It's been a tough year for many of you and it's a good time to acknowledge all we have to be thankful for. Personally, I'm thankful for many things, including the trust you place in me as your financial planner. So, from my family to yours, Happy Thanksgiving.
Last week we discussed how one of the main impediments to increasing investor transparency is how complicated the financial services industry is. A big part of this has to do with jargon.
Every industry has its own language, but finance, perhaps along with medicine, has the added distinction of being dangerous if you don't understand the lingo. One of my jobs, so far as I see it, is educating you about the terms, themes, and jargon that's most important to your financial health over time.
Without basic knowledge it's hard to know what questions to ask and if the answers you're getting are sufficient, leaving you open to missteps or even fraud. In other words, what you don't know can hurt you.
While everybody's knowledge level is different, it's helpful to get a sense for where we are as a country. Earlier this year research firm YouGov surveyed about 1,200 American adults to gauge awareness of 35 financial terms.
Folks have a decent understanding of fundamental terms like "Savings Account", "Net Worth", "Asset", and "Liability", with over 70% of respondents reporting confidence about those terms. But the numbers are almost reversed for terms like "Index Fund" and "Amortization", with 60-70% reporting being uncomfortable with, or having no knowledge of, the terms.
These terms, and the others on the YouGov list (see the link below), are essential to one's financial health. Accordingly, over the next several weeks I'll be starting at the bottom (the least understood terms) and choosing a couple or so to define and comment on. Yes, you could easily look these terms up in Google, but I'll attempt to give you the real-world-financial-planner definition. Hopefully this will provide some clarity and increase your understanding.
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