This is the compromise between how much risk you’re willing to take and the invesetment return you hope to make. Generally, with all types of investments, the greater the risk, the greater your potential return could be.

Funds are run by investment professionals who pool your money with the money of thousands of other investors. This allows them to spread your money more effectively across different investments more cost efficiently. The aim is to stop one investment having too much of an effect on your overall pension pot.

Inflation is the rate at which the price of things people buy goes up. As prices rise, your pound buys less. Let’s say inflation is running at 4% a year, then a trolley full of groceries that costs £100 now, will cost £104 a year from now.

Volatility is when prices go up and down. A highly volatile market is one where there are huge price swings in the value of investments in very short periods of time.

An index represents the performance of a whole stock market. The ones you probably hear of most are the UK’s FTSE 100, the US Dow Jones and the Japanese Nikkei. They cover the key companies in their countries. But there are many other more specialised indices. An index fund is the same as a passive fund.