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The investing world is filled with confusing acronyms that make navigating money and markets challenging. It’s an alphabet soup that the finance crowd knows well, but like with any industry, those who are not in the weeds day-in, day-out, often don’t understand the jargon.

Acronym du jour: TINA

One particular piece of lingo being tossed around financial TV quite often these days is the “TINA” trade. “There Is No Alternative” to owning anything but stocks, was the investing regime for more than a decade up until a few months ago. The logic was because interest rates were so low, it didn’t make sense to have a significant amount of bond exposure in your portfolio. Meanwhile, short-term savings accounts yielded next to nothing.

Jump ahead to today, and it might be “rest in peace” to dear old TINA. Interest rates are near 15-year highs in parts of the Treasury market while money markets finally feature a rate above 2%, surpassing the dividend yield on the S&P 500 with some funds. Even just holding a broad corporate bond index fund, early in the fourth quarter, could possibly earn you more than 5.5% based on the starting yield.

Chart titled: TINA to the Graveyard. Bond Market Yields Have Risen Back to Life. Chart shows the current yield as of October 6, 2022 for Short-Term Municipals at 3.2%, the current yield as of October 6, 2022 for the 2-Year Treasury is at 4.2%, the current yield as of October 6, 2022 for the Aggregate Bond Market is at 4.7%, the current yield as of October 6, 2022 for the High-Quality Corporates is at 5.7%, and the current yield as of October 6, 2022 for the Low Quality Corporates is at 9.2%. Source: Ally Invest, St. Louis Federal Reserve.

“What’s that mean?”

So, we’ve gone from the TINA investing world to, what some have dubbed, the “TARA” environment (There Are Reasonable Alternatives). You can always count on Wall Street to brand something new! But what are other acronyms that the pros toss about? Let’s explain a few that are top of mind in today’s volatile markets.

  • ISM & NFP: Two of the most important pulses of economic health are measured monthly, then released during the first few days of the new month. The “Institute for Supply Management” (ISM) manufacturing and services reports, and the “Non-Farm Payrolls” (NFP) employment report crossed the wires just this week.

The pair of ISM reports details the goings-on within the key manufacturing and services sectors including snapshots of employment, supply chains, and inflation. Once the ISM reports are digested, then comes the all-important jobs report, typically on the first Friday morning of the month. While usually volatile and often unpredictable, economists on TV proclaim their forecasts immediately before the number is released by the Bureau of Labor Statistics (BLS).

  • P/E & EPS: Who doesn’t love the latest hot stock tip? During bull markets, people crave them, and Wall Street is quick to provide a host of potential winners.

A company’s “price-to-earnings” P/E ratio is a rule-of-thumb stock valuation metric used to determine if shares are a decent value or not. It uses a firm’s stock price and its annual “earnings per share” to, in theory, determine if shares are a buy or sell. There’s much more that goes into proper stock valuation, however, and there are even multiple ways to calculate earnings per share. So always take those tips with a big grain of salt.

  • 401(k) & IRA: Finance is not just about Wall Street and stock picking. It’s about your future.

One of the best ways to take charge of your retirement is by investing for the long haul in your company’s 401(k) plan or through an “Individual Retirement Account.” There’s no special meaning behind the term “401(k)” – it’s simply the section of the IRS code that outlines retirement plans (the IRS is not known for its branding game). While you contribute to a 401(k) through your employer and typically select from a menu of investment choices, the onus is on you to open an IRA account, contribute to it periodically, and select your own investments. You can have both a Traditional (pre-tax) and a Roth (after-tax) IRA, and many 401(k) plans now allow for Roth contributions, too.

Numbers cut through the noise

And here’s a bonus: SPIVA. The “S&P Indices Versus Active” scorecard is a semiannual look at how well professional mutual fund managers did. While their job is to beat a market benchmark, like the S&P 500, the latest findings reveal sad results for the pros: Less than 10% of active large-cap investment managers outperformed the S&P 500 over the last 10 years. Maybe all those complex-sounding terms are used so you overlook their actual performance!

Chart titled: Fancy Terms, Lousy Performance: Active Mutual Fund Managers Tend to Perform Worse than the Market. Chart shows the percentage of U.S. Large-Cap Funds Outperforming the S&P 500. For one year the percentage is at 44.57%, for three years the percentage is at 14.12%, for five years the percentage is at 15.53%, for ten years the percentage is at 9.97% and for fifteen years, the percentage is at 10.62%.

The bottom line

The financial markets have their own lingo, and talking heads love to toss around sometimes cryptic words. Keeping up with the latest jargon can go a long way in understanding the latest market news and views.