One of the most important decisions that you need to make when investing into bitcoin is exactly just how much of your money you will put into it in terms of percentages. This might seem like a simple and easy to solve question, but there are actually quite a few layers and factors that you need to consider before deciding. Some of these could be your age, financial situation, amount of debt, if you have a family, how high of a salary you have, if you have other investments, and your appetite for risk. As you can see there are several things areas that could eventually determine what the right amount for you is. And that is the most important thing to remember. What is a great amount for someone else, might not be the correct amount for you, and vice versa.
In fact this has always been a question that I found myself struggling with. I'm always wanting to go all-in 100%. Of course that isn't the rational or responsible thing to do and I would never recommend someone else to do that. I often feel that way because my mind is so certain where everything in the world is heading and that road is going towards bitcoin. With everything that has happened throughout the last year; it would be difficult to make a case for bitcoin not being the future. And that is why I want to invest so heavily into it. Seeing the future; I want to do everything humanly possible to accumulate as much BTC as I can to set myself up great for the future.
But you have to remember that as high as the reward potential is for bitcoin; there is also risk as well. Be sure to do your own research to decide what is right for you. So let's try to figure out what might be a good percentage for you to put into bitcoin and also the factors that might determine it.
Age
This could in fact be one of the most important factors that determine how much you invest into a more risky asset such as cryptocurrency. If you are younger it is much more reasonable to go all-out on a risky asset that you believe in, but if you are nearing retirement age you should not risk as much.
For example, for a person anywhere in their twenties or early thirties; it could be very reasonable, perhaps even smart to risk at least 50% of your net worth into this asset category. If you have complete conviction; you could perhaps even go all-in. Why? Because you have a lot of time to correct things if your investment were to go to zero and your highest earning days are still ahead of you. But if things go right, and you were to compound those earnings with interest for several years; you could be set up incredibly well for the rest of your life.
But as you begin to increase in age your outlook might need to change. You should then begin looking into having a balanced portfolio of both high risk and rewards assets, to more conservative assets as well. This is because you will have less time to make up for your mistakes if things were to go south.
When you are thinking about investing into bitcoin; you always need to have a plan of what you're hoping to achieve, but also always know what point you're at in life. This will help lead you to take the correct risk asset that is good for you and invest accordingly.
Life Situations
Every one has a different life situation and this might be the biggest determining factor for how much you should invest into bitcoin. For example a person who is married and has children might need to use much less risk when they are investing. After all, they need to be sure that they will be able to provide for their family. But if a person was single and was only taking care of themselves, they could be much more risky with their investing endeavors. This applies not only to relationships, having children, but also other situations as well.
There could be other things that are more pressing for you to use your money towards than a risky asset such as bitcoin. Perhaps you have a health issue that requires a significant amount of savings, or you are saving for important events such as a wedding, moving, a house, graduation. Surprise expenses such as fixing your car broke down, or a variety of other things.
Two different people could have the exact same salary, but it would be reckless for them to invest the same amount into bitcoin, because of their personal situations being so different. You need to look at why you are doing what you're doing; what is the purpose, then invest accordingly.
Financial Situation
Are you heavily into debt? This is potentially another key factor that will determine how much you put into bitcoin. For a person who is debt-free; it would be much more acceptable for that person to go all-out investing into bitcoin, ethereum and any other cryptocurrency that they strongly believe in. But if you are under a blanket of heavy debt; perhaps car loans, credit card debt, house mortgage, medical expenses or anything else; it would be much less responsible for you to invest so heavily into bitcoin. Your first responsibility should be to pay down that debt and eliminate it as soon as possible. You would be surprised how much less stressful that can make your life. After that is completed; then you can be much more risky with how you invest.
I'm not saying that you shouldn't invest while you are in debt. After all, I have debt myself. But you just need to be more responsible about it. If you are struggling to make your monthly payments and are living paycheck to paycheck; then you should not be investing. You should be completely focusing on how to pay off that debt. But, if you are having no problem making monthly payments, and can even pay much more than the minimum monthly amounts. Then it would be more acceptable to begin investing into bitcoin.
But I know the feeling of this situation all too clearly. Many people who are burdened by financial stress are looking for any way possible that could completely change their life and eliminate this difficult situation. Many people probably come to the conclusion that bitcoin is their answer. I know that is how I felt. That if they just accumulate enough bitcoin, that it could fix all of their problems. Just always remember to be careful out there.
Never Invest More Than You Can Afford to Lose
And I would say that this is probably the most important factor of all. You should never invest more than you can afford to lose. If bitcoin were to go to zero; would you still be able to survive? Of course I have a giant percentage of my portfolio in bitcoin and I would be devastated if the price were to go to zero. But it is a loss that I could absorb and still survive until the next day. I'm not risking my rent money, food money, debt or bills; I'm only risking the money that I don't necessarily need. That I could afford to lose. And that is the way you have to look at it. When you do decide to invest into cryptocurrency, you need to understand that this all could end horribly. Come to grips that you could lose this money, and that will make your life much less stressful.
Speaking of stress; this is another thing that you need to consider as well. If you are constantly worried about where the price of bitcoin is, or perhaps you aren't able to sleep because you're worried about it. This is a great warning that you are investing too much into it. That you are investing more than you can afford to lose. Always be careful out there.
How about me?
I have mostly gone all-in to cryptocurrency; especially bitcoin and also ethereum. I have more than 90% of my net worth into these assets. Of course I have savings, a few other investments as well, but nothing compares to my investments in these categories. I have extremely strong conviction in where things are heading, and that conviction has only become stronger the last year. I am investing accordingly.
But you need to remember that I am still quite young, married but with no children. I have debt, but it isn't crippling. Therefore I am able to take on quite a bit of risk and I have fully accepted the fact that this could all go to zero. If it were to do that, I would pick up all of the pieces and start fresh again the next day.
But how about you? How much of your net worth do you have into bitcoin, Ethereum and cryptocurrency in general? What challenges have you faced!?
As always, thank you for reading!
Hmmm that's a great mindset. If ever it all go down hill, I'm sure I wont be able to pick all the bits up and continue regretting it the rest of my life haha. I'm in my twenties, a fresh grad, and my employment is by April. I plan to go all in by then :))