Unravelling the Financial Jargons your Advisor may use. The ultimate Cheat Sheet!

Estimated reading time: 8 minutes 31 seconds

“Do not save what is left after spending… but spend what is left after saving: Warren Buffet”

Warren Buffet needs no introduction and with his quote stated above, he has very specifically pointed out when are you capable enough of spending. Every time I read this quote, it kind of motivates me for increasing my savings and securing myself for a healthier half of my life. So, we can’t deny the fact that how important financial planning is in our life. This whole business model started back in the early 1600s and the first to open was the New York Stock Exchange back on May 17, 1792. But the actual financial planning scenario came into existence back in the 1960s.

As per SageFinancialAdvisors, “Financial planning as we know it today was born in December 1969 when thirteen financial services industry leaders gathered to discuss the creation of a new profession.” But why are we discussing here Financial planning history? If you note down the dates above, it started back in the 1600s and the need is still increasing at an exponential rate. As they say, good ideas survive but the best ideas become part of an individual’s life. Financial planning no doubt is now one of them in this ever-growing paced world.

The intention of writing this post is to make sure that even if you are a newbie to the financial world, you get every sentence and every technical jargon mentioned without any confusion. Most of the time clients get all puzzled up when an advisor starts using heavy financial terminologies. Because of this, their clients don’t fully understand the strategies being formulated by advisors and each time they spend their time googling on what it means. After reading this blog, you will be fully aware of all the terminologies being used in the financial advisory world. But, if you feel that I have missed any, feel free to share those on

Without any further ado’s, let us first try to understand the parent terminology and then we can drill down to other sub terminologies connected with it.

Financial Freedom
Well, this terminology is pretty self-explanatory but to put it in simpler words, it is a document that lists out an individual’s current financial situation and how his/her goals depending on his current incoming cash-flows and assets can be achieved. This document also lists out the numerous strategies that are going to be implemented by a Financial Advisor to help reach pecuniary goals made by an individual.

For instance, let's say you have X amount available with you as savings and have a total of Y amount as inflow each month. You probably need 4 goals to be fulfilled at the end of 5 years. After your statements and goals are clearly specified and stated to a financial advisor, it is now their job to assess, analyze, calculate and then present their strategies on how to grow the amount X+Y and fulfil all your goals by the end of 5 years. All these strategies and calculations are very well presented in this document for clients to refer to.

This overall process of formulating, strategizing, and calculating done by a financial advisor is represented as Financial planning document.

Market cycle
Just as the season changes in a year, similarly the market too changes. But it is to be noted that there is no specific time frame for it. It may take a minute to either go up or down and may also remain stabilized over a year making it unpredictable to understand where it is actually headed to. I find this whole guessing the entire market shifting game so fascinating. Well less about me, lets now discuss more on the market cycle. According to Investopedia, “Market cycles, also known as stock market cycles, is a wide term referring to trends or patterns that emerge during different markets or business environments. During a cycle, some securities or asset classes outperform others because their business models aligned with conditions for growth. Market cycles are the period between the two latest highs or lows of a common benchmark, such as the S&P 500, highlighting a fund’s performance through both an up and a down market.”

On a broader vision, there are 4 different types of market cycles listed below.

The Accumulation Phase
The Run Up Phase
The Distribution Phase
The Decline or Run Down Phase

You may not want this in detail as we do not want to confuse you with the core terms here. But I believe you now get a gist of what the Market cycle is.

Market volatility
Market volatility in its broadest term can be seen as a measure or parameter using which one can determine the pace with which any market changes, either up or down. Now, why does volatility come into the scene? There are actually a lot of factors that can directly affect the volatility rate in a market, some of which are Political Developments, Change in Economic Policy by government, Economic Crisis such as the crash of 2008, Economic Indicators, market changes in other countries. Thanks to for such a detailed insight. Now, volatility also means that prices of the stocks in the stock market are moving rapidly, possibly swinging in both the directions, up or down. If the volatility parameter is swinging towards the higher price scale it often suggests that risk associated with your portfolio is much higher now as the constant movement of prices can crash the existing market.

A financial adviser is someone responsible for providing you with financial advice based on what your current financial situation is. One of the most important jobs of a financial adviser is that after understanding the current market condition and your requirements, they advise you on your portfolio optimizing risk and returns. Not just investing your money, financial advisors are also responsible for planning your entire savings and also planning your budget from current age to your retirement. It is a crucial part of their job to check with you regularly and get any updates on your financial situation changes so that depending on your updates if there are any amendments required, the adviser will change your investment and retirement strategies accordingly. Always do note that one can call themselves a Financial adviser if and only if they possess the licenses and required certifications as per Securities and Exchange Board of India (SEBI) guidelines. So do check this before you are hiring any advisers for your financial planning.


Brokers always are the intermediary or middleman available for doing things on behalf of other parties. Like in the world of the stock market, it is the job of brokers to buy and sell stocks or things on behalf of their clients. In return, for each of the transactions a broker executes, they are paid a certain amount of fixed fees or commissions. These brokers can either be an individual or a specific firm trained in carrying out these activities. In the case of registered firms, they can also extend their brokerage facility by providing other types of services such as investment planning, examining and evaluating any financial information. Many times, brokers and financial advisers are understood to be the same. According to, “The primary difference between these two careers is financial advisors assist in the planning, management, and investments that a client already has, while brokers primarily deal with assisting potential stockholders in potential investments that would prove to be lucrative to the client.” It is also to be noted that financial advisers and brokers have different licenses and scope of fiduciary responsibilities.

Market Standard Deviation
You must have come across the term standard deviation during statistical analysis. Standard deviation represents how much is the value deviated from the average value, also referred to as the mean. Now in the financial world too, standard deviation represents the same thing. Let me explain this with an example. You have a stock or a commodity whose prices have gone either higher by $10 or lower by $10. So the current standard deviation is for $10 on either higher end or the lower end. In the financial world, the market standard deviation is also used to understand the market volatility about which we discussed earlier in this post. When talking about volatility, market standard deviations are directly proportional. So, when the market standard deviations are low, the market volatility parameter decreases drastically, and hence there is a lower risk on the securities or investments made by you. If the market standard deviation lies on the higher end, it represents high market volatility which means prices for a stock or a commodity are changing too much too frequently and this leads to higher risk on securities or investments made by you.

Asset Allocation
Rather than investing all your money in the same stock, it is always advised that you spread your amount in different types of stocks, bonds, real estate, mutual funds, to diversify and reduce the portfolio risk. There are numerous resources available for investment but it is the job of a financial adviser to understand your retirement and financial goal requirements and then pick the right set of frameworks for your financial planning and invest in it. This is what asset allocation means and while you may not have so in-depth knowledge on finding the right mix of these frameworks, it is always advisable for one to consult with a right financial adviser and make sure that your financial planning road-map exists.

Asset Class
So, where to invest your money to get maximum profits. These are the types of questions covered under Asset Classes. Asset classes as defined by Investopedia,“ is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Asset classes are made up of instruments which often behave similarly to one another in the marketplace.” Some of the most famous asset class types are bonds referred to as Fixed Income, Cash, mutual funds, equities, or stocks, and they have different market risks as well.

The writer of this Market commentary is Arzoo Dalal. She can be contacted for queries and clarifications on


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