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What your broker really means

For as long as humans have been upright and speaking, we’ve been developing words and phrases to help us communicate with each other. The investment community is no different. Investment jargon on the whole can be useful – we say ‘P/E ratio’ to avoid having to say ‘the ratio of the per-share price of a company’s shares to its per-share post-tax profits’ every time.

Short-cuts can also help muddy the waters or distract you, though – or can suggest that maybe the person using them doesn’t know as much as they want you to think!

We’re pretty optimistic people at The Motley Fool. We don’t have a lot of time for pessimism or cynicism. The stock market – despite its regular bouts of exuberance and despair – is one of the greatest wealth-building opportunities known the man.

Of course, being optimistic isn’t the same as accepting something in blind faith. One of the clues that you need to dig deeper is when you hear a lot of that investment jargon being used.

Next time you’re talking to your stockbroker, taxi driver or a mate of a mate at a barbeque, this guide might help.

Decoding the jargon

Can’t fall any further: Can fall further… possibly a lot

Ready for a pull-back: No one knows where the market is going, but I sound like I do

The market is ready to climb: See above

A good chance of finding oil: An average (read: poor) chance of finding oil

Working on a breakthrough new technology: Here comes another capital raising

Can’t be valued using regular techniques: There’s no way to justify the price

At a 5-day high (or low): That’s as long as my attention span can cope with

Leveraged for a recovery: Deep in debt and the recovery had better come soon

New business model: The others didn’t work, and we have our fingers crossed

Temporary lull: In a tailspin

Paradigm shift: I have no idea what’s happening either

New normal: I can’t remember back more than 5 years

A sure thing: Belly up in 12 months

Can’t lose: Belly up in 6 months

Now or never: Already belly up, but need to find a sucker to buy the shares

It was a black swan event: We didn’t do our research well enough

The trend is your friend: Until it ends

Just look at the chart: You can drive by looking only in the rear vision mirror, right?

Primed for a takeover: Nothing else will save it

Buy and hold is boring: I can’t wait to lose my money chasing ‘excitement’

Buy and hold is dead: Again? Seems to have had more resurrections than Lazarus – and going strong

Warren Buffett has lost it: See above

Shares are too risky: Don’t mention index-tracker who has increased his portfolio 30-fold in 30 years

Foolish takeaway

Of course, that’s all a bit tongue in cheek – and there are many wonderful brokers and analysts. Unfortunately, there are many others also looking to give you advice on how to invest… so it’s not as tongue in cheek as we’d like! As a general rule, the hotter the tip, the further – and faster – you should run.

Long-term, business-focussed investing can be boring – wonderfully, wealth-buildingly boring! And what’s more exciting than that?

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 

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