So you finally decided that you want to start investing your money, well congratulations on that! Now you have to learn how to invest wisely!

This is the first big step in your way to becoming a seasoned investor and letting your money work for you. But before you go ahead and start to invest in anything that comes your way I suggest you read this article and learn how to invest wisely.

In this article, you will learn how to make better decisions before investing your money and safeguarding your funds. You will also learn about common mistakes people make when they first start to invest and how to handle them.

Learning to Invest wisely is something that takes time, trial and error, and learning to get right.

So let’s go ahead and jump into what makes good and wise investments against bad ones.

Table of Contents

The importance of investing wisely

Before we go on to talk about how to invest wisely, I want to take a few moments and talk about the importance of investing wisely.

Normally when talking about investing lots of people have many negative thoughts and all kinds of resistance.

Here are just some of them –

  • Investing is dangerous – you can lose everything
  • Investing is gambling
  • Investing is hard and takes too much time
  • You can’t earn with a small amount of money
  • You need lots of money to invest
  • All the profit will go to taxes

While inherently they are not 100% wrong, they are neither 100% right. As humans, we have a cognitive bias to see things in a black or white way.

When we think about issues that are new or unknown to us these views seem to amplify and make us very judgmental and fearful towards them.

The thing here to notice is that if we take the time to learn, read and understand more about topics we have strong feelings for, we might learn that it isn’t so scary as we thought.

This is the same for many topics we are fearful of and especially things that involve our hard-earned money.

Money is basically a tool for our survival and prosperity in life. Therefore it should come as no surprise for us that we have strong emotions towards choices revolving around it.

Nevertheless, we should always make wise decisions about investing and learn the best we can about a certain investment before we commit to it.

The more we will invest our time to learn and understand about investing the more we will have success in our investments and we will grow as investors. If we will invest poorly, we will lose time, money, and motivation to continue pursuing these options and that is exactly the opposite of why we started in the first place. If we invest wisely our wealth and options in life will grow and prosper every day.

Why even bother going on this tedious path?

Reasons to invest in the first place

1. Investing as a mindset – Investing is probably more of a mindset and way of living rather than a certain action. The action of investment in itself is pretty simple.

You take your money, buy an asset that you want to hold for a certain time, and wait. That’s it. The whole point of investing as a mindset is to always look for your next investments and to have the patience and belief in your investments.

When you invest your money in some assets – there is never a guarantee to make it, otherwise, everyone would do it. The only way to get good results in investing is like every other skill – to continue practicing and learning more about it.

The investing mindset is one of growth, both for your money and yourself as a person. As you go on with investing you will see that not everything revolves around money, but also about the journey and the clarity you gain for making wise investments.

2. Growing your capital over time – As we continue our last point, investing does have the end goal of growing your capital and making a profit. When you invest, you are putting some of your hard-earned money on hold for a month, years, or even decades – in a belief that its value will rise over time. That is the whole game of investing wisely and one of the main reasons people do choose to invest wisely in some asset or project.

3. Belief in an asset\project – every investment comes with an element of belief – that the asset\company\stock you are investing in will make a positive impact and grow in value over time.

For example, some of us wouldn’t invest in a company that is harmful to children – or that abuses workers, because we wouldn’t believe that is right or sustainable in the long term. Maybe we believe that green energy is the future of our planet and we want to support that and choose to invest in that field. There are many reasons for people to invest in a project, but if we do not believe in it or feel like it doesn’t have much future we shouldn’t invest in it.

4. Preserving your capital – Some people invest in a mission to preserve their capital. As the world progresses, economies usually have a set amount of yearly inflation that happens. That means that every year your money loses a small percentage of its value just because there is more and more money being produced and brought into circulation around the world.

Wise people do not want to lose even a dollar worth of their money, just because time went on and work actively to prevent this loss. There are many ways to preserve your wealth like investing inexpensive metals, stocks, real estate, and bonds. As time goes on the value of your capital can be preserved and even grow over time and that should be one of your aims when approaching investing.

How to Invest Wisely
Research can take time

Do your own research

When it comes down to how to invest wisely, you should always, always, and always – do your own research.

In short DYOR.

This point is very crucial for your success.

So many people give out advice to invest in this and that or try to tell you about the next big thing. Maybe you have that friend who always tells you to invest in a certain stock, or your parents always tell you to keep your money in the bank and forget about investing all together.

Both might be good advice for certain situation, but how in the world can you know which one is right??

There are just to many things that can go wrong when listening to all the advice being thrown at you.

For starters, many of the advice you will get will probably contradict each other in one way or another.

That is just the nature of getting advice from many sources of people – everyone has a different opinion, and a different set of goals and views.

Some people might have a hidden motive to try and make you invest in a specific asset – maybe they get something out of it and their intentions aren’t pure.

So how can you make sure you are investing wisely with all the bad advice around?

The best way to make smart and good investments, that are appropriate for your risk, for your current capital and for your long-term goals is to do your own research.

As we said earlier, the more you learn about a subject, the more you know and understand it.

As a result, you can start making good and healthy decisions, that respect your goals and your risk tolerance, and make you great profit over the years. Perhaps you want long-term low-risk investments that you can put in a set amount each month and forget about it.

Or maybe you are looking to take big risks with a high reward potential because you are young and have the capital to make bold choices.

