Investment firms win first prize for gobbledygook

19 December 2018

And the winner is… There is an unspoken rule in the English language that those four words must by followed by a long, exaggerated… pause. Suspense builds as nominees squirm, and audiences will the presenter to say the name of their favourite contestant.

So at an investing awards ceremony I went to last week, no one was surprised at first when the presenter – who was a comedian with no background in finance – went quiet mid-way through announcing the winner of an award for a type of fund. She announced: ‘The winner of best Core ETF goes to…’ and then stopped.

It took some time to realise there was more to her silence than dramatic effect, but when she spoke it became apparent why.

Eventually, with a deep breath she revealed the winner: “iShares Core FTSE 100 UCITS ETF (ISF).”

Where do you even start with such a mouthful?

Thank goodness she didn’t have to read out the full shortlist of nominees, which included such tongue-twisters as SPDR Bloomberg Barclays Global Aggregate Bond GBP Hedged UCITS ETF (GLAB).

The world of investing is full of technical language, abbreviations, acronyms – and as new products are developed so is the jargon to accompany it.

But what’s funny is that at the same time, investing is becoming simpler.

You can do it yourself, using a good online platform.

You don’t have to fork out costly fees to middlemen.

And while it may be tempting to hark back to the good old days when you had a stockbroker to buy shares for you in companies you knew, you had just a fraction of the options open to us today and it was unaffordable for many.

It may have been comforting to know your money was with just a few household names, but the stakes were so much greater if they failed.

Now you can gain access to thousands of companies around the world on your phone while waiting for a bus.

If only, that is, we’re not put off by the jargon in the first place. The first trick to doing this is realising that while the investment industry at times seems loath to explain things in clear language, most of it is not very complicated.

Stick with it a while and we ordinary investors soon come to realise that, for example, that the name of the winning fund just means that it buys a share of all of the 100 biggest UK companies available to investors (denoted by iShares Core FTSE 100). It is regulated by the European Union (UCITS) and shares are not picked by a human, they’re just picked by a machine depending on what the biggest UK companies are at any one time (ETF or exchange traded fund).

Anything that still seems unfathomable after a bit of probing is probably worth staying away from anyway.

The second trick is not being put off by the choice.

It’s great to have options, but if that’s going to cause decision inertia, there are ways of narrowing it down.

At Moneywise, we have put together a list of First 50 Funds, which offer a good starting point for compiling a beginner portfolio. Investing platforms also tend to have lists of funds they recommend for anyone starting out.

In this issue, we also reveal the winners of our 2018 fund awards, a highlight of the Moneywise calendar. These are awarded not to the funds that saw the best returns this year, but those that have consistently done pretty well. And just as importantly, none of them are too expensive.

We explain what they do and why they might be of interest to investors.

If you have some investing jargon you want busted, please get in touch by email, by post or social media (see below) and we’ll break some of it down over the coming months.