If you’re considering buying cryptocurrency, you’ll need to ensure that all of your finances are in order. That implies having an emergency fund set aside, a manageable debt, and ideally, a well-diversified portfolio. Your crypto investments might be considered another element of your portfolio that helps maximize your overall return while also adding value. Here we’ve listed 9 steps that you may take when considering investing in Crypto.
1. Understand what you’re investing in
Cryptocurrencies are just one of the hundreds competing for digital currencies, and they’re all powered by a technology called a blockchain. The basics of blockchain involve a secure database where transactions can be recorded without going through an intermediary such as a bank or other centralized institution.
2. Determine your investment goals
Anyone considering investing in cryptocurrency should take the time to answer some basic questions about their financial circumstances and personal goals: How much money do you have to invest? Is this money for short-term expenses, long-term needs, or an emergency fund? Do you plan on buying more cryptocurrency in the future? When will you need this money? Once these issues are addressed satisfactorily, it’s time to proceed with investing.
3. Create a budget
If you’re going to invest in cryptocurrency, it’s necessary to plan for the possibility of losing your investment. That means setting aside a small amount of money from each paycheck specifically for investing. You’ll also want to track any losses and gains on the cryptocurrency market as they happen. Some people make their informal budgets by keeping records of all their cryptocurrency transactions on paper or an Excel spreadsheet. This will help you see how much your portfolio is worth at any given time and track your gains and losses over time.
4. Start slowly and use dollar-cost averaging
While it may be tempting to pour all of your savings into cryptocurrencies and hope that they increase massively in value overnight, this strategy can backfire disastrously if some correction is on the cards (which some analysts and financial experts think is likely). Dollar-cost averaging involves buying a set number of dollars worth of cryptocurrency at regular intervals over a long period. The goal with dollar-cost averaging is to ride out market fluctuations without getting burned. We discuss “DCA” extensively in the “Investing in Cryptocurrency” Course.
5. Buy the basic or main coins
Instead of putting all your money into a single cryptocurrency, it’s more prudent to split your investment between two or three currencies. Basically diversifying your portfolio in the top Cryptocurrency by market cap.
6. Watch that volatility
It would help if you also considered that cryptocurrency is a notoriously volatile market compared to the stock market or even gold. The fluctuations can be quite dramatic at times.
7. Manage your risk
As with any investment, there are ways to manage your risk. It’s important not to put too much money into cryptocurrency at once because if one of your investments tanks, it will take down all your other ones with it. You should also avoid buying currencies that have recently increased drastically. It could be that they’re due for a correction, but it could also be that the currency was pumped artificially to cause an early spike.
8. Study your investment
There are plenty of websites with information on cryptocurrency available through simple internet searches. It’s crucial to stay up-to-date with market conditions and avoid putting all your money at risk by investing in currencies that are likely to plummet soon. If that’s too difficult to do then becoming an Encryptoza member would be your best bet as we take the time to assess the different type of Crypto and propose buying opportunities exclusively for our members.
9. Be able to walk away
Finally, it’s worth remembering that cryptocurrency is not just an investment; it’s an investment commodity like gold is. It may go up or down in value, but it doesn’t give you any income unless you sell at a later date (and even if you do sell at a later date, you might still end up out of pocket compared with the original currency worth). Risk is always involved, so make sure you know exactly how much money you can afford to lose before buying your first crypto coins. If their value goes down, recognize that fact and decide whether or not the risk is worth the possible reward before investing more. The same should be accurate if their value spikes up. Don’t invest more than you can afford to lose, no matter how good the deal.
As you can see, starting cryptocurrency investing isn’t as complicated as many people think it is. Once you’ve made up your mind about the long-term plan for your money and set aside some of every paycheck to invest, the next step is to research how to make those investments. The steps outlined here should help get you started on that process.
Remember that this article is NOT investment advice, but just a guide that will hopefully shed some light on newbie investors of cryptocurrencies. All users should do their due diligence before making any investment decisions.
Our purpose is to make crypto simple and provide our members with the right guidance so that they can in end the be profitable. To learn more, make sure that you visit encryptoza.com and sign up either for the “FREE” or “Paid” membership. Yes we have FREE courses available so be sure to Sign Up! All the best! 🙂