This story will start with a bit of a different tone as some others you might have read from me. The start is a warning that goes: Do not ever listen to investment advice from so-called experts online or in any circumstance you meet them. This might sound like I'm shooting myself in the leg here but the reason is that you should never put your money into something you do not understand. Quite often when people read regarding investments and the possibilities around it, they take it as advice that this is the correct way to do it. The point that will hopefully be clear after reading this is that it is never that simple and what works for one person, might not suit your goals in any shape or form. Let us start looking at the topic in a way that it gives you tools to create an understanding into investing so that you are able to create actions that support your goals.

How to approach investing

The basic definition of the action of investing is to buy an asset that you hope will grow in value over time. Reason why you cannot get past this word in any personal finance related discussion is due to the part of: the hope of growth of value over time. Investing is the only way to make your money create wealth in the long-term with a substantial amount over time, if things go well. Unfortunately there is no way to predict how much and will this be sustainable in the long-run, hence the hope of growth.

So investing is this very important thing that everyone is talking about and everyone should be doing it, then why this pessimistic approach? Yes, investing is something everyone should be doing as otherwise most of us will never have anything extra in the long-run and will be struggling to change the environment or circumstance we are in. Reason for a bit cautious or even slightly negative start here is, you need to build a correct mindset around investing first for it to work for you. The importance of investing cannot be stressed enough if you are interested in creating wealth but with a flawed mindset that you base the actions on can cause you much more harm than good. So let's look at some basic concepts on investing and start to build the correct mindset through this.

The most common ways to invest

Let's quickly go through some of the most common ways to invest your money.

• Stocks or shares - When you buy a share of a company you become an owner of that company. The ownership percentage is determined by the amount of shares you buy of the company. You can also buy shares from multiple companies using various funds as index funds, mutual funds or ETFs. They give you the option to buy into all the companies that this fund is investing in. These shares have the ability to increase or decrease in value. They can also give the right to dividends that the company is distributing, usually based on the company's earnings.

• Bonds - These are technically just loan contracts between parties. You can lend money to companies or governments with usually long-term agreements, even up to 30 years. You can gain interest on the money you borrowed during the loan period once it is over, depending on the contract.

• Real estate - There are few different ways to invest into real estate. Buy an apartment/house and rent it or fix it up and do something called house flipping. House flipping means you buy something that is not up to date and you renovate it and sell it with a margin. You can also invest into various funds that pool the money that does the same but on larger scales.

• P2P lending - This is technically the same as bonds but with private people or smaller businesses. The contract time for the loans tends to be shorter than bonds and tends to also yield higher interest rates.

• High yield savings account or HYSA - Various financial institutions offer HYSA accounts where you receive interest on the deposited money. These can be fixed term deposits or simply get interest on the amount on regular intervals, depending on the contract.

The actual list of investment possibilities is longer but these are the most common ones that usually pop up when talking about investing. There are many different ways to invest as you can see and all of these have their pros and cons. What you need to decide when starting is what type of an investor you are. Do you want to be actively involved or want to just buy your part and see where it leads. Regardless of the type of an investor you are or will be there is one common variable that all of these investments share, that is risk.

Something that is always there: risk

The definition of risk in the most simple form is that something might happen that we cannot control. Risk is usually thought in a negative way and by this the possible effects tend to be not helping us achieve what we set out to do. Would you believe it if I said that the whole world is running on probability and luck and that skill has only a limited amount of effect on outcomes in the end? Not going deep into this topic currently but if we are able to change our way of viewing events and outcomes to this perspective, accepting and understanding risk becomes easier. There are things we know, the known unknowns, unknown knows and also the unknown unknowns that we can categorize probabilities or risk with. The things that we tend to not be able to prepare for usually gets us in the end and stops us from getting the wanted outcome, the unknown unknowns. We have very little control over things in life in the end, only some things very close to us we have some power over but still does not mean we can compete against an unexpected and overwhelming external force. This is something we simply have to accept when talking about investing. Whatever you invest in will go up and down in value and there is no way of predicting when and how much these fluctuations affect.

How to prepare for market volatility

Market volatility simply means how much the market prices go up and down. This happens all the time, weekly, daily, hourly.. There is no way to stop the market from changing. Our economy has simply been built like this and it always tries to increase in value until we, the people, or large financial institutions decide to not trust it currently and things shift downwards. As an investor you need to keep this in mind, the value of your investments go up and down all the time, the hope of growth in the long-term is the key for success. The best way to prepare mentally is to understand that the volatility is there but the best way to prepare financially is to have a buffer of cash that can be used when the market is down. This can be used for paying your living costs if you lose your income stream due to layoffs for example, or to buy more into funds or other investments that you are already doing as there is a discount going on. The importance of cash or access to it when the opportunities arise to use it to gain more assets is something that is undervalued by many. As you most likely noticed the shift from unpredictable ups and downs to the word opportunity, this is the main mindset change we need to get with market volatility. We know the volatility is there, we are able to prepare for it in many ways, use it.

When playing the long game and not trying to do some get rich quick moves, we are able to use these market shifts to our advantage. Get into the mindset of when the market is down, it is a great opportunity to create more assets, not to sell on a discount. What often happens when people are not mentally ready is that panic selling happens as your asset value is down. The main point to remember is, you did not lose the asset, the asset just lost value. You lose the asset when selling, not by market shifts, unless of course bankruptcy happens for some specific assets, edge cases always exist. As the market down creates loss to your asset value, market ups corrects the value in the long run. Change your mindset from short term gains and losses to a long term game and your wealth will accumulate almost by itself.

Are you an active or passive investor?

When you start your investing journey it is usually best to decide where you focus your money to start with. Diversification is a term we have not discussed but this usually comes only later on into the mix. Usually the starting point that is recommended is to buy into 1 asset that is diversified already, as index funds, to get the most out of your investments. This I also believe, gets you going, you start to understand how it feels to invest and it is a good strategy for the long-run. This is usually thought to be a passive way to invest, you buy the share of the fund and keep adding into it and let it sit and grow. This is the way for most of us, very few of us have the possibility or interest to be more involved in our investments than this. There are people who just can't stand this type of waiting and need to be more involved in their investments. These types of investors are usually into e.g. real estate or start up investors. They like to be involved in their investments and feel the impact they make. These investments usually require some knowledge and skill sets that are in value to be able to leverage these investments. Being a startup investor is not recommended as a starting point into investing but I wanted to bring out the possibility for the future more active investors. So are you handy at fixing up things or you can even sell ice to eskimos, these types of investments might be a good fit for you. If real estate seems like your thing and you want to be actively involved, there's nothing wrong making this your first investment. Try just to get an understanding of which type, active or passive, could suit you in the beginning so you are able to narrow down the possibilities where to focus first.

First the mindset, then actions

The main focus should be in the beginning to first create a healthy relationship with investing. The money you put in should not keep you up at night if the market trend is downwards. Investments go up and down and this is totally fine, don't let the volatility influence your everyday life. Make investments according to what you can afford, pay living expenses first, make sure you have cash saved for rainy days and the rest invest for long-term gains. Why make sure you have this healthy mindset all the way with you on your investment journey is to avoid emotional and impulsive decisions. We are not very rational beings to start with, our brains are just trying to keep us safe, not happy or make rational financial decisions. This mindset gives you the tools to stop making decisions on the go where emotions have taken control. Rather take a step back, think for a moment what is actually happening before pressing the sell button for example. Get into the mindset that money is just a tool, it does not define you as a person, make the tool work for you and not the other way around, this is the fundamentals of investing.