Motley Fool Hidden Gems Investing - Warning: Financial Jargon Ahead!

Episode Date: September 29, 2020

Financial jargon can make even the smartest people feel stupid. Jason Zweig, longtime columnist for The Wall Street Journal, shares his insights into why it works and how to get around it. Learn more about your ad choices. Visit megaphone.fm/adchoices

Chris Hill. With The Motley Fool Money Extra, I'm Chris Hill. Never underestimate the role that jargon plays in the financial industry. I can't tell you how many times I've talked with lawyers or doctors, intelligent credentialed professionals, and they get paralyzed at the thought of investing in the stock market. It is due in no small part to the jargon that the financial industry throws at them. This is a topic that Jason Zweig knows all too well. As a longtime columnist for the Wall Street Journal, he has seen up close how it works. Jargon in the financial industry has a particularly toxic aspect to it. I mean, you mentioned doctors. Think of it, for example, you go to your doctor's office

and your doctor tells you you have some alarming-sounding medical condition, I don't know, you know, peritonitis of the peritoneum or something like that, and you immediately freeze, your palms start to sweat, but the first thing you'll say to your doctor is, what is that? What does that mean? And your doctor will explain it to you in terms you understand, And if you have a good doctor, she'll explain it to you until she can tell you understand it. But jargon in the financial industry works in a very different way.

There, the jargon is not meant to be precise the way jargon in science or medicine is. It's meant to complicate what otherwise might either be simple or scary. but furthermore it has this extra toxic effect which is when you hear it instead of saying what is that what most people will do is they'll just nod because they want to be on the inside they want to feel as if you know i'm an insider and so i know what a proprietary leverage discount model is even though those words when you put them together don't really mean anything at all other than the fact that the person who's saying them to you is is either hiding something from you or pretending to know something that he doesn't really know

but by nodding and and sort of faking it yourself you make yourself feel as if you understand what's being discussed when, in fact, you don't. And as soon as you nod, the person telling you about it will stop explaining and will just deepen the jargon. So jargon in the financial industry is sort of the step before getting beheaded. Remember, a good financial advisor will always take the time to explain things that you don't understand. And if you want to learn more, Jason Zweig is one of the best writers you can be reading. I'm Chris Hill, thanks for listening, we'll see you next time.