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Matthew is an award-winning journalist, specialising in savings, tax and insurance.
The government hopes next year's cut to the cash Isa allowance will encourage savers to invest, but new research shows 48% of people are put off by complex financial jargon.
'Index funds', 'asset allocation' and 'diversification' are terms that baffle people most, according to a survey by digital bank Zopa. The study also found 37% are confused, 28% are anxious and 23% feel intimidated by the language used.
With 54% of people saying they’d consider investing if it was easier to understand, here we decode key terms and show why investing can be a powerful tool to grow your nest egg.
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Find out moreInvesting your money instead of stashing it in interest-paying savings accounts or cash Isas has historically delivered stronger long-term returns. But although 70% of people surveyed by Zopa said they are keen to grow their personal wealth, complicated jargon is discouraging 48% from investing.
The findings come as Bank of England figures show £12bn was ploughed into cash Isa accounts in April, one year before a shake-up to allowances.
From 2027-28, savers under 65 will only be able to put £12,000 a year into a cash Isa. The overall £20,000 Isa allowance remains, but any additional contributions will need to go into other Isa types such as a stocks and shares Isa.
The reforms are intended to encourage more people to invest, but Zopa's study found 49% don't understand what a stocks and shares Isa is, with 54% saying they don't know how the account differs from a cash Isa.
Other basic terminology is also tripping people up. Compound interest and capital gains are also widely misunderstood, with 55% of people saying they don't understand either term.
Understanding some of the key terms can make investing feel less intimidating.
In this table, we clear up confusion about 10 terms Zopa found would-be investors were most puzzled by. Results are ordered by percentage of people who said they don't understand.
| Term | Percentage who don't understand | Explanation |
|---|---|---|
| Index funds | 71% | Index funds track a group (index) of companies, such as the FTSE 100, by buying all or some of the investments in it. |
| Asset allocation | 68% | Asset allocation is the process of balancing your investment between different assets, such as cash, bonds, and shares. |
| Diversification | 61% | This is when you invest across a wide range of markets to reduce the overall risk of losing money. |
| Equities | 60% | Investing in equities means buying stocks and shares in companies listed on the stock exchange. |
| Volatility | 57% | Volatility is a measure of how sharply and frequently an investment’s value changes. |
| Compound interest | 55% | Compound interest is when returns are earned on both your original money and previous returns, helping your savings or investments grow faster over time. |
| Capital gains | 55% | A capital gain is the profit you make when you sell an investment for more than you paid for it. Gains made outside an Isa or pension may be subject to Capital Gains Tax. |
| Bonds | 54% | This is a loan to a government or company. In exchange, you receive regular interest and get your original investment back when the bond matures. |
| Risk tolerance | 54% | This refers to the amount of risk you're willing and able to accept when making investments. |
| Stocks and shares Isa | 49% | Stocks and shares Isas let you invest in funds, shares and other assets without paying income tax or capital gains tax. |
Source: Zopa. Based on a survey of 2,000 UK adults conducted from 18 to 20 April 2026.
Investing in funds, shares and other assets requires a certain amount of patience. The longer you stay invested, the more likely you are to benefit from the market’s biggest gains.
Analysis by AJ Bell, for example, shows that someone investing £1,000 a month in the Investment Association Global sector from 1999 to 2024 would have earned £49,211 more than the average cash Isa saver.
Despite the potential rewards, investing is not for everyone.
It's generally unsuitable for short-term savers who plan to use their money within the next one to five years – for example, for a wedding, car, or house deposit. If you are retired, the length of time required to make a decent return may also be off-putting.
Emergency funds, typically three to six months’ worth of living costs, are best kept in cash for quick access rather than invested in the stock market.
Stocks and shares are also a poor fit for those who are risk-averse or simply cannot afford any drop in their investment value. And anyone looking for predictable, fixed returns may find the ups and downs of investments frustrating.
Megan Thomas, Which? investments expert says:
'It’s a myth that you have to be super wealthy or obsessed with stock markets to invest, but it can still be daunting to get started.
'You don’t necessarily need to know which individual stocks you’d want to invest in. You can work with an independent financial adviser if you can afford it, or many investment platforms offer "ready-made portfolios" where you answer a questionnaire, and they provide you with a balanced set of investments that fits with your aims.
'If you’re willing to try finding investments yourself, consider spreading your investments out across different sectors, geographical areas, and types of investment to balance the amount of risk you take on.'
Here are some simple steps you can take if you're nervous about taking the leap:
It's important to decide the level of risk you’re comfortable with. Ask yourself how much money you're prepared to lose in a worst-case scenario.
Some investments are also riskier than others. Gold and government bonds, for example, are often the go-to for more risk-adverse investors. On the other hand, investing in crypto can be high-risk and, while you could make huge returns, you also stand to lose more.
One way to mitigate any potential perils is to diversify your portfolio. That means holding lots of different types of investments.
Investment platforms offer a great starting point – they’re a cheap and easy way to buy and sell multiple investments in one place. You can pick your own investments in the form of individual shares and bonds, or, if that sounds too intimidating, you can pick an investment fund instead.
Investment funds allow you to pool your money with that of other investors to buy a ‘basket of assets’, which often includes a selection of shares and bonds from different companies.
Managed funds – or ‘ready-made portfolios’ – are also a smart option for first-timers. Offered by platforms like Bestinvest, these one-stop-shop products let experts build and monitor a diversified portfolio based on your risk level.
The professionals do the heavy lifting for you, so they're great for beginners who prefer a hands-off approach.
These are also called tracker funds and are a great starting point for less-experienced investors, and can be held in a stocks and shares Isa. They’ve grown in popularity for good reason: one low-cost investment gives you instant diversification.
Rather than trying to beat the market, index funds simply aim to match it, often by holding every stock in the index. Without a team of managers and analysts to pay, they’re usually very cheap to run. Although platform fees still apply.
Whatever approach you take, try to resist the temptation to constantly check your portfolio. That can be hard with investment apps at your fingertips – but too much fiddling can backfire.
If it’s built on a solid plan, stick with your portfolio and review once a year, rebalancing if needed. Constant tinkering can turn a carefully considered portfolio into a random mix of investments.
