Everyone feels the urge to invest at some point in their lives. The chance to increase their wealth is just too attractive to ignore. The problem is starting your journey as an investor; it can feel like stepping into a foreign world where even the language is so alien you may as well be looking at hieroglyphics.

However, just like everything else in life, it is just a matter of giving yourself a chance to better understand it. That’s the only way to escape the intimidating clutches of investing.

So, to help get your journey as an investor well and truly underway, we have pulled together a list of terms that will help you succeed, whether it involves forex trading, CFD ASX, stocks, shares, funds,  or whatever. The aim is simple here, to help you walk away with filled with confidence and ready to research some potential investments you’ve had your eye on.

1. Diversification

This is the financial industry’s way of telling you not to put all your eggs in one basket. That’s because the more you can spread your money into different investments and areas, the less risk you will have worry about. What you want to do is diversify your portfolio.

2. Bear & Bull Markets

These terms will not help your investment strategy, but they will help you understand what people are talking about when it comes to the market conditions you are faced with. In a bull market, investors are optimistic that their investments will go up in value, while a bear market is more typically characterised with a bad economy, falling share prices, a rise in unemployment and the kind of recession that calls for austerity.

3. Compound Interest

Like the force used by Jedis, compound interest is one of the most powerful things in the universe. When it works in your favor it is great, but when it is stacked against you, it is horrendous. Let’s say you have $1000 invested and it goes up 10% that year, the next year it will be 10% of $1100. Your investment grows at a faster rate each year. However, if you are in debt, then kind associated with personal loans, then compound interest can really get on top of you, which is why paying off debt is the best investment you can make.

4. Mutual Fund

This is essentially a pooled portfolio of investments. You buy shares, stocks or bonds in a trust and the money is then invested by a professional portfolio manager. This is a great way to reap the benefits and share the risks while having a professional oversee the funds progress. At the end of each year, you will then receive a report that details everything you need to know, from the investments you own, the amount of income that was generated, capital gains made and losses incurred.

5. Asset Allocation

This links to diversification quite nicely because asset allocation is all to do with what type of investments you spread your money across. These are typically called asset classes and there are three of them: cash, bonds and stocks. How much you invest in each of these depends on what your long and short-term goals are, how much risk you are comfortable with and the timeline involved.