There are basically three keys to financial success: Save more than you spend, live by a budget and INVEST. Confucius once said, “…a man who does not think and plan long ahead will find trouble right at his door.” If you take your disposable income and buy a piece of property, that would be considered as an investment.

However, in order to transform any type of investment towards reaching financial freedom, it is crucial to note that effective financial management must play its part. This includes debt management, as well as, trying to live within your means.

One of the main obstacles to financial freedom is not knowing how to stay out of debt because even with massive investments in stocks, your creditor could end up cashing in your investments should you fail to pay off what you owe.

As such, it is important that people understand how to keep their debt manageable, as well as, keeping their credit rating high. For more information on how to monitor this, you can check on companies that monitor your credit as you continue to pursue your dream for financial freedom.

Now, once you have all your debt management cards on the table, the next thing is to invest your finances in high-yielding assets. Stocks are amongst the best when it comes to seeking high returns from financial instruments.

So how do you re-invest your partially debt-financed capital?

Many investors would argue that investing in stocks would thrust you to financial freedom, but it takes more than just putting together a portfolio and hoping for the best. Here are a few things all aspiring investors should understand on their way towards achieving financial nirvana.

Investing in stocks is not gambling; it requires the investor to take calculated risks based on certain metrics that present potential returns over a given period

To begin, the stock market is not for everyone, but anyone can invest—all that is required is capital, a broker account, and potentially a financial advisor. One of the principles of smart investing recommends that you lower your expectations and be patient. Just to note, some people have invested hastily with borrowed funds only to end up on the losing side.

The other thing is that you must know what you are buying: Warren Buffet put it as clear as the day when he said, we should only invest in businesses that we understand. This does not necessarily mean that you pick blue chip stocks like Apple (Nasdaq:AAPL), Alphabet (Nasdaq:GOOG​) (Nasdaq:GOOGL), or Facebook (Nasdaq:FB). Some investors have grown to notice that understanding and investing in smaller players in promising markets tends to yield better returns over time.

However, these types of stocks also have higher risk levels, and thus may not be the ideal option for most investors. As such, other investors look for safer, but moderate return investment options like dividend stocks.

As for the risk-shy investors, they should consider investing in defensive stocks: some investors do not like to engage in the short-term bull/bear stock trading menace but rather prefer to only concentrate on long-term investment opportunities.

If you are this type of investor, then you would do better adding a few defensive stocks to your portfolio. This is because markets are highly unpredictable and anything can happen over a long period. One good example of a defensive stock is Warren Buffett’s Berkshire Hathaway (NYSE:BRK-A).

Defensive stocks are either; well diversified or operate in industries that produce essential products to consumers, such as energy/electricity, water, and healthcare, among others. As for Berkshire Hathaway, it’s a widely diversified stock with stakes in several companies from different sectors.

Conclusion

In Summary, if you play your cards right and learn the ropes of the market well; you will most likely make money in stocks. Trading stocks can not only guarantee a retirement free of financial woes but also provide an opportunity to gain milestones towards financial freedom provided you play your cards right.

However, this does not mean that you forget the other essential element in the route to financial success, which is proper money management. Monitoring your debt is as essential towards financial freedom as picking the right stocks to invest in.