We all have financial goals. The paths we take to achieve them vary from person to person and can lead to a fulfilling professional life. Most of us believe that savings are the best option to achieve our goals. However, savings alone are unlikely to keep up with inflation and taxes and will mean a much longer working life to achieve any goal. Therefore, savings may not lead to financial freedom.

Investing your way to independence

Investing is the only way to achieve financial freedom. It is a process of taking measured risks with the potential to increase wealth at a higher rate in the long term through cryptocurrencies, mutual funds, etc. The principles of investing are based on time horizon, asset allocation and orientation towards financial goals that should not change regardless of market cycles. It takes many years to create significant wealth.

It would be prudent to draw up your own investment strategy that sets out your philosophy, framework and portfolio management process. You should choose your investments wisely, according to your risk tolerance; and if possible, build your portfolio with guidance from an experienced financial advisor or trusted products like the Ripple Packet. Stick to your portfolio allocation over a long period (at least five years) with periodic review.

Investors have often shown a tendency to withdraw money from risk-oriented asset classes (e.g. cryptocurrencies) and flip it into safe asset classes during a downturn. This behaviour leads to investors not taking part in any benefits when the situation improves.

Cryptocurrencies… assets of the future

Some economic analysts predict that a major shift in cryptocurrencies will come when institutional money enters the market.

What’s more, there is a possibility that crypto will be listed on the Nasdaq, further adding to the credibility of blockchain and its uses as an alternative to conventional currencies. Some predict that all cryptocurrency needs is a verified exchange-traded fund (ETF ). An ETF would definitely make it easier for people to invest in Bitcoin, but there still needs to be a demand for investing in crypto that may not be automatically generated through the fund.

Some of the limitations that cryptocurrencies currently face – such as the fact that someone’s digital fortune can be wiped out by a computer crash or that a virtual vault can be looted by a hacker – can be overcome over time thanks to advances in technology. What will be harder to overcome is the fundamental paradox that plagues cryptocurrencies – the more popular they become, the more regulation and government control they can attract, which undermines the fundamental premise of their existence.

Although the number of merchants who accept cryptocurrencies is growing, they are still very much in the minority. For cryptocurrencies to become more widely used, they must first gain widespread acceptance among consumers. But their relative complexity compared to conventional currencies is likely to deter most people, except technologists.

A cryptocurrency that aspires to become part of the mainstream financial system may have to meet very different criteria. It would have to be mathematically complex (to avoid fraud and hacking attacks), but easy for consumers to understand; decentralised, but with adequate safeguards and consumer protection; and maintain user anonymity without being a conduit for tax evasion. These are high demands, but the growing number of cryptocurrencies means that eventually one will manage to shoot into the right place in the market.

Know the rules of the game

It is advisable to keep at least the equivalent of six months of daily money as an emergency fund and to invest this money in highly liquid instruments. It would be unwise to hold a large portion of your investments in instruments with low liquidity.

It is not advisable to take out new loans unless absolutely necessary. Any outstanding loan repayment could adversely affect future creditworthiness. On the contrary, every investor should try to repay their debts, starting with higher-interest loans, such as credit card debts, to reduce the financial burden.

Whether faced with extreme optimism or pessimism, markets eventually return to more reasonable long-term valuation levels. According to this theory, returns and prices will return to where they came from – time generally brings the market back. So when it comes to retail investors, the lesson is clear: have a plan and stick to it. It’s worth considering the significance of everything that happens in the market and using your best judgement.

Even among the most successful investors, there is a tendency to believe that when things go in their favour, profits are unlimited. This is simply not true, and nothing lasts forever – especially in the financial world. No matter how favourable the market is now, it’s not worth counting on it always being that way.

Education is the key to success

The most important investment you can make is to invest in yourself and perhaps one of the best ways to do this is to learn about personal finance. Good financial management puts you in a better position when unexpected expenses arise or when you suddenly lose your job. It also makes it easier to deal with debt and invest money for retirement.

On the other hand, poor money management can be costly. For example, a low credit score means higher interest rates on credit cards, car loans, mortgages and more. The higher the interest rate, the more you pay for what you buy compared to someone with a good credit score.

Just as everyone needs regular check-ups with their GP, you should eventually check your finances. It is also important that your investment goals are achievable. If you don’t have an idea for them, you can start with small goals to make investing a habit. The younger you are, the greater the benefits of compound interest.

Learning for the future

Anyone can learn how to be a smart investor, especially if armed with the right tools and resources.

If someone is going to learn the tips and strategies necessary to make smart investments, first let them consider how they like to learn. Do they prefer a hands-on approach to theory, or do they retain the information better with a teacher personally guiding them through the steps?

Then search for the best options that fit your schedule, budget and learning style. This may mean taking an investment course at a local university or enrolling in an online course. You could use an online investment simulator or browse the educational libraries offered by many industry portals.

These days, anyone can start investing, regardless of their budget. You just need to know what types of investments are available to you based on the funds involved. Some courses, such as the Ripple Education Packet, cover the basics of investing, including technology, strategy and analysis. Others delve a little deeper into stocks and commodities, or even international investing.

Of course, you should choose the course that best fits both your interests and your knowledge. If you are just starting out in investing, there is the Ripple Packet, which is designed to teach the basics about the market, how it works and what different types of investments can do for an investor and their portfolio.

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