There's some jargon that I've picked up from engaging with the markets and market participants, that has actually become normalised, but when you unpack it, you are left confused as to what the actual meaning is.
Here are 5 terms that I find confusing and amusing at the same time:
1. Taking profits
The concept of taking profits involves selling your shares for higher than you bought them. But profits aren't free, you lose the shares you sell. So it's just trading your shares for a certain price different from what you brought it for. It's not likt you get profits without losing anything
2. Tax Harvesting
Entails selling some shares at a loss in order to offset your overall tax liability. Like "profit-taking" you are not just playing checkers with money, but you are actually giving up a proportional ownership in a business to offset a tax liability. As an investor, ask yourself 'Is it really worth it?'
3. Being bearish or being bullish
What does it actually mean to be either of these? Are you buying, selling, holding, trading with leverage or shorting. One term, so many implications
4. Dividend yield
Investors often look for companies that pay a high dividend yield. Companies pay shareholders a share of profits, they don't pay a dividend yield. So chasing companies with a good or high dividend yield is confusing, not to mention dangerous
5. Buy & Sell Analyst Recommendations
The stock market is a place where buyers and sellers engage with each other. In a market, for a share to sell, there has to be a buyer. For a share to be bought there has to be a seller. Where a stock has a 'sell' rating, who is being told to 'buy' and vice versa. Baffled!
Are there other terms that you find confusing as to what they mean in theory and in practice? Please share yours, I'd love to hear them
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