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ReFrame Dictionary

ReFrame Dictionary Howard County ReFrame Financial Planning

Common terminology in plain English

Below is a list of some of the most common financial jargon used in the investment advisory and financial planning industry.  I've included my plan English version of each of these terms.  My goal is to provide a easy to understand definition so you can get a general understanding of  the complex jargon used in our industry.  If you click on the term, it will link you to Investopedia and their more comprehensive definition.    

  • Asset Allocation:  How much you have invested in each of the three major asset classes - equities, fixed income and cash or cash equivalents
  • Diversification:  How your minimize the risk associated with your investments but spreading your investments over different investments.  Such as large cap, mid-cap or small-cap within equities.  It's the saying - "Don't put all your eggs in one basket".
  • Investment Policy Statement:  Usually used by financial advisors to outline the rules and guidelines as to how your funds will be invested.  
  • Risk Capacity:  Your need to take on risk in order to achieve your goals in the time horizon you defined
  • Risk Tolerance:  You ability to stomach losses in your investments.  The more you are comfortable losing, the riskier assets you can invest in
  • Time Horizon:  How long before you need to withdrawal the funds
  • Volatility:  The ups and downs you experience in the market.  The riskier the asset, the wider the swing between the ups and downs