Given the corona and holiday season, some humour with a serious background is probably more appropriate than a theoretical discourse. The following selection of terms for the letters of the alphabet is not entirely arbitrary but is intended to entertain.


Alpha: Price gain or loss thanks to market-independent factors. A portfolio of solely alpha-positive individual stocks is the Holy Grail of every investor.

Beta: Volatility of the share price compared to the market. Optimal are stocks with beta above 1.0x when prices are rising and vice versa.

Chart: Comparison of two variables, mostly share price over time. It is advisable to extend the chart 2-3 years into the past to check its validity.

Discipline: Conscious adherence to certain parameters is a key to success. It applies to all stages of the investment process and its handling.

Emotions: Feelings are out of place when investing money. Studies show that they are even more frequent when making sales decisions than when buying.

Fund: Investment vehicle managed by a specialist. Important are satisfactory performance over a longer period of time and low costs (TER = total expense ratio).

Gnomes of Zurich: a term created by Labour Ministers in London for the Swiss banks that carried out foreign exchange transactions during the sterling crisis of 1964.

Hedge: Protection against loss of value. A hedge costs money and can hardly do justice to the time axis. In most cases, trust in the investment made is the better solution.

Index: Statistical value of a representative selection of shares. The calculation can be price, value or equal weighted. Investors are usually satisfied with an index performance despite there being a considerable number of shares that perform better.

Junk: Bonds with a credit rating of BB+/Ba1 or worse, nowadays unfortunately more often called high-yield bonds. The word junk (junk) is to be taken literally.

KYC: Know your Client/Customer is an ethical concept of the regulatory authorities to prevent the worst kind of nonsense. Unfortunately, the problem is not solved with multiple choice questions.

Liquidity: Sufficient number of shares to ensure smooth trading. Unfortunately, far too little attention is paid to the other meaning, money market holdings.

Macroeconomics: Analysis of the overall economic situation which commands too much attention. Microeconomics, the analysis of industries/companies, should be in the foreground.

NAV: Net Asset Value is the value of a fund whereby all securities are added up at closing prices, all liabilities are subtracted, and the result is divided by the number of fund units. Caution: The value may well be one month old!

Option: The right to buy (call option) or sell (put option) a certain number of shares at a certain price during a specified period. A certain price at a certain time is clairvoyance and the premium a risk factor, so a correct initial buy/sell decision of the share is sufficient.

Pareto Law: Vilfredo Pareto (1848-1923) formulated the 80/20 rule, according to which 20% of investment decisions probably also account for 80% of the success achieved.

Quality: Outstanding qualities are always sought after, rarely found. Despite all the difficulties of definition, “better than average” is the decisive factor, knowing full well that everything is relative.

Risk: The measurable possibility of loss is part of the investment business but can be reduced in various ways. The most underestimated risk is the tendency not to correct mistakes, i.e. not to sell at a loss.

Structured products: Investment vehicles created according to desired criteria, which are often tradable. Particular caution is recommended when combining coupons and share prices.

Theory: The analysis of a set of facts in their relation to one another, e.g. MPT (Modern Portfolio Theory) an investment decision approach that permits to classify, estimate and control risk and return.

Unrealized gains/losses: Theoretical figures, as only a sale produces a real figure. Investors tend to realize gains too quickly and let losses accumulate.

Volatility: Rapid and extreme price fluctuations. It can be because the outlook for a company is uncertain or because there are a limited number of shares outstanding.

Widow and Orphan Stock: Stock that pays high dividends and is considered to be safe. It usually has a low Beta and is involved in a non-cyclical business.

Xenophobia: Exaggerated fear of foreigners. Investors prefer the domestic market, which all too often makes them forget better investment opportunities abroad.

Y-axis: Ordinate axis in a rectangular coordinate system. In finance, this is the price axis whose components correspond to a higher degree of equation (parabola, hyperbola).

Zen: A version of Buddhism that aims at enlightenment/premonition by direct intention through meditation. At least, it is a good way to reduce stress.


Every term listed above is of course worth a longer discussion and can be interpreted differently. The assigned meaning is meant to be food for thought.



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Christian Wagner
Financial Advisor