We value you, our clients and readers, and never want to mislead or confuse you, but we will often use words and phrases, some of which are generally used in finance and others that we’ve coined as part of building our practice and brand, that you may not have encountered on other personal finance or money sites.
To aid in your enjoyment and understanding, here is a “WealthKeep dictionary,” a list of standard and proprietary definitions which we will update periodically as our site grows.
We hope you enjoy your WealthKeep experience!
- Active Keep. A dedicated strategy to handle the money you make–from your job and in the markets–in such a way that keeps it from evaporating due to the destructive forces that desperately try to take it away from you. Active keeping strategies involve paying close attention to tax minimization, asset location, budget and spending, debt management, risk management, and saving habits.
- Alpha. Describes a given strategy’s ability to beat the market. Also called “excess return.” For instance, an active manager may produce a return higher than the benchmark index she manages against. This would indicate the manager had enough skill to earn more than the general market.
- Asset Allocation. Asset allocation is an investment strategy that aims to balance risk and reward by apportioning a portfolio’s assets according to an individual’s goals, risk tolerance and investment horizon.
- Asset Location. A tax reducing strategy that can create tax alpha, since not all investments are taxed the same way especially when they are optimally located. In other words, certain types of securities should be held in tax deferred accounts like your 401 (k) or IRA, while others are better off in taxable accounts.
- Bear Market. A market that is moving downward. The opposite of a Bull Market.
- Behavioral Investor Coaching. A method to teach investors how to recognize behaviors that may have prevented them from attaining their financial goals. The goal is to reduce the effects of emotional behavior on investment performance. Once recognized, the focus becomes the activities that are within an investor’s control (managing risk, taxes, costs, holding periods, account types, etcetera) and seek to establish a better personal framework, a decision making process that leads to better and more consistent outcomes. (See MONeYmotions)
- Be the Market, NOT beat the market. Market timing is a debunked investment philosophy. The combination of passive selection and asset allocation seeks to manage portfolio risk based on an optimal portfolio allocation and the level of risk an investor is willing and able to take.
- Becoming an Intelligent Investor. Learning to recognize and defeat the innate human desire for instant gratification, and avoid making random, spontaneous or impulsive investment decisions The objective of every investor should be to first become an intelligent investor, and then build intelligent portfolios that will perform throughout moving markets, changing cycles, reversing trends and bursting bubbles.
- Beta. The measure of the the broad market’s overall volatility or risk, known as systematic market risk.
- Bucket System: A routine and generally necessary step for retirees that places different types of assets in separate “buckets,” based largely on asset class risk, time, and when the assets will be required to generate income to meet living expenses.
- Building Intelligent Portfolios. Looks at strategic, passive approaches to building a lifetime financial plan, and avoids traps such as “beat the market,” and “day trading.
- Bull Market. An upward moving market. The opposite of a Bear Market.
- Certified Financial Planner (CFP) designation is a professional certification mark for financial planners conferred by the Certified Financial Planner Board of Standards (CFP Board) in the United States, and by 25 other organizations affiliated with Financial Planning Standards Board (FPSB), the international owner of the CFP mark outside of the United States. To receive authorization to use the designation, the candidate must meet education, examination, experience, continuing education and ethics requirements, and pay an ongoing certification fee.
- Certified Coach. A professional coach that has completed all Approved Coach-Specific Training Hours as prescribed by the International Coach Federation (ICF).
- Core and Satellite. A portfolio construction and management strategy that establishes a dominant “core” position, say 30% to 50% of the portfolio, in a large capitalization index, typically the S&P 500 or MSCI World, and “satellites” that orbit the core, comprised of small- and medium-capitalization asset classes, as well as alternative classes such as real estate or commodities.
- Diversification. The inclusion of more than one security or asset class for the purpose of minimizing portfolio risk. The”not putting all your eggs in one basket”theory.
