Episode #4: Cracking The Financial Code

Today’s Prep:

There’s a lot of jargon out there in the financial world, and it can be confusing. David cracks the financial code and helps you learn the lingo.

(Click the featured times below to jump forward in the episode)

Equipping Points:

[00:12] – Bamboozling Financial Talk.

  • Some financial advisors insist on using confusing jargon and complex metrics when talking to their clients. Sometimes you need someone who will give it to you straight and help you break the financial code.

[00:36] – Explaining Market Corrections. 

  • Your advisor might tell you your portfolio is simply undergoing a market correction. While this could sound confusing, it really just means you’ve lost money. If you don’t understand how your portfolio is invested, you need an advisor who can explain your investments and how they’re performing in a way that’s easy to understand.

[1:25] – Education Is Important. 

  • We lack financial education in this country. After all, no one really teaches you in high school how to invest in the stock market. Additionally, many brokers and advisors are caught up on product pushing. However, financial education is an important part of the planning process. Proper education can help you crack that financial code.

[1:54] – What Is Upside Potential? 

  • If your broker is forecasting significant upside potential for a certain investment, it probably means their firm has taken a large position in that stock. Therefore, they want you to buy it and help them meet their sales quota.

[3:14] – Alphas, Dollar Cost Averaging, And RMDs. 

  • Okay, at this point, your advisor is just trying to sound intelligent to get you to let them manage your money. They think if they can throw around enough jargon that it will convince you to work with them. Conversely, a good advisor is able to take confusing financial concepts and make them easy for you to understand.

[3:48] – If It Can’t Be Reasonably Understood By A High School Student, Try Again.  

  • Well-meaning professionals can slip into jargon. Everyone does it. After all, we best understand our industry or field of study. However, even the most complicated of concepts should be broken down in terms that are easy to understand. If your advisor is confusing you, ask them to try explaining the conversation in another way. If they can’t, or won’t, it might be time for you to find a new advisor.

Today’s Takeaway:


More From David:

The host: David Dickens

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