Investing is one area where it's easy to be bamboozled by jargon.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
When that happens, it's important to say "I don't understand".
One of my maxims for investing is to only put your money into something you understand.
It has to pass the 'barbecue test' - if you can't easily explain how an investment works to a mate or family member, chances are you don't have a full grasp of how it can make, or lose, money for you.
It sounds simple enough. The trouble is, the world of investing can be a minefield of jargon.
This doesn't just make it harder to get a clear picture, it can prevent people from getting started altogether.
A 2019 study by Goldsmiths University of London shows just how confronting jargon can be.
When participants were faced with financial lingo like 'stockbroker', 'asset manager' and 'investment risk', almost one-fifth broke out in a sweat, 44 per cent reported an increased heart rate, and one in five (23 per cent) started experiencing muscle twitches.
Further research showed that one in four Brits found the idea of sharemarket investing about as scary as the prospect of skydiving.
When the study looked at the reasons behind this fear, the overwhelming response - cited by 86 per cent of respondents, was that people are baffled by financial and investment jargon.
It all sounds a bit extreme, however there's a good chance plenty of Australians feel the same way.
The problem is that we are facing what's likely to be a prolonged period of very low interest rates, and sticking with savings accounts can take a toll on your financial wellbeing.
Sharemarket investing, be it through direct shares or exchange traded funds, offers the potential for much higher returns than cash savings over the longer term.
Fortunately, there are plenty of free, high quality resources like the MoneySmart website, that can help you learn the ropes of sharemarket investing - without the financial mumbo jumbo.
When you're ready to start investing, be it through an online broker or via a platform like InvestSmart, it's good to know that help is always available.
Along with a online wealth of educational tools, you can always pick up the phone and speak to a real person.
It's not always easy to say "I don't understand", but it's not an admission of defeat.
It's a sign that you want to take control of your financial future, and no one will ever think less of you for that.