- Efficient Market Hypothesis. EMH theory states that it is impossible to “beat the market” because existing securities prices reflect all available and relevant information at any given moment. This is stock market efficiency, and the EMH theory predates the internet by many decades! Passive investors, the proponents of passive portfolio management, consider this to be doctrine, and buy index-based exchange traded funds that track market performance.
- First, fix the investor. Addresses ways to identify, understand and modify an investor’s worst investing habits that are driven by inherent human behavior.
- Holistic Financial Planning. Comprehensive, personalized objectives-based planning that considers all areas of your life; a blueprint to manage your resources, such as assets, income, time and skill, in the pursuit of attaining your most cherished life goals.
- Index. An index, like the S&P 500 or Dow Jones Industrials, represents a particular market or market segment. You cannot invest in an index, but you can generally invest in an ETF or index fund that represents the index.
- International Coach Federation. The ICF defines coaching as partnering with clients in a thought-provoking and creative process that inspires them to maximize their personal and professional potential. It is the governing body that permits credentialing as a certified coach after an enrollee completes coach-specific training that meet ICF’s standards, achieve a designated number of coaching experience hours, and demonstrates appropriate understanding and mastery of the ICF definition of coaching, per the Code of Ethics and Core Competencies.
- Investment Policy Statement. A written document that details an investors personal investing policy and protocols, and is generally used as their investing blueprint.
- MONeYmotions. WealthKeep’s branded Behavioral Investor Coaching. Money and emotions often collide to disastrous results, leading to the need for Behavioral Investor Coaching.
- NAV, Net Asset Value: As the term pertains to share prices of mutual funds and exchange traded funds (ETFs), net asset value is the total value of a fund’s assets minus the value of its liabilities, per share.
- Passive Make. The concept of Passive Make demands that we focus on the broad strokes (be the market, NOT beat the market), invest largely in exchange traded funds, or other related passive approaches to wealth building, which track the indices, make simple decisions regarding our personal, goals-based allocation model and spend far less time trying to read the financial tea leaves and watching the markets bounce up and down.
- Strategic Asset Allocation. A portfolio construction and management strategy that sets target allocations in the various asset classes, and keeping those allocations throughout the portfolios life by rebalancing back to the original allocations at given intervals, say monthly, quarterly or annually, when the original allocations have changed due to market movements.
- Tax Alpha. The attempt to produce positive, excess portfolio returns by ensuring your strategies and holdings are arranged in such a way that they can be held or sold at the least tax cost, are allocated in the optimal balance of asset types to achieve your goals, and having investment types and account types optimized by achieving the correct asset location, since not all investments are taxed the same way especially when they are optimally located in the best taxable or tax-qualified accounts.
- Then, fix the investments. After first engaging in critical behavior identification activities, i.e. fixing the investor, (addressing ways to identify, understand and modify an investor’s worst investing habits that are driven by inherent human behavior), an investor seeks to identify the money enemies, and build intelligent portfolios based on passive management and asset allocation theory.
- Time in, Not timing. Market Timing is an investment approach that has been debunked by the world’s leading investment professionals, including Peter Lynch, Sir John Templeton, John Bogle, and Warren Buffett, to name just a few. Successful investing relies on a long-term, active approach to keeping more of what you make, and a steady savings habit over the long-term (“time in”). Time in, Not Timing, Part Deux.
- Winning by not losing. An approach to long-term wealth building that places the emphasis on risk management and protecting the downside.
- Your money has enemies. Anything that reduces your overall investment return (your “keep”), such as taxes, inflation, rising interest rates, hidden investment fees and commissions, faulty allocation and location strategies, high portfolio turnover, and certainly out of check emotional behavior which leads to impulsive or random investing habits.
The terms “Certified Financial Planner “and “CFP ” are exclusively reserved for professionals who successfully complete initial and ongoing certification requirements established by the Certified Financial Planner Board of Standards Inc.
Legal Disclaimers: WealthKeep LLC (“WealthKeep”) is a publisher and private coaching practice. As a publisher, WealthKeep posts educational content that readers should not regard as investment recommendations. [read more]