Do They Speak English On Wall Street?

In this column: Stock-market-ese is almost a foreign language, but you may have more motivation than you had back in high school French. Your comprehension could affect your wallet.

What's a "comfort letter?" No, not a reassuring note from a friend. At least not in the context of this column.

What are "fallen angels?" They aren't the former good girls hanging out and breaking hearts in the honky-tonk cafe on the four-lane bypass out past the airport.

Those are terms from the world of investing. Even as mutual funds and 401(k)'s bring mainstream Americans rushing into the stock market, the baffling fog of stock-market jargon serves a barrier keeping average people out.

At the same time, the stakes for understanding the insider terms are high. After all, you don't want to make a faulty investment decision just because there's a term you've read in an article and skipped over, or your broker mentioned in passing that you didn't understand and were reluctant to ask what it meant.

If you're new to investing, or even if you're experienced, you might wish to check out some of the informative and resourceful investment glossaries available on the Web.

The InvestorWords Investing Glossary tells us that a comfort letter is a reassuring note to a would-be investor from a company about to offer its stock for sale. The company gets the letter from an accounting firm to vouch that its public financial claims accord with accepting bookkeeping procedures.

The American Business Language Web site advises that fallen angels are "stocks or bonds that were originally considered good investments but which are now considered risky."

Our Picks

Those are but two of the dozens of glossaries, encyclopedias and other resources on the Web for investment and financial jargon. Some are mere alphabetical lists, while others allow for keyword searching. Most provide links to further information about terms that are used in definitions. Most of them are quite helpful.

Here are a few more plain-language online investment dictionaries to get started with, along with a sample definition from each for flavor:

• Campbell R. Harvey's Hypertextual Finance Glossary -- Campbell, a Duke University Fuqua School of Business professor, goes in for fancy titles, but the definitions inside his 3,600-term resource are quite understandable. Check out his no-nonsense take on no-load mutual funds: "A mutual fund that does not impose a sales commission." Period. And that'll be on the final exam.
• Quicken.com Glossary -- The software vendor offers a few hundred key definitions of investment term with two access points: A search box or the linked alphabetical list in the left column. Although there aren't as many definitions here as on some other Internet financial glossary sites, the explanations are more thorough and tell you what you should do with this information. The definition for 10-K, for instance, explains that a 10-K is an official version of a public company's annual report and is filed with the Securities and Exchange Commission. But it elaborates: "It's not just a duplicate of the annual report?The company must leave speculation behind?That means you often will find more financial information and expanded descriptions of the company's operations and the risks it faces." It ends by providing a link to the SEC's searchable database of 10-Ks. Handy.
• TermFinance -- This site leans to definitions of some highly technical terms, but there's some useful plain-language stuff as well like option (the right to buy a stock at a certain price for a predetermined length of time.)
• Washingtonpost.com Business Glossary -- A searchable index of more than 3,000 terms. Sample: A holding company is a corporation that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors.
• Investor's Galleria Glossary of Trading Terms -- Several hundred definitions, in alphabetical order. Dividends, says Investor's Galleria, are the "distribution of a portion of a company's earnings, cash flow or capital to shareholders, in cash or additional stock."

Hold that thought: We'll devote a future installment of this column to dividends -- what they are, who pays them, the good and the bad, what to expect from them. Until then, brush up on your terms!

First published Nov. 18, 1999.