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The complete cynic’s guide to investing

A glossary for people trying to make sense of today's financial world.

Adviser: Advises on investment and financial matters, or just sells products. The financial industry can't decide one way or the other.

Buy low, sell high: What advisers tell clients to do.

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Buy high, sell low: What many of their clients somehow end up doing.

Buy low, sell lower: What people who invest in Research In Motion shares do.

Cash is king: Means that the only safe thing is government Treasury bills; what financial pros say when they're selling low.

Contrarian: Someone who is wrong in predicting what will happen, but in a different way than the herd.

Currency risk: The danger that your U.S. equity fund makes 2 per cent and the Canadian dollar rises 3 per cent against the U.S. buck.

Diversification: A practice of mixing different types of investments that everyone agrees with yet does differently.

Due diligence: What investment industry people accuse you of not having done when their products fail you.

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Equities: A term for stocks used by investment people who want to sound smarter than their customers.

Emerging markets: Where investors go for exposure to countries that haven't yet made our mistakes.

Exchange-traded funds: Once a clean and easy way to buy the returns of major stock and bond indexes minus a tiny fee; now, additionally, a way to package any and all investing strategies, no matter how loopy or needlessly complex.

Fees and commissions: Where we see the strange dichotomy of people obsessing over the price of the everyday goods and services they buy and ignoring the cost of the investments on which their financial goals depend.

Fiduciary: On Bay Street, a word that shall not be spoken; means the client's financial needs come ahead of the firm's revenue needs.

Financial consultant: See adviser.

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Financial planner: See financial consultant.

Financial stocks: What investors buy to make back the banking and mutual funds fees they pay.

Fixed income: Bonds and guaranteed investment certificates; what you buy to fix a portfolio with too much exposure to stocks.

Foreign content: For 10 years, a way to "diworsify" your booming Canada-focused portfolio; now, a refuge while Canada gets its stock market comeuppance.

Gold: Not edible, potable or even portable, but thought to be worth having when the world ends.

Guaranteed investment: You won't lose money, but the real guarantee is that the company offering the product makes more money than you.

Hedge fund: Expensive mutual funds for rich people seeking exotic ways to lose money.

High yield bonds: Make that high risk bonds.

Inflation: The one certainty in investing and financial planning.

Investment consultant: See financial planner.

Irrational exuberance: Any exuberance qualifies these days.

Labour-sponsored investment funds: A way to lose money on young, unproven companies as opposed to more mature businesses that are listed on stock exchanges.

Leverage: Borrowing to invest; allows you to lose not only your money, but also your broker's.

Long term: The time period over which you must stay in your investments to make money. Basically, forever.

Money market fund: Short-term parking place used by investors who don't mind paying more in fees than they're getting in returns.

Mutual fund: As Kodak was to photography a few decades ago, so is the mutual fund industry to investing. Quite useful, very popular, widely available and seemingly oblivious to its shortcomings.

Net worth:The optimistic notion that people own more than they owe.

Quarterly account statements: Where many investment firms pretend to show you how they're doing with the money you gave them.

Rally: Short bursts of stock market euphoria; generally followed by long bursts of stock market misery.

Real return bonds: Really, no return right now. Just the potential to do better when inflation becomes a threat.

Retirement: The period of life where you wish you invested more when you were younger.

Risk tolerance: The over-estimation by investors of their ability to accept big losses.

S&P/TSX composite index: Canada's benchmark index for bank, energy and mining stocks, and not much else.

Value investing: Dumpster diving for stocks other investors have tossed aside.

Volatility: A calm word for those endless ups and downs that have scared many people away from the stock market. Like calling cancer an illness.

Editor's Note: An earlier version of this online article incorrectly defined currency risk. The error has been corrected.

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About the Author
Personal Finance Columnist

Rob Carrick has been writing about personal finance, business and economics for close to 20 years. He joined The Globe and Mail in late 1996 as an investment reporter and has been personal finance columnist since November 1998. Rob's personal finance columns appear in The Globe on Tuesday and Thursday, and his Portfolio Strategy column for investors appears on Saturday. More

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