New investors should tread carefully before investing in cryptocurrency
Often people get confused when they learn about new stuff. More so, when it is related to finance. The case with cryptocurