5 tips for investing in Cryptocurrency
It’s no secret that the world of cryptocurrency is wildly volatile, but with enough research and preparation, you can mitigate some of the risk involved with jumping into the crypto market. These five tips will give you an idea of what you need to know to make your initial investment in cryptocurrency and subsequent investments safer and more secure. First, though, let’s take a look at how cryptocurrency works in general.
1) Think Before Investing
Before you buy into any kind of investment, take some time to consider if it's really a good idea. You'll want to understand why you're investing and what your goals are—for example, do you hope to make a quick buck? Are you planning on long-term growth or trying to build up a nest egg for retirement? Does your investment align with your values and goals? Don't invest in something just because someone told you that it will be worth it. Look at other investments out there and compare them; maybe even talk with an expert who can help evaluate what makes sense. Most importantly, don't fall prey to get-rich-quick schemes or other gimmicks: they simply don't work.
2) Understand the Risks
The biggest risk to cryptocurrencies is that they never live up to their hype, and that hype is pretty huge. Do your homework before putting any money into a new form of digital currency. Be sure you understand what problems it’s trying to solve and how it’s different from other cryptocurrencies—and then make an educated decision on whether or not you think you can profit from it. Don’t be afraid to ask questions, either; they don’t call them crypto-currencies for anything! Whether or not your investment pans out, there are plenty of lessons that can help you avoid repeating history with future investments.
3) Calculate the Return
To calculate your ROI (Return on Investment), divide your profit by your initial investment. For example, if you invested $100 and made $250, you’d have a return of 50% ($250 / $100 = 2.5). ROI is a useful way to measure if an investment is profitable. However, it can also be confusing because different investors are comfortable with different levels of risk, and some investments do not have a readily-apparent return. Be sure to think about how much you’re willing to lose as well as how much time and effort you're willing to put into researching each potential investment opportunity before putting money down on anything.
4) Think Long Term
Investing is a long-term game. Sure, it’s possible to make a buck here and there through day trading, but in general, if you want to grow your money and maintain your financial security, you have to think long-term. The moment you start trying to time markets or banking on big overnight movements with stocks or cryptocurrencies is when you should back away. Not only will these moves most likely fail, but they can even backfire spectacularly if they're attempted at sensitive times during big news cycles (as we saw after Brexit last year). Additionally, bear markets that result from long-term selloffs are painful not only because of how much money is being lost but also because of how much time it takes for buyers to show up.
5) Research and Stay Current
The first step toward safe cryptocurrency investing is to know exactly what you’re buying. Don’t trust anyone who tells you otherwise. There are several free online resources that can help you study blockchain technology, understand how different cryptocurrencies work and where they fall on a maturity scale, and watch out for new coin scams as they emerge. In fact, doing your homework (and research) will help keep you one step ahead of scam artists who use fake news stories to prey on people's emotions and steal their hard-earned money. Here are some resources to help get you started