When you have never invested before you should first familiarise yourself with principle of opportunity cost. It means that when you are undertaking a certain activity you can not do something else. This also applies to investing and even to not investing. When you are using your money to buy something you aren’t able to use that same money for investing. If instead you use your money to invest you might be able to use the money later on to buy it anyway, with the profits.
Once you joined the club of investors, even with a small amount you start to look at it differently. Slowly you completely understand that the best opportunity is to invest and to avoid other costs as much as possible. This is the point you can start understanding the difference between the different types of investments and different companies or opportunities. At this point you will notice different possible investments.
Never invest emergency savings in the the stock market. – Suze orman
When you have invested for a while you see investments appear in all corners of life. You will start to realise that when you join one investment you can’t put the same money in a different investment. Now you can start looking at the positives and the negatives of certain investments. An investment promising 12% in one year seems amazing, however such an percentages go together with a higher risk that me and many others are not willing to take. Sometimes it is acceptable to put a low amount in such an investment, as long as you are aware you can lose you money easier. Secondly consider what the cost is of a high risk high reward that you may not see it back and can’t invest in something else.
Another part of condisering what you are doing is thinking about how much money you are investing. When starting out you should only invest a small amount. However if you have been investing for 10+ years think about increasing it a bit. This can be buying stocks or even adding bonds, real estate and even crowdlending into the mix. Because having 98% of your money just sitting in a savings account costs you money rather than making it. It also goes the other way around, never use your emergency money to increase your investing. You need to always have a couple months of income stacked in a savings account. This means you can endure a sudden cost or even to profit from a stock market crash.