Have you ever felt confused by financial advice or market commentary? You are not alone. A significant barrier for many Indian investors is the very language used by the finance industry, which often takes common words and assigns them entirely different meanings.
The High Cost of Misunderstood Words
Dhirendra Kumar, the founder and CEO of Value Research, highlighted this pervasive issue in a recent column dated 07 December 2025. He recounted a conversation with an investor who logically assumed 'expensive' stocks referred to shares with high price tags, like ₹100 versus ₹20. Kumar clarified that in finance, 'expensive' relates to valuation ratios such as the price-to-earnings (P/E) ratio. A stock priced at ₹20 can be far more 'expensive' than one at ₹100 if its underlying earnings do not justify the price.
This confusion is rampant in mutual funds. Many investors chase funds with a low Net Asset Value (NAV), believing a ₹15 NAV is a 'cheaper' or better bargain than a ₹150 NAV. NAV is merely the per-unit price and holds no indication of the fund's future potential or quality. This misunderstanding leads to illogical investment choices, akin to hunting for low-numbered currency notes thinking they are more valuable.
Hijacked Terminology: From Dividends to Corrections
Kumar places the blame for this confusion squarely on finance professionals who repurpose everyday language. He points to several key examples that continue to trip up sensible investors.
For years, 'dividend' in mutual funds was a major misnomer. These were not true dividends representing profit sharing but simply a return of the investor's own capital. Although SEBI (Securities and Exchange Board of India) now mandates such plans be called 'payout' or 'distribution,' the legacy of confusion persists, with many still viewing them as bonus income.
The term 'liquid' evokes fluidity, but in finance, it strictly means an asset can be quickly converted to cash without a significant loss in value. Similarly, a market 'correction' suggests a fix for something wrong. In reality, it's just a term for a price decline, which may not make valuations more 'correct' at all.
Beyond 'Growth': The Path to Clearer Understanding
Another problematic term is 'growth-oriented' investing. To the average person, growth implies expansion and improvement. While these funds do invest in growing companies, the technical definition refers to buying shares of firms trading at high valuations based on expectations of future expansion—which may or may not materialize into good returns.
The consequence of this linguistic fog is a needless barrier that makes investing seem more complex than it is. Kumar argues the solution is not to avoid investing but to recognize the artificial nature of the confusion. By understanding that 'expensive' isn't about rupee price, 'liquid' isn't about physical state, and 'correction' isn't about fixing errors, the fundamentals of finance become far more accessible.
He concludes by inviting readers to share other terms that confused them when they started their investment journey, emphasizing that clarity is the first step towards confident financial decision-making.
