule favoring “Can you simplify investment commentary better than I” instead of “than me.” Garner’s American Usage says “I” is the traditional right answer, but “me” is okay for a deliberately relaxed, colloquial tone. After sharing this topic with friends, I changed the title because I realized that passions run high on this issue. By the way, I realized that I’ve been caught on this issue before, as you’ll see if you read “Are you as compulsive as me or I?

Image courtesy of thaikrit at FreeDigitalPhotos.net

Should your investment commentary be different?

“Should your investment commentary present a distinctive point of view?” That’s the great question posed by a participant in one of my presentations on “How To Write Investment Commentary People Will Read.”

My answer? It depends.

What is the distinctive point of view?

If a distinctive point of view means ideas that hold their own vs. leading investment strategies, that’s easier said than done. Not everyone can be an original thinker.

Another challenge: Competing with top investment strategists may also require access to world-class data to support your contentions. That may be tough if you’re at a small company with limited resources.

On the other hand, ideas aren’t the only way to distinguish yourself. You can stand out with the way you express your ideas, instead of the actual content of your commentary. Perhaps you show some personality or you’re an elegant or humorous writer.

Your audience matters

Investment commentary that displays thought leadership appeals to some audiences more than others.

For example, if you sell your firm’s tactical asset allocation services, readers will care about the originality and accuracy of how you assess markets. In short, thought leadership matters if it is an important part of your appeal as an investment manager.

Some readers won’t care whether your ideas are original or common. This is particularly true of individual investors. I believe they’d rather know that you understand them and their needs. In their case, investment commentary explaining how a recent event or trend affects their portfolio may be more powerful than groundbreaking commentary on the stock market.

What do YOU think?

I’m curious to learn your thoughts on this topic. Please comment.

Financial website writers, match headlines to content or lose readers

Your web pages should deliver on the promise made by your headlines. That doesn’t happen in the economic commentary example shown below (with company name blacked out). 

Economic commentary example

Let’s look at what went wrong, so you can avoid these mistakes.

1. Most of the paragraph is unrelated to the headline

A Wall Street Journal report about bank surcharges has nothing to do with the headline topic of “Emerging Markets Continue Impressive Growth While Developed Markets Continue Recovery.” Emerging markets don’t enter the picture until the last two sentences of the paragraph.

2. Too-long paragraph lacks WIIFM and topic sentence

The paragraph is so long and dense that it’s likely to scare away all but the most motivated readers. Writing for the web demands that short chunks replace massive blocks of information. The content doesn’t explain its WIIFM—what’s in it for me. To catch busy readers’ attention, you need to make it clear why they’ll benefit from your content. For example, will you help them to understand why emerging markets’ growth will outpace that of developed markets, making them an important component of a diversified portfolio? The example in the image above fails the WIIFM test.

The paragraph also lacks a strong topic sentence that introduces its overall topic. To me, it reads as if a person saw an interesting article in The Wall Street Journal and spouted reactions off the top of his or her head, and then moved on to a Financial Times article and, finally, a thought about the emerging markets.

3. The graph isn’t supported by the text

The “World Economy — Gross Domestic Product (GDP)” graph in the web page’s image doesn’t relate to the accompanying text. A good writer would have related the headline and the graph in his or her text, instead of rambling about banking.

How to fix this page?

Fixing this page would require one of two approaches. First, throw out all of the text, except possibly a revised version of the last two sentences, and create new content focused on the growth of emerging vs. developed markets, as shown by the graph, other data in the clickable link, and other evidence.

The second approach would require throwing out the current headline and graph to focus on the implications of the Fed’s capital surcharge. The banking text would need a drastic rewrite to become more focused and less flabby.

Writing sensitively about tragedy in your investment commentary or blog

Tragedy strikes more often than you’d like. It could be an event like the initial Malaysian Airlines plane disappearance, the Boston Marathon bombings, or something that happened in your community. Discussing tragedies can bring us closer together. It can make stale topics timely. However, it can also offend and disturb your readers, as discussed in “‘Epicurious’ Enrages Followers With Boston Bombings Tweets” on the Mashable blog or “This Guy’s Replies to 9/11 Brand Tweets Sum Up Everything That’s Wrong With 9/11 Brand Tweets.” You need to tread carefully. I have some thoughts about how to manage this challenge.

1. Acknowledge the tragedy

Before you dive into the bottom-line implications of the events, acknowledge that it’s a tragedy that affects human lives. You might write something like “We are all hoping for a happy ending in the disturbing case of…” or “We are deeply distressed by the…”

2. Consider your context

Context matters. Let’s consider three scenarios for writing about airline stocks the day after the March 8 disappearance of Malaysian Airlines Flight 370.

