10 Signs You Are Not Investing Wisely

Investing your money can be a smart, future-oriented decision, but if you don't know what you're doing, it can also be a complete, financially-ruining disaster. No one can entirely escape the volatility of the market—even Warren Buffet made some terrible investment decisions—but you can make informed, smart choices and decisions in order to maximize your gains and minimize your losses. Everyone wants to become a millionaire through investments alone, and never have to worry about money again. The investment market can be dangerous though, and it's important to watch out for these signs you are not investing wisely in order to avoid some of the major mistakes that could mean the difference between financial independence, and financial ruin.

Your investments sound too good to be true.

If your investments sound too good to be true, they probably are. Everyone wants an investment that's guaranteed to bring them a massive return, with almost no risk of equally massive loss. Unfortunately, everyone else knows that everyone wants this, and so you have to be wary of those who will tell you what you want to hear. If you're led to believe that your investments will make you rich without ever putting you at risk, it may be a sign you're not investing wisely, and actually getting duped. The fact of the matter is, investments come with risks. Anyone who tells you otherwise—especially for investments with massive potential returns—is probably not looking out for your best interests; but rather, just trying to sell you on it.

Your decisions and planning look something like "get rich quick schemes."

Investments should be long term goals. Budgeting habits that all wealthy people do include putting money away for their retirement plan, future kids' college fund, or other significant goals. These are admirable, and often achievable, goals. However, you are not going to reach financial independence tomorrow. One of the biggest pitfalls for new investors is approaching investing as a "get rich quick scheme." It's just not likely to happen. So if you're making investment decisions with only short-term, big-return goals in mind, it may be one of the signs you're not investing wisely. Instead, you should look to the future, and develop long-term financial goals. Don't lose sight of basic personal finance in your desire to improve your financial situation.

You don't have a clear sense of your risks.

If you don't have a clear sense of your risks, you're not making smart investment decisions. Investing is, at its core, a game of risks and risk management. It's okay to take some risks—in fact, it's necessary—but you should always know what those risks are before you make any moves. You should manage your risks in proportion to the risk you can afford to take. This is another reason to avoid investments that seem too good to be true—most likely, investments that promise big returns for little risk are not in fact giving you all the information on your risk, and damage your ability to make sound, smart investment decisions. Make use of resources like Motley Fool to inform all of your decisions as extensively as possible, and don't allow yourself to be goaded into jumping on the latest train without forethought.

You make quick decisions.

Another sign you aren't investing wisely is that you make quick decisions. Wise investing is investing in the future, not the present. The best investments are financially stable investments, which will improve your financial situation over time without risking a devastating loss of capital. These investments tend to be stable, long term ones—that is, ones that don't drastically change from one day to the next. As a result, investments that require you to make snap, spur-of-the-moment decisions are generally risky and unlikely to provide you with financial stability down the road. You may face the possibility of a nice sum of money in the near future, but at the cost of risking your entire retirement plan or other future plans.

You're always looking for the inside scoop.

Avoid insider trading. If you find yourself trying to make the most of your investments by finding information that others don't have, it may be a sign you are not investing wisely. This is not just because this kind of investing is illegal or immoral: It also may very well erroneous. Sometimes, companies or individuals attempt to bolster their stock value by leaking fake information, spreading rumors to bring in people who believe they are receiving unique tips or insider secrets. At best, the result of this will be a disappointing investment. At worst, it could mean a major loss of capital and financial stability.

Your investments are all the same.

If you want to invest wisely, you need to invest in an informed and educated manner. This means doing your research, and maybe taking a look at the stocks billionaires own that may interest you and guide you towards successful investment strategies. Of course, you want to invest largely in what you know and what you understand; however, you also need to diversify your investment portfolio if you want to have financial stability. This means making different kinds of investments, in both big companies and small companies, in differing markets. That way, you spread your risk out and avoid losing everything if one market or market niche crashes. So, if your investments are all the same in some significant way (only big companies, only real estate, etc.), it may be a sign you are not investing wisely and may be endangering your financial situation.

Your investments aren't liquid.

Your investments won't be much good to you if they aren't liquid. Even if you reach your financial goal or seemingly come about financial independence, you can't pay your bills or fund your retirement plan with assets that you can't utilize or remove when you need to. This means that you are at risk of being trapped in a bad deal if things take a turn for the worse, and your risk is greatly increased. You want to be able to extricate yourself from an investment when you need to, so liquidity is something you should watch out for when you make your investment decisions.

Your investments are buzzing.

You don't want to be jumping on the newest, exciting, buzzing investment options. Generally, an investment that is currently generating a lot of buzz is great for those who had already invested in it, but not a great option for new investors. By the time an investment is "hot" like this, the time to invest is likely already passed—at best, you might invest briefly for a small return, but more likely, your investment will fall near its peak, and you'll ultimately lose out.

Your investments are all you think about.

Your investments shouldn't be overwhelming your life and causing you stress and headaches. If your investments are causing you constant stress, you should rethink the way you approach them. Consulting with a professional and receiving educated guidance can take a lot of that pressure off of you, so you can spend more time enjoying the results of your investments than driving yourself crazy thinking about them. Your levels of stress and concern over your investment might also be a good way to tell if your methods are panning out—if you feel like you're constantly worried about them, your risk might simply be too high.

You're investing money you don't have.

There are things that have to come before investing: You need to pay your bills and pay off your credit cards, budget for your future and mortgages. You have expenses, and those need to come first. You also want to make sure you keep a stable emergency fund to get you by if you lose your job or fall upon hard times. This is all money you need to be sure you are not putting at risk. Saving is an investment, and one of the biggest signs you are not investing wisely is that you are putting money into stocks or funds that you don't really have, or can't really afford to invest. This might mean investing borrowed money, or investing money that you should be allocating to other major expenses.