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These days, we are bombarded on all sides with information on how to make [money](https://leofinance.io/@leoglossary/leoglossary-money) fast and easy. Investing is a tricky subject to understand, but there are a few basic steps that you can take to invest safely. 
![How can I invest wisely.png](https://i.imgur.com/OuiFoH1.png)
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## Diversification equals safety

There is no better way to ensure that you are investing safely than by diversifying your portfolio. This will help you prepare for several different outcomes for the financial [markets](https://leofinance.io/@leoglossary/leoglossary-market), and protect you from the effects of any one individual [investment](https://leofinance.io/@leoglossary/leoglossary-investment). [Mutual funds](https://leofinance.io/@leoglossary/leoglossary-mutual-fund) and [ETFs](https://leofinance.io/@leoglossary/leoglossary-exchange-traded-fund-etf) are both simple and effective ways to diversify your portfolio, automatically spreading your money across many different [asset classes](https://leofinance.io/@leoglossary/leoglossary-asset-class).

Some [investors](https://leofinance.io/@leoglossary/leoglossary-investor) who have been burned by a single stock or sector may prefer to use mutual funds or ETFs as their sole investment vehicle. Others who have more diverse needs may use them as one of several investments in their portfolio. Regardless of which option you choose, every strategy must include some form of diversification to ensure safety and stability. 


## Investing is all about long-term thinking.

A lot of things make a long-term approach so important. In the words of [Warren Buffett](https://leofinance.io/@leoglossary/leoglossary-warren-buffett), 
>“If you are not willing to own a stock for ten years, don’t even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio’s market value.” [Warren Buffett on Business: Principles from the Sage of Omaha (ed. 2009)](https://libquotes.com/warren-buffett/quote/lbb4b9m)

## Know the risks involved 

Investing has become a necessity in the modern world. The money we put in investments is what we use to [buy](https://leofinance.io/@leoglossary/leoglossary-buy) things that we need and want.

People invest to make money on their investments. Investments can be categorized into two types: [equity](https://leofinance.io/@leoglossary/leoglossary-equity) and [debt](https://leofinance.io/@leoglossary/leoglossary-debt). Equity investments are [stocks](https://leofinance.io/@leoglossary/leoglossary-stocks), [bonds](https://leofinance.io/@leoglossary/leoglossary-bond), and [commodities](https://leofinance.io/@leoglossary/leoglossary-commodity) while debt investments are [saving accounts](https://leofinance.io/@leoglossary/leoglossary-savings-account), [certificates of deposits](https://leofinance.io/@leoglossary/leoglossary-certificate-of-deposit-cd), [treasury bills](https://leofinance.io/@leoglossary/leoglossary-treasury-bill), and so on. Investors have to know the [risk](https://leofinance.io/@leoglossary/leoglossary-risk) involved with each type of investment before they can make the best decision for themselves which one suits them best.

## Bankruptcy does happen 

Some people prefer investing with [banks](https://leofinance.io/@leoglossary/leoglossary-bank) or financial institutions, for example, banks and [brokerage firms](https://leofinance.io/@leoglossary/leoglossary-brokerage-firms) due to their safety but others find it riskier because there is not much protection if something goes wrong (e.g., [bankruptcy](https://leofinance.io/@leoglossary/leoglossary-bankruptcy)). 

The safest way of investing to them is through mutual funds where you don’t have any direct control over the company in which you are investing your money but this is also considered risky because if your fund has already been invested in some companies it is difficult to know which ones might go [bankrupt](https://leofinance.io/@leoglossary/leoglossary-bankrupt). This is why you are often advised to invest an amount you can afford to lose. 

## Before you buy stocks or bonds 

If you want to buy bonds or stocks, there are a couple of things that you need to keep in mind. First, make sure that the bond or stock’s value has been calculated and listed in the market. Once you do this, try buying the [share](https://leofinance.io/@leoglossary/leoglossary-share-stock) at a [price](https://leofinance.io/@leoglossary/leoglossary-price) lower than its [cost](https://leofinance.io/@leoglossary/leoglossary-cost) because if it rises higher than its cost after your purchase then you can easily [sell](https://leofinance.io/@leoglossary/leoglossary-sell) your shares and make a [profit](https://leofinance.io/@leoglossary/leoglossary-profit) with minimal risks. If you want to invest in a company’s shares, then it’s best to buy them from the company itself and not from a [broker](https://leofinance.io/@leoglossary/leoglossary-broker). 

## Invest wisely with these 9 steps

• Find the right financial advisor who's a good fit for you

• Get a detailed understanding of what you're investing in and why

• Make sure that your money is properly diversified to reduce risk and [volatility](https://leofinance.io/@leoglossary/leoglossary-volatility)

• Look for low fees and [expenses](https://leofinance.io/@leoglossary/leoglossary-expense), as well as no hidden fees or penalties

• Know your risk tolerance level before investing 

• Take the time to learn about new products so they can be better prepared

• Take the time to learn about the different investment types and how they work.

• Understand your investing goals - what you want to get out of it when you want it, etc.

• Research the types of investments that could work for your situation - what type of risk level are you comfortable with? What are your financial goals?   


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