Investing can be an overwhelming experience for newcomers to the concept. There are a lot of things you need to know before you can start making smart investment decisions but finding out what those things can be difficult when you aren’t even familiar with the terms being used to describe various aspects of the investment process. Many people choose to not get involved with investing for this very reason, but will almost certainly come to regret that decision when it comes time to retire and the funds simply aren’t there. The best way to ensure you will be able to retire comfortably when the time comes to retire is to make smart investments and plan ahead. Make sure you do everything you can to make sure the money is ready and waiting. Smart retirement investing is one excellent way to ensure your nest egg is robust enough to support you through your twilight years. This guide to the most common terms you will need to know when starting out in the world of investing will provide you with the knowledge you need to make the experience less overwhelming.

Asset:

This is likely a term you are familiar with and one you will hear often when you are beginning your research into investments. An asset is anything of economic value but is not necessarily limited to money. Property, real estate, cars, securities, office equipment, inventory and cash are all examples of what can be considered assets. In its simplest form, an asset is anything that can be sold or traded for cash.

Asset Class:

Asset class refers to a type of investment. This could be cash, real estate, businesses, property, stocks or bonds. This is a term many people have trouble with, believing it is related to how much you have in assets. Asset class has nothing to do with upper, middle or lower class designations.

IRA:

IRA stands for individual retirement account. IRAs can be established through a bank, mutual fund or brokerage and allow individuals to set aside money every year which can begin being withdrawn six months before the individual reaches sixty years of age. It is possible for the individual to withdraw money sooner but that individual would then face a ten percent penalty. The funds in an IRA can also rollover to be distributed to another IRA.

Mutual Fund:

A mutual fund is run by an investment company with shares of the fund being sold to the public. The money raised for the fund is then invested in stocks, bonds and other investment vehicles. In return for investing in the mutual fund, those who have purchased a share are given an equity position in the fund. Shareholders will be sell their shares when they choose but the price they receive will depend on the performance of the securities the fund holds.

Security:

A document that offers proof of equity that has been issued by an organization or corporation that is not an insurance policy or fixed annuity.

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