Investing Jargon, Explained

Understand what the most common terms really mean.

A cartoon showing a mixed up arrow eventually pointing up, with a man in a suit looking for where to go.
(Image credit: Getty Images)

Are you an “accredited investor”? Do you want to buy some “ADRs”? How do you make money on “call options”?

The investment world is rife with technical terms that can have surprisingly negative effects on your ability to build a financial nest egg, says Patrick Heck, a research psychologist for the Consumer Financial Protection Bureau. “Jargon can definitely create barriers to entry,” especially for new investors who are often discouraged by terms they don’t understand, says Heck, who notes he is speaking as a researcher and not for the agency. Jargon can cause problems for more-experienced investors as well, he said. Some investors become overconfident when they think they understand jargon, which can lead to riskier choices, one study shows.

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Kim Clark
Senior Associate Editor, Kiplinger's Personal Finance

Kim Clark is a veteran financial journalist who has worked at Fortune, U.S News & World Report and Money magazines. She was part of a team that won a Gerald Loeb award for coverage of elder finances, and she won the Education Writers Association's top magazine investigative prize for exposing insurance agents who used false claims about college financial aid to sell policies. As a Kiplinger Fellow at Ohio State University, she studied delivery of digital news and information. Most recently, she worked as a deputy director of the Education Writers Association, leading the training of higher education journalists around the country. She is also a prize-winning gardener, and in her spare time, picks up litter.