Today I wanted to bring you some tips on Crypto-investing!
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It is pretty important to know what you should avoid or what you should do when it comes to cryptocurrencies. A lot of people are now trying their luck in the crypto market rather than the stock market because of the incredible returns some of their known ones are getting.
Just a short disclaimer – This is not financial advice. I am as new to crypto as some of you reading this and I just have a few tips that you should avoid as a crypto newbie! I am not recommending any particular cryptocurrency! Please do your own research before investing!
With that said, let’s get started, shall we?
- Don’t Buy High & Sell Low –
This may seem like the most basic advice but it’s true. A lot of us panic when we buy a coin at a certain price and the market drops, maybe a little, maybe a lot but the rule still remains. Do not sell your investments at a loss.
You have to remain calm and let the market go through the ebbs & flows and there is a lot of that when it comes to cryptocurrencies. Much more than the stock market due to it being decentralized and not being governed by any single body.
Always remember, what went down will also come up again.
The crypto market crashed in March of 2020 but it went higher than ever and if you had any money to invest at that time, your returns would have been incredible.
Remember, Patience is key.
2. Do not invest more than you can afford to lose –
This brings me to my next point quite nicely. Do not invest your entire life savings in crypto hoping for a 1000% return. Crypto is still a very new market and no one knows the direction it will take. So many cryptocurrencies that were relevant a year ago, no one even remembers them now and only a few have remained relevant. So due to this volatility, only invest what you are comfortable losing (with an expectation of better returns in time).
Investing everything in one asset is a sure-shot way of losing everything in case that one investment crashes.
3. Stay away from the Hype –
The current Crypto market is currently at the whims of one eccentric billionaire who needs no introduction.
This brings me to my next point, STAY away from the hype. Crypto is so new to the world that big businesses are slow and hesitant to enter it and when they do, they bring big waves to the markets. Tesla buying 1.5 billion dollars worth of bitcoin made the value of Bitcoin soar and break all-time records high but recently when the same company announced that they are no longer allowing people to buy cars with Bitcoin, the whole market experienced a dip and not just Bitcoin.
If you had invested based on just hype, you would never be sure when the hype dies down and takes your money with you.
Do not be the person who believes one news trend and puts all his money in one basket. Take your time, breathe and think twice. One night of sleep won’t affect the long term and may let you re-think your strategy.
4. Do not exceed 5-10% of your entire investing portfolio in crypto
This is a golden rule that I follow. I have my mutual funds, I have my stocks, I have my FDs and then I have my crypto.
The simple reason behind that is I do not completely trust or understand the entire mechanics behind the crypto market at this point nor do I think I can comprehend it fully. I will keep educating myself but I will not, at this point, invest in it thinking that it will help me get rich quickly.
I have only invested in some coins that I deem dependable in the long run and I am just patiently waiting to let it reach a point where I can redeem them for substantially more than I put in.
I sure hope that happens but in the meantime, I am only dipping my toes in the water.
5. Diversify your coins –
The more your portfolio is diversified, the better you are prepared for the ups & downs of the markets. This is the rule that applies to all markets and especially crypto markets.
If you have your moolah spread around multiple coins, if one goes down due to an unfortunate case, your entire portfolio isn’t going down with it.
This doesn’t mean that you can’t have favorites. Of course, you can. It only means that you keep a list of favorites in case one of your coins decides to jump off a cliff.
We hope that you found these tips useful! We are also learning about cryptocurrency as it’s the new fashion in the world of investing and it pays to be a little mindful of your money at the end of the day and you should make good decisions.
Signing off for now!