Words & Phrases That Should Be Banished From Finance

Financial planner extraordinaire Michael Kitces had a great post last week on some words and phrases that need to be banished from retirement planning.

A few examples Kitces used:

  • Banish retirement income in favor of retirement cash flows.
  • Banish retirement in favor financial independence.

This got me thinking about some of the other words and phrases that need to be thrown out or at least used in the correct context from the world of finance.

Here’s what I came up with (and yes, I’m sure I have used many of these in the past):

We use a proprietary investment model. Unless you’re Jim Simons of Renaissance Technologies, your model can probably be copied or created by hundreds of other investors or an algorithm. Implementation is more important than the actual model in most cases.

Equities & Fixed Income. What’s wrong with just using stocks and bonds?

Granular. I don’t know why this word annoys me, but it does. Just say the amount of detail and be done with it. This word screams I have a master’s degree or PhD.

Idiosyncratic risk. Risk unrelated to the markets or even company-specific risk both work for this one. This one gets used in plenty of marketing pitch books.

Portfolio optimization. Portfolios can only be optimized to the past, not the future. They can really only be allocated, not optimized.

Spoos: Slang for an S&P 500 futures contract. Seems like something all the cool kids say to show they’re in the know.

Bubble. Everything that goes up in price without immediately crashing is now considered a bubble. Bubbles are rare, so let’s save the term for an actual mania.

The market is down from profit-taking. Does that mean when the markets rise it’s up from profit-seeking?

Risk-adjusted returns. Translation: We underperformed the market, but here’s an equation to prove that we didn’t spectacularly fail. Plus, risk is subjective, so really this is a way of saying our returns didn’t fluctuate around the average as much as our benchmark’s returns fluctuated around the average.

I’m a contrarian. I’m all for contrarian investing, but there are so many opinions out there today that it’s nearly impossible to be a true contrarian anymore. You will always be able to find someone that disagrees with you these days. As James Osbourne (@BasonAsset) put it on Twitter last week: “I don’t know” may be the last true contrarian investment strategy.

We’re top down investors. So is everyone else in one form or another.

We’re bottom-up stock-pickers. So are 80% of portfolio managers

Unless this time is different… This one doesn’t need to be banished, but John Templeton’s famous saying does need to be put into context. For many this is a blanket statement to use whenever the market disagrees with their current posture. What most fail to realize is that (a) it’s never different this time — with regards to human nature and (b) it’s always different this time — with regards to the market and economic landscape.

Passive investing. Too many people equate passive investing with index funds. The S&P 500 ETF (SPY) is the most heavily traded ETF on the market, meaning it’s not being used passively. Passive investing has more to do with investor activity than fund activity. Quantitative funds can be active in the sense that they deviate from the market index, but they are passive because they use a systematic process. Investors can also passively invest in these passively-run quant funds or actively trade in and out of them. Plus, there’s an index for everything these days. It’s more about activity vs. inactivity and high cost vs. low cost, not active funds vs. index funds.

Black swan. People are always trying to predict the next black swan event, but they don’t understand that a black swan is a something that come as a surprise to everyone. You can’t place a probability on a black swan.

Non-finance words lightning round:

Ironically. Everyone gets this one wrong.

Literally. Same with this one and it’s overused. Literally THE BEST…

Thought leader. Seems cult-ish.

Foodie. Who doesn’t like to eat?

Having said that… I’ll let Larry David and Jerry Seinfeld explain.

National Football League. Broadcasters and color commentators can never just call it the NFL. They have to call it the NATIONAL. FOOTBALL. LEAGUE.

Any other ones I missed?

Financial independence in lieu of retirement, and other phrases that should be banished from retirement planning (Nerd’s Eye View)



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What's been said:

Discussions found on the web
  1. TheACsMan commented on Oct 28

    Years ago, when “granular” was such an en vogue word in the world of financial talking heads, I asked Ted David, who at the time was a CNBC anchor, just what it meant.

    I just wasn’t certain, even from its context whether it referred to the clarity of detail or the fractured state of the details.

    “I don’t know. Sometimes, I just wished they would speak English,” was his response.

    • Ben commented on Oct 28

      Ha, nice. I feel the same way whenever I hear someone use the term. Are they using it wrong or am I thinking about it in a different context?

  2. Max Hutsell commented on Oct 29

    Related to the overuse of National Football League is the frequency of the phrase “in this league”.

    • Ben commented on Oct 29

      Yup, I always hear “when you make it to the league…”

  3. Brendan Mullooly commented on Oct 29

    Not just in finance, but all business…synergy. Cannot stand it.

    • Ben commented on Oct 29

      Agreed. Creating value or value-add is another one in that category.

  4. Jeff Howard commented on Oct 29

    With respect to the NFL and announcers…

    Why is every forced fumble a “veteran play” or fumble lost a “rookie mistake”? Everyone who has ever played defense in a football game has been coached since the beginning of time to strip the ball when they tackle. Likewise, every RB who has ever lived has been told not to drop the ball. Rookies cause fumbles and veterans fumble the ball. The amount of their experience has nothing to do with it.

    P.S. love the site. Keep up the good work.

    • Ben commented on Oct 29

      True, like they don’t force fumbles in high school or college? Sports announcers are probably worse than a lot of the financial pundits out there.

  5. Doug commented on Oct 30

    Sorry if my serious reply ruins your tongue-in-cheek party, but I’m 95% sure that the NFL – excuse me, “National Football League” – requires broadcasters to say the full name as a copyright/trademark/legal issue. Doesn’t make it any less silly, but lawyers gotta be lawyers.

    I love this list, though!

    • Ben commented on Oct 30

      You’re probably right. For a league that makes billions of dollars a year in TV contracts I wouldn’t doubt it.

  6. Morgan commented on Oct 31

    “Perfect storm” should never ever be used again. Maybe replace it with “sh#t happens”?

    • Ben commented on Oct 31

      Yes, I’m in on that one. It seems like there’s a new perfect storm every 6 months.

  7. Brian Lauzon commented on Nov 18

    “At the end of the day…” (This was captivating at first but it’s been beaten into the ground!)

    “Inflection Point” (These are really rare and almost impossible to observe when you’re at one.)

    And totally agree on “value add”. It’s usually referencing something your market is not willing to place a value on!

    Great topic!

    • Ben commented on Nov 18

      Good ones. I always find myself using ‘At the end of the day’ and try to catch myself, but you’re right, way overused.

  8. Mark Zoril commented on Nov 18

    How about White Paper – aren’t these essentially marketing pieces presented as some type of objective study?, or Best in Class (Best of Breed; Best Practices). Who decided the practices referred to are the “Best”? Also, it seems now that “Breaking News” lasts for about 48 to 72 hours.

  9. Blake commented on Sep 11

    Myself… “if you could include Bob, Sue, and myself in the email”. I cant do something to/for/with/etc YOURSELF…