Both goals are legitimate and right, you just need to identify what’s right for your profile, build an investing plan and follow it.

How to do your own research?

Doing your own research is a process that takes time and effort – but it is very rewarding. I want to tell you that the first time I invested I just randomly bought some stocks I thought were a good pick, and prayed they would go up. Some did go up, and some didn’t, and I consider it a lucky event. When I first started to invest I wasn’t sure where to read or learn about it, and I was very overwhelmed with all the information.

Over time I learned what assets I want to invest in and decided to dedicate my time in learning about that market and the assets offered there. I started learning about the technical part of investing and also about the process behind why assets go up and down with their prices, what drives that certain market, and what to be aware of.

Little by little I made progress and started to invest more carefully with a plan I built for myself – and most importantly I followed the plan and stick to it even when things weren’t always smooth.

When you invest in things you researched and believed in you will be less afraid and emotional, and you will stick to your plan more easily.

The best way to learn about investments is first of all to choose the niche you want to invest in.

Let’s say you want to invest in the stock market, choose 2-3 sectors (for example fintech, technology, and medical stocks) and learn all about them.

The best places to learn are from:
  • Books
  • Articles in financial newsletters and sites
  • Courses (free and paid)
  • Financial advisors
  • Very specific Youtube channels that provide real value

There are so many resources to learn from and I will make a list of great resources I use daily to learn from, and also some books that are game-changers and taught me a lot about investing and finance.

Doing your own research takes time, even finding resources is part of the research you make while planning your investments.

Though this process might sound long and tiring, you might be surprised how fast you can get the basics settled and make major progress towards your goals of investing.

On the other hand –  don’t wait too long before starting, as you can always start small and build up from there when you gain more and more knowledge. There are some things you can only learn from experience so take that in mind.

Persistence is the key here, and remember that practice makes perfect.

How to Invest Wisely
Enjoy the endless knowledge available for us today

General guidelines for how to invest wisely

So let’s gather up the most important guidelines in order to make good and promising investments. These general guidelines always apply and will make your investment choices much better in the long term. Remember that investment is a game of patience, and will always test you in one way or another. You have to always keep positive and ready to learn, and treat investing as a skill like anything else.

Here are the general guidelines-

  • Do your own research – as we already went through it deeply in a previous section in this article I’ll keep this one short. As I said earlier, before making any investment – learn all you can about it. What are the risks? Who stands behind it? How did you hear about it? Did someone with a hidden motive advice you to invest in it?

    Try analyzing why you want to invest in this particular asset, and involve critical thinking in the process. Ask yourself all the hard questions, and only invest when you are sure about the investment. Don’t confuse confidence with “hopium”* about this investment.

    “hopium”– An addiction to false hopes.
  • Keep your investment safe – always invest through a known organization, and through an organization you trust. If it is real estate abroad, get lots of reviews about the company, check if their business is legit and all the paperworks are correct. The last thing you want is to invest in snake oil or some scam company that will run away with your money. It’s very important not to jump into investments that sound too good to be true, as they might just be that. Regarding money, I believe you can never be “too safe”.
  • Setting the right goals and sticking to them – after you chose the investments you want to pursue, you need to create a plan with precise goals – as to when you go in and out of the investment. It might be a very long term investment, or a very short term one. Either way you need to have a clear plan and goal, and when you hit it to follow through.

    Yes, your plan can definitely change shape on the way, but it’s very important to start out with a solid one. When you go on without a plan there is more room for mistakes to be made.
  • Never invest money you need – this one is a crucial point. I suggest strongly to never invest money you will need in the time frame of the investment. Investments can go down, they can also fail, and you can never know in advance. Always make sure you have an emergency fund, and the funds you need for living before investing. Many new investors become greedy and believe they can hit the markets, especially if they have a few wins when they begin. As follows, they rush to bet their life savings thinking that is a wise investment strategy, and more often than not it will involve huge losses.
How to Invest Wisely

Safest ways to invest wisely

What if you don’t want to do your own research, and you are just not that interested in learning so much about investments? Can you still invest your money in a safe and wise way?

In that case, I would recommend investing through the most solid investment channels such as banks, saving plans, pensions, and investment brokers that can manage your funds.

You can make great profits through these channels without getting so involved in the process, and in fact, for most investors, the profits will be higher through these investment channels while minimizing the risk.

There are lots of solid capital funds and hedge funds that will be glad to manage your capital and invest it wisely for you for a certain management fee.

In return they will navigate you through the wild jungle of investments.

You can always choose the level of risk through these channels and manage your funds accordingly. If you are in for the longer term it might be better to have a higher risk tolerance, but if you are nearing retirement age it’s wiser to choose a more solid option.

Just remember this – there is never a 100% safe investment. If anyone guarantees you a 100% successful investment I recommend running the other direction. Fast.

To sum it up

There are many ways to invest your money, many options, assets, and temptations – everyone promises the best rewards and low risk. The only way to getting closer to the truth is checking for yourself, getting good advice from trustworthy sources, and reading and researching about the latest advances in the market.

I urge you to get into the game of investing, but only after learning and depending on no one but yourself.

Never take financial advice from anyone for granted, and always look for the catch, even if it doesn’t seem like there is one.

You might never find a catch, but it will help you develop the critical thinking required to invest wisely and correctly.

I hope you enjoyed this article, and I would be glad to hear from you in the comment section – what are you investing in at the moment?