How to make smarter investment choices (2024)

The fear of losing money accompanies every financial decision—it’s a basic instinct and a significant reason people often prefer to save rather than invest their money. The 2019 Charles Schwab survey revealed that about 59% of US citizens consider themselves savers rather than investors. On the other hand, those who decide to put their money on some financial asset are also burdened by the fear of missed opportunities.

There is always some fear associated with making financial investments; as much as they guarantee financial freedom, there are possibilities of incurring losses. That is why it is crucial to make decisions with caution and be clever about them. Below, we will guide you through some fundamental steps needed to achieve this.

What do smart investments entail?

Smart financial choices are about selecting investments for their growth potential and possible value increase.

It also involves creating goals and making realistic plans that align perfectly with them. The financial market is a haven of opportunities, and this increases exposure to the number of instruments available.

However, not all of these options work for all market participants. There will be short-term or long-term assets and several associated risk levels. Your decisions as a savvy investor begin with understanding these diversities and making plans to accommodate them.

Tips for making smart investment decisions

Here are some tips to help you become a smarter investor.

Set investment goals

Having a set goal is critical to smart investing for many reasons. For one, it provides a constant sense of purpose during your journey. More importantly, tracking your progress over time is a good practice for success. The duration of your plans comes into play here because it helps define the timeline for each investment.

There are short-term and long-term opportunities to consider. The short term is often between one year and five years, while the long term can be as long as a ten-year plan.

Real estate is a typical example of the latter. This is because property values tend to increase over a long period.

Cryptocurrency ICOs (Initial Coin Offerings) are an excellent short-period alternative. In these, people invest in Web3 projects before their launch by buying presale tokens. When the project debuts, they make their profits.

Setting a goal right from the start gives a sense of direction and helps you decide on what works for you based on your financial budget, patience, and risk tolerance level.

Diversify assets

Anyone with some business or life experience knows putting all your eggs in one basket is never a good idea, as you risk losing everything in one go. The concept of asset diversification was created to hedge against such situations.

Different asset classes react differently to economic conditions. For example, AAPL stocks would respond negatively to poor market sentiment or declining investors’ interest in the company’s product, while the dollar is influenced by economic sentiment. Specific indicators almost immediately affect stocks compared to currency pairs.

Utilising such information to diversify your portfolio can help you weather the storm. That’s not all; with a diversified portfolio, you can expand your opportunity set and go beyond the home market.

You can start curating your list of instruments via advanced brokerage platforms with multiple options. OANDA is one such platform that accommodates several financial market professionals, including stockholders, crypto investors, and the OANDA prop trader.

Build a healthy appetite for risk

Some questions to ask to know your risk appetite are:

  • How long will you be able to stay invested?
  • How comfortable are you with making losses?
  • How much experience do you have in the market?
  • What level of return are you expecting?

If your answers to these questions err on the side of caution, you have a low-risk appetite. It’s okay to have a low affinity for risk-taking, especially if you’re just starting. First, it can help you clarify what opportunities to consider. On the other hand, there are ways to build a better risk appetite — that is, creating a solid risk management plan. Some strategies for managing losses better are:

  • Using take profit and stop-loss orders.
  • Avoiding trading during extremely high volatility periods.
  • Employing hedging strategies.

Revisit and strategise

Monitoring and reviewing your progress is as important as creating goals. Once you have begun investing, monitor and observe performance. Make changes when necessary and review your assets.

The performance of certain assets might change over time. Know when to buy, sell, or reinvest. For instance, some crypto assets have their good times and bad times; if you’re not in for the long haul, learn the concept of swing trading and how it can be used to make quick decisions on a short-term basis.

Taking action towards smarter investing

The investment market has much to offer everyone, but your gains greatly depend on your abilities and skills. Therefore, every plan should revolve around constantly educating yourself on market intricacies, smart investments, and building toward a sustainable portfolio. An excellent way to do this is to take courses, read more, and join active communities in any field of your choice.

How to make smarter investment choices (2024)

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