Today’s Prep:
Do you know the difference between large cap and small cap funds? What are basis points? This episode will discuss various financial jargon to help translate what these really mean.
Equipping Points:
What did they just say? Some of these financial terms can get thrown around but not everyone knows what they mean. On today’s podcast we’ll try to break it down so you can feel at ease and informed the next time you’re in a financial conversation.
People sometimes get confused by asset allocation. It’s about allocating your assets into different types of stocks, not just all-in-one. For instance, you’ll want exposure to large cap stocks, mid cap stocks, small cap stocks, and within those, international stocks as well, not just one of them. The best performer last year is not always the best performer next year. What do those different terms mean? Which one carries more risk?
When accounts go down, you might notice your risk tolerance isn’t as high as it seemed when things were up. What’s your risk tolerance? Remember that your definition of aggressive or moderate might be different than Wall Street’s definition of risk. Understanding your risk tolerance is critical to building you plan to see how much you can really tolerate.
If you say something costs 100 basis points, what does that really mean? When would you hear the term basis points and why does it matter when making your decisions?
Finally, what are qualified accounts? This means it is qualified from a tax code. If you have a qualified plan, those are things like an IRA, 401(k), TSP, 403(b). All of these are qualified or protected from taxation until you take it out.
Listen to the entire episode or click on the timestamps below to skip ahead to a particular term.
0:47 – Sometimes financial jargon comes up.
1:30 – What is asset allocation?
2:55 – What is your risk tolerance?
5:47 – What are basis points?
6:26 – What’s small cap, mid cap, and large cap?
7:22 – What are qualified accounts?
Today’s Takeaway:
“Diversification and asset allocation go hand-in-hand, they’re not the same thing but one is trying to fulfill the other.“
-Eric Peterson
Related Resources:
Subscribe To The Podcast:
Apple Podcasts - Google Podcasts - Spotify - Stitcher - iHeartRadio - TuneIn
Check out some other recent episodes
Mailbag – Roth IRA, Emergency Funds & Tax-Deferred vs. Tax-Free
Making more money is great, but what happens when it becomes a roadblock for contributing to a Roth IRA? And how can you make your emergency fund work smarter for you? In today’s episode, we pull from the mailbag and answer a mix of listener questions. Eric addresses concerns that reflect the real-life hurdles many face on the road to retirement.
Read MoreHow 2025 Tax Updates Can Impact Your Financial Plan
Although tax season has come to a close, the time for smart tax planning has just begun! In this episode, we unpack the upcoming tax updates that could affect your planning for the next few years, including changes to 401(k) contribution limits, tax deductions, and the potential benefits of using tax-advantaged accounts like HSAs.
Read MoreEarly Retirement: Dream Come True or Financial Trap?
Ever fantasize about leaving your 9-to-5 before traditional retirement age? You’re not alone, but is early retirement even possible? In today’s episode, Eric explores what it really takes to retire early including how to tackle healthcare costs, how to make money last longer and the importance of shifting your mindset from spender to saver.
Read MoreWhat 400+ Advisors Say Really Keeps Retirees Up at Night
What are Americans really concerned about when it comes to retirement? In this episode, we unpack the results of an insightful survey from Financial Advisor Magazine, which was completed by over 400 financial advisors. We’ll also compare these answers with the real-world concerns we hear every day from the clients in our own practice.
Read MoreBracket Busters and Stock Flops: The Risky Game of Picking Winners
March Madness is here, and just like filling out a bracket, picking individual stocks can feel like a thrilling gamble. But the odds of winning big are slim. In fact, history shows that most stock picks, like most brackets, end up busted.
Read MoreAre Hidden Fees Draining Your Retirement Savings?
In this episode, Eric reveals the true cost of investing and how to protect yourself from unnecessary financial drains.
Read MoreWhat Game Night Can Teach Us About Financial Planning
In this episode, Eric breaks down the surprising financial lessons hidden in classic board games, offering valuable insights to help you navigate your retirement strategy.
Read MoreMailbag – Upsizing, Financial Advisors & Business Owner Planning
Join us as we answer questions about the challenges of downsizing, the emotional aspects of planning for family gatherings, and the realities of transitioning into a financial advisory career.
Read MorePlanning for Kids, Grandkids, & Your Future
As many nearing retirement age are discovering, adult children and grandchildren can significantly influence financial strategies, making it crucial to understand how to navigate these relationships effectively.
Read More