The investment world is full of weasel words designed to mislead investors, or maybe just accentuate the positive. This produces confusion, which hopefully will be diluted by this guide to some of the most common misnomers employed out there.
Amortisation
It is found in company accounts and, strictly speaking, means a method of depreciating a proportion of the cost of a fixed asset until it has been 'written off' - or when the full cost has been amortised over a number of years. But this makes arbitrary assumptions about the value of the assets and allows firms to write off goodwill which is, of course, hard to quantify. This can be a method of burying costs and distorting the value of a business.
Balanced
Fund managers and investment advisers tend to use this term to suggest an objective standard for balancing an investment fund. In reality it is a subjective term expressing a view of how balance can be achieved. For example, a fund split into bonds and equities can be said to be balanced. But this is meaningless because bonds underperform equities. So other than ensuring that one half of the portfolio will perform worse than the other, it is hard to discern what purpose balance is serving.
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