We don’t blame you for searching for a crypto guide. The buzz justifies it all. The fact that it is helping people net significant income is a sufficient reason why you should already
know the nuances of crypto investments.
Stocks, investments, market down and stuff like this could sound very overwhelming, but trust me, you don’t even need to have sound knowledge in finance to have a profitable investment in crypto. This guide will be the voucher for the same.
So without further ado, let us understand how to invest in cryptocurrency in these simple five steps.
1. Do Your Research
Like any other investment option, you should thoroughly research the cryptocurrency you plan to invest in. Over 15,000 different cryptocurrencies are currently traded publicly, and the numbers are increasing almost daily. Therefore, it is very important that you understand the intricacies of each investment case.
Exhaustive research will help you understand the potential upside and downside of the investment. There have been many instances where a cryptocurrency flatlined or completely disappeared, so be careful with experiments initially. Experts suggest that
As a thumb rule, an investor should not invest more than 5-10 percent of the portfolio in digital tokens.
2. Manage Your Risk
It must sound like stating the obvious, but it is what it is. Cryptos are highly volatile in nature and can throw your financial state off balance. Therefore, before trading in crypto, understand the risks well. To ensure a safe start, begin with a small amount, and as you progress, you can keep adding more.
It is a good practice to keep a small portion of your money separately for trading so even in case of a major loss, your day-to-day activities don’t get hampered. If needed, take professional assistance to manage your risk. Even if you don’t take professional assistance, always remember the rule that you should never invest more than you afford to lose.
3. Choose the Cryptocurrency
The next important step is to choose the right crypto. Unfortunately, there is no one-size-fits-all solution to help you choose the right cryptocurrency for investment. However, there are certain parameters based on which you can choose the one that would fit you the best. For instance, your objective, the amount of risk you are willing to take, the expectation of return-both in terms of time and amount, the nature of crypto etc.
Among all the aforementioned parameters, the most crucial is the crypto type. The nature of crypto greatly determines its volatility. For instance, some cryptos, including bitcoin, are not backed by the usual hard assets or cash flow. Instead, they are dependent on market conditions. Your return relies on someone paying more for the asset than you paid for it. This could be a risky proposition for most people except seasoned investment players.
4. Buy and Store the Cryptocurrency
So, now that you have already decided on the crypto you want to invest in, the next step is to buy it. Unfortunately, investment brokerage firms and banks do not offer cryptocurrencies, so you can get it only through dedicated cryptocurrency exchanges. There are various websites that can help you choose a good crypto exchange. Best Crypto Exchange in Australia offers you the best options.
Alternatively, you can buy it from a friend, family member or a mere acquaintance who is willing to sell it. After buying the currency, you will have to store it in crypto wallets. Crypto wallets is a software program designed to keep cryptocurrencies. It could be hot- connected to the internet, or cold-not connected to the internet. You should choose a wallet that maintains a good balance between security and convenience.
5. Hold and Sell
The final step is to analyze the market condition and decide if you have to hold the crypto or sell it off. As a beginner, you can also sell them off for a tiny-weeny profit. It is better than selling it at a loss, at least. However, as you start to understand the gimmicks, you can hold them for longer for good returns.
One important thing to note here is that sometimes you will have to make hard decisions such as selling it off for very little profit or even a loss. Do not get delusional and make that tough choice, or it can land on you a mess.
Should You Really Invest in Cryptocurrencies?
To put it straight, cryptos are even more complex than stock, but the fact that people have been able to make significant money through it makes it worth a try. However, as a beginner, my advice to you is to start small. You should have your finances in place as a proper risk management plan, a diversified portfolio of investment, and most importantly, an emergency fund.