Plain-speaking the language of retail investors

Portfolio managers and analysts generally feel most comfortable interacting with highly sophisticated institutional consultants and wealth managers who are well versed in the highly technical and jargon-laded lingua franca of the investment world.

But as many asset managers find themselves struggling to capture new inflows, they’re asking portfolio managers and analysts to communicate directly with investors, either in person, at live events such as webinars and conference calls, through fund commentaries, presentations and via the news media.

The problem is that most portfolio managers feel most comfortable speaking to institutional consultants, wealth managers and other groups who understand it. These CFA-certified investment professionals don’t bat an eye when managers toss around terms like excess returns, yield curves, spreads, correlations, momentum and duration.

But portfolio managers can’t get away with communicating this way with retail investors, most of whom have neither the knowledge nor patience to learn these obscure terms of the trade. Even wealthy investors who entrust their portfolios to investment advisers and some new-to-the-beat journalists expect a fund company’s representative to convey their insights and results in language they can understand without a financial dictionary or Google search at their fingertips.

This doesn’t mean that portfolio managers need to “dumb down” messages. There are many ways to convey information without using jargon and confusing language. But it does require using more simple and literal explanations and a conscious commitment to move away from descriptions of how we do it to those that clearly communicate how investors benefit.

A good place to begin this process is by reviewing your web site, videos, market commentaries, retail fund presentations, fact sheets and recent news coverage for obscure and confusing language that some audiences may not understand. To get you started, we’ve created a list of some of the most common investor-unfriendly words, phrases and concepts and suggestions for simplifying their meaning.


Use of this common shortcut obscures the potential positive or negative impact of a fund’s holding strategy. Instead of using a typical phrase like “the fund’s holdings are characterized by low turnover” say something like, “We tend to hold our stocks/businesses for a long time. This strategy also reduces transaction costs and reduces taxes.” Conversely, for high-turnover strategies say something like, “Our high-turnover strategy allows us the opportunity to take profits and cut losses when it makes sense.”

Bond yields and rates

Few investors understand how bonds work and even fewer understand the relationship between yields and prices. Market commentators don’t help by using phrases like “Yields fell last month” to describe a bond market rally. Most investors associate market performance with price fluctuations, so you might as well use the same terminology when describing bond performance, i.e., “Treasury bond prices rose last month.”


To most people, exposure has negative connotations. So, instead of saying something like “the fund has increased its market exposure in China” (leaving the investor to decide whether this is intentional or accidental), emphasize the positive with language such as, “the fund has increased its investments in Chinese companies offering strong growth potential.”

 Basis points  

Institutions and advisors love this granular breakdown of a percentage point, but it’s hard for investors to understand. If your fund has management fees of 115 basis points, use bips with professionals, and 1.15% with everyone else.


Using a term that many people associated with criminals isn’t the best phrase to use when discussing a portfolio manager’s faith in its processes and opinions. Use words like “beliefs” and “commitment” instead.

 P/E ratios and multiples

These phrases just make investors’ eyes glaze over. Be simple and literal when discussing the relationship between valuations and earnings and don’t require investors to come to their own conclusions. So, for example, instead of saying “the company has a P/E ratio of 20” or “the stock is trading at 20x” simply say that the price of the stock is currently 20 times higher than its current earnings and then state whether you believe this makes it an attractive or risky investment-and why.

 Secular inflation

This phrase all too often finds its way into numerous economic outlooks. Be literal and say “we’re in an extended period of mild price increases” or “mild, prolonged inflation.”

Tracking error

This phrase, which took its rightful place in the jargon pantheon when index funds and passively managed ETFs started taking serious market share away from actively managed funds, still means very little to investors. Help them understand why it’s important by replacing shortcuts like “the fund has low tracking error” with more explanatory (and benefit driven) language such as “the fund is managed to deliver returns that mirror those of its index as closely as possible.”


Why use a term that most investors associate with a bad round of golf? Use “index” instead.

Alpha and Beta

These terms may be front and center in discussions with institutions and advisors, but they’re Greek to most retail investors. Instead of using terms like “the fund delivered positive alpha” make it simple and say, “the fund outperformed its associated index.” Hopefully your compliance department won’t require you to add “on a risk adjusted basis.”

Likewise, when discussing volatility, try to avoid head-scratching metrics like “the fund’s beta was 1.2” and instead say what it means, such as “the fund’s returns were 20% more volatile than the market as a whole.”

Expense Ratios

Investors understand that they need to pay fees. So why try to hide these costs in phrases such as “the fund has an expense ratio of 1.1%” when you can be honest and say, “The fund charges investors 1.1% of their account value every year to cover its management and administrative expenses.”

Other Phrases to Avoid (if Possible)  

In addition to the words and phrases above, all of which can be explained in simpler terms, there are a whole slew of additional terms that-outside of a prospectus-portfolio managers may want to avoid discussing altogether unless they feel extremely confident that they can explain them in ways investors can easily understand. These include:

  • Excess, expected and risk-adjusted returns
  • Yield curve
  • Spreads
  • Duration
  • Qualitative and quantitative analysis
  • Momentum
  • Correlation
  • Sharpe ratio; and
  • Information ratio

Adapt or Miss Out

“Versioning” your communications for audiences with different levels of investment knowledge may place an increased workload on both your portfolio managers and your marketing and sales teams. But unless your firm can afford to focus its sales efforts solely on institutional investors and consultants, you’ll need to adjust the way you communicate to gain traction with a new generation of younger and wealthier investors who demand that fund companies communicate with them on their own terms.

 Dan Sondhelm is CEO of Sondhelm Partners, a firm that helps asset managers, mutual funds, ETFs, wealth managers and fintech companies grow through marketing, public relations and sales programs. Click to read Dan’s latest Insight articles and to schedule a complimentary consultation.