On The Agenda:

Every industry has its own jargon, and financial planning is no different. Today, we’re explaining some common financial jargon and what it means.

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Episode Show Notes:

On this episode of How Money Works, Craig and Jennifer Moser share some common jargon in the financial planning industry and what it means.

Asset allocation

This is a method to balance risk and reward, meaning putting money into different, dissimilar investment choices based on your goals, your risk tolerance, and your time horizon. Don’t put all your eggs in one basket. Make sure you understand what the volatility might be with those investments.

Risk tolerance

How much loss are you prepared to handle when making an investment decision? You need to understand how you would handle losses, if they happened.


They are required minimum distributions. If you’ve save in an IRÅ, 401k, 403b, for example, when you hit the age of 72 now you are required to take a certain percentage out of those qualified plans.

Basis points

So, 100% would be 100 basis points. If you were paying a mutual fund 50 basis points to manage your large cap growth stock portfolio inside of the mutual fund, then 50 basis points would roughly be half of 1%. It’s a cost in our industry, and we calculate it on basis points.

Listen to the full episode or use the timestamps below to jump to a certain section. Thanks for listening.

Important Points:

1:07 – Asset allocation

1:50 – Risk tolerance

2:49 – RMDs

4:42 – Basis point

5:20 – Large, mid and small caps

6:12 – ETF

7:14 – Qualified accounts

8:09 – Drip stock

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