Please explain! Financial Jargon Decoded

Happy Australian Day and Happy Chinese New Year.

May your year ahead be filled with prosperity, blessings, luck happiness and joy.

And to all our earlier Australian immigrants in order of immigration Aboriginals, Torres Straight Islanders, Convicts, Free settlers, Gold Prospectors, Farmers, Post WW1 & WW2 Immigrants, 10 pound POM's, New Zealander's, SE Asians, Stan's, NE Asians, African's, Chinese and more recent arrivals, thank you for creating and defending the opportunities we are blessed with today.

Today Australia still remains the lucky country and I believe will remain so, long into all our futures. Even our National Anthem is awesome! STRAYA

However did you know......  

Interview with Pauline 

Me: Pauline did you know you can speak Chinese? 

Pauline: Please explain!

Me: Did you know that the Aussie saying "Fair Dinkum" actually comes form the early Chinese gold prospectors of Australia. The Chinese (Cantonese) prospectors would say their strike was "ting kum" to mean pure or genuine gold.

Later this saying was more broadly integrated into Australian as an expression to mean fair, genuine, honest and true. So Pauline when promoting yourself as a dinkiy-die, fair dinkum Aussie, you're actually speaking a dialect of Chinese. How do you feel about that?

Pauline: Awkward silence......, blank stare back...... and sounds of crickets in back ground.

Me: Thanks Pauline, you can go now.

Moving forward but still on the theme of interpretation and translation.

The following is some financial jargon decoded and unpacked to keep you from looking like a drongo in the conversation, while turning those sausages, or making a salad at your next family/friend BBQ.

Who knows you may impress them so much they may even ask you for some financial advice... (probably about Bitcoin or residential property is my guess).

Financial Jargon Decoded.

Bottom-up Investing. No this is not about investing into the Mardi Gras festival or buying into one of the floats. (I'm gonna hell for that one..). Actually bottom up investing simply means buying assets at low or bottom prices.

Going Long. You might say this throwing a ball to you team mate on the football field, but....Going long actually means you have a rising market view. Going short means you you have a falling market view.

Efficient frontier. Are you talking about Elon Musk, SpaceX or heading west on your horse and wagon? In fact efficient frontier is simply different assets and their performance vs risk.

Core & Satellite Approach. Sticking with the SpaceX theme and in a galaxy not so far away.... Core and satellite simply means most of your money being in one investment style and then you have smaller investments in other riskier investments.

Dead Cat Bounce. You know the saying about a cat having nine lives? Well imagine each near death experience the cat is one less life closer to its death. A Dead Cat Bounce is when a company hits a high price and followed by a drop in price. The next high is lower than the last high and the next lower is lower than the last low. It's kinda like a death of a thousand cuts. Till death.

Ponzi. AYYY! no not my childhood hero Fonzi from Happy Days. Fonzi was cool. Ponzi's are not. Ponzi schemes are when a company or person brings in new investors with the promise of high returns and delivers these returns with the new income from new investors. More investors then enter and the scheme grows. The scheme fails when new investors stop entering and the company or person cannot sustain making the payments. Often investors loose 100% of their money in these schemes. Bernie Madoff

Index. Nope it's not your middle finger or what we looked up before google maps i.e. Gregory's Street Directory or UBD Pg 19 6M... Adrian Court Carlingford. 
An index refers to the average performance of an asset class. Active investors buy and sell assets to try to beat the index performance and justify their fees and existence to investors.

Arbitrage. Not to be confused with the abattoir or animal slaughter house, sorry vegans!
Arbitrage is the simultaneous buying and selling of an asset to take advantage of a price difference. Confused? An example is when you might buy a countries bond and sell another countries currency at the same time in the hope of making a profit on the difference in prices..unless your very good refer back to the meaning of abattoir.

PE. At school we had PE or Physical Education. In markets PE means something different. PE is the acronym for Price and Earnings of a company. The PE ratio is the benchmark valuation for investments. Simply divide the price of the investment by its earnings/return to get the companies performance vs its price.

Day Trader. A person who buys and sells assets multiple times a day. This person could also be confused with someone who trades their days and nights for..... (crickets) .i.e. day time in front of a computer screen trading shares and night times trading sleep for watching financial news to get idea's for next day trading... At the same time often risking their own money to try and make a profit.


This post was written by Peter Horsfield, as such they are his personal views. Peter helps you to focus on what’s most important, the right strategies at the right time. To learn more about How to become Financially Independent visit Peter Horsfield Smart Advice

About Peter Horsfield

Peter Horsfield is an Authorised Representative and Investsure Holdings Pty Ltd ABN 16 050 286 630 as trustee for Horsfield Family Trust ABN 55 609 068 513 is a Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523.