Scenario one: Airlines analyst for a buy-side investment management firm

When you’re a securities analyst, writing about events that move stock prices is an essential part of your job. You can’t avoid it. Plus, if you’re a buy-side analyst, what you write will stay within your firm (unless you speak with the press). This gives you more freedom than writers who communicate with the general public. Your audience needs to know what effect an airlines disaster will have on the stocks you follow. In fact, it would be irresponsible to ignore the potential impact.

Still, you don’t want to be seen as gloating over an investment opportunity created by a tragedy. That’s ghoulish.

Scenario two: Wealth manager writing a client newsletter

When you write a newsletter for clients, you’ll have a feel for their sensibilities. Also, you’ll know what they expect from you—whether it’s coldly objective analysis or a warmly personal take on news that affects their finances.

If your clients value objectivity and data above all, I believe you can discuss the bottom-line implications of the tragedy after a quick acknowledgment of the sad event’s effect on people’s lives. Still, there may be more sensitive folks among your readers. Think about whether you need to discuss the tragedy now. If your newsletter discussion would be just as relevant later, then consider waiting.

Scenario three: Writer of a blog for general consumption

You’re at the greatest risk when you publish your thoughts in a medium that anyone can find online, such as a blog or op-ed piece. Tread carefully. Consider how you would feel if you or your family experienced the tragedy in question. Acknowledge that this is a serious event that hurts people. Be especially careful if you’re publishing where you’re likely to be read by people directly affected by the tragedy.

3. Consider the timing

Writing about a tragedy as it unfolds is different from writing about it six months or even one week later. Feelings are most raw in the early days. You must balance these emotions against the fact that whatever you write—especially if you’re an analyst covering securities that are directly affected by the tragedy—may be most valuable in those early days.

4. Get a second opinion

Not sure how your piece will be perceived? Ask someone you trust and respect for feedback. You’ll get the most helpful feedback from someone in your target audience, especially if they’re candid.

Depending on their audience, you may decide that an event is too painful for them to read about at this point.

YOUR opinion?

How would YOU like financial authors to deal with tragic events in their writing? I’m eager to hear your thoughts and insights.

(By the way, I’d like to thank the participant in my presentation to the Baltimore CFA Society who asked the question that sparked this blog post.)

 

Photo Credit: mharrsch via Compfight cc

Famous quotes make your commentary memorable

It’s hard to make your investment commentary stand out. After all, everybody’s writing about the same facts. However, adept use of quotes can make your commentary memorable.

For example, here’s how The Wall Street Journal’s “Ahead of the Tape” column started with a quote from the Bible (Matthew 20:16) on June 30, 2014:

Similarities between Scripture and financial markets are rare, but one verse seems to be a recurring theme: “The first shall be last, and the last shall be first.”

The writer, Spencer Jakab, explained the quote’s application in his column’s second paragraph.

Pundits and investors alike have a tendency to extrapolate the recent past into future expectations. That often is a recipe for disappointment.

The rest of the column discussed examples of Jakab’s theme. For example, commodities, which disappointed in 2013, were rebounding at the time of his article. Readers may remember Jakab’s quote—and the related lesson—long after they’ve forgotten which asset classes lag or outperform.

The column concluded by circling back to the Bible, saying “to everything there is a season,” a reference to a famous passage from Ecclesiastes. Nice symmetry there!

5 proofreading tips for quarterly investment reports

Proofreading quarterly investment communications stresses people. Tight deadlines and client demands add to the pressures on a small department. However, creating checklists and processes will ease the strain. I have some suggestions to help you be accurate and avoid stylistic inconsistencies and typos.

This post started as a response to the tweet you see here.Tweet asking about proofing

1. Create checklists for data

There’s nothing worse than sending out a third-quarter report that’s labeled as a second-quarter report. This almost happened to me early in my days as a director of investment communications. That near miss inspired my love of checklists.

When writing quarterly communications, create a list of data that must be updated. This is especially important if you start writing in a quarterly template document that holds the last quarter’s data.

Another way that I manage this when updating documents with previous-quarter data is to turn on Microsoft Word’s “Track Changes” feature. I know that most of the document should turn red with changes before I “accept all changes” and start proofreading.

A variation of this data checklist is a list of common errors that you review just before you hit “send” on your document.

2. Create a style guide

Typos, poor punctuation, and stylistic inconsistencies are more likely when you lack a style guide. You can adopt a standard style guide, such as the Associated Press Stylebook or The Chicago Manual of Style. However, you still benefit from a style guide specific to your company. Your guide will cover issues those guides avoid, such as how to spell the plural of “Treasury” or whether a portfolio is overweight “in” or “to” a sector.

Read more about my take on style guides for investment managers.

3. Use technology that identifies weaknesses

Your word processing software’s grammar and spell checker isn’t perfect, but it’s still worthwhile. I supplement mine with PerfectIt software, which checks for consistency in your usage.

There’s also software that will help you to identify larger issues of style and grammar. Hemingway is a free app that assesses the difficulty level of your sentences and suggests some ways to improve them. Grammarly is another option.

4. Read your work out loud—or get software to read it

When you do heavy editing, it’s hard for you to see the typos and other weaknesses in your work. That’s why I initially used Adobe Acrobat Pro to read out loud, as I described in “Why I love Adobe Acrobat Pro for proofreading.” Now that I have a version of Microsoft Word that can convert text to speech, I use that. I can hear problems that I can’t see.

5. Use a fresh pair of eyes

In an ideal world, a professional proofreader will review your work. That happens at some of my larger clients. When my client agreement permits, I often hire an outside proofreader to review the first complete draft. A pro who knows the industry will do the best job but any set of competent fresh eyes is likely to help.

If you lack the luxury of outside help, see if a colleague can review your work. Or, leave your work overnight—or at least for an hour—before you review it with fresh eyes.

More resources

For more proofreading tips, check out “Six ways to stop sending emails with errors.” You can test your proofreading skills weekly with Mistake Monday.  Check the Investment Writing Facebook page on Monday mornings.

Six ways to stop sending emails with errors
Six ways to stop sending emails with errors

 

Do you have tips for proofreading? Please join the conversation.

Image courtesy of num_skyman at FreeDigitalPhotos.net.

NOTE: This post was updated to remove references to the free Consistency Checker, and hOw wE eDiT wRiTTeN cOnTenT, which are no longer available.

How to discuss index and portfolio returns: My case against synonyms for “return”

How many ways can you say “returned” when writing about indexes and portfolios? This question seems to eat at many investment and marketing professionals.

I’m delighted that writers of market and portfolio performance commentary seek to make their writing more lively for their readers. I know that’s why they’re asking about synonyms for the verb “return.” However, they have hit one of my hot buttons. Please, please, please stop using gazillion synonyms for “return,” “rise,” and “fall” when you write dense paragraphs.

Why do I say this? When you read a dense paragraph or report with many return numbers, it becomes hard to absorb them if your brain also has to interpret the different words representing “return.” For example, you have to decide “Is ‘delivered’ positive or negative?” or you must recognize that 5% is positive when it follows “gained,” but negative when it follows “fell.” Sure, it’s not brain surgery. However, it slows your readers.

Please take the test below.

Which of the following is easier to understand?

If you’re skimming or reading in a hurry, like so many of us, which of the following sentences can you understand more quickly?

  1. The S&P 500 returned 2.9% vs. -1.3% for EAFE.
  2. The S&P 500 was up 2.9%, while EAFE was down 1.3%.

I am such a strong believer in #1, that I’m posting a poll where you can answer this question. Let’s see what people say. The poll offers a “comment” box if you’d like to opine on this topic.

My suggestions for return-heavy paragraphs

1. Stick with the verb “return.”

2. If you’re comparing two numbers, put the numbers close together for easier comprehension. In other words, “The S&P 500 returned 2.9% vs. -1.3% for EAFE” instead of “The S&P 500 returned 2.9% and EAFE returned -1.3%.”

3. When reporting more than two returns, consider using a table or graph. It’s easier to scan data arranged neatly in columns than in a long, long sentence. You can still refer to the returns in your text, along with a suggestion to “See the table of index returns.”

4. Present returns in a logical order. For example, give all stock index returns first, followed by all bond index returns. Or, all U.S. index returns, followed by developed country and then emerging market returns.

When “return” synonyms are okay

I am happiest to see synonyms for “return” when a paragraph is devoted to a single index. For example, “The S&P 500 soared 25% for these three reasons…”

A little variety is okay even when you’re discussing more than one index. Perhaps you start with plain old “returned” for one index and then use “soared” for the second index to add emphasis and personality. Just don’t throw too many synonyms at me or I’ll get cranky. More importantly, you’ll lose readers when they get bogged down in SynonymLand.

Don’t give up on colorful language

My rant against synonyms for “return” shouldn’t scare you away from using colorful language in other places. I’m generally a big fan of powerful verbs and language that shows your personality. I’m leery of synonyms only when they interfere with comprehension.

Note: Edited on June 10, 2014, for clarity.

 Image courtesy of Stuart Miles / FreeDigitalPhotos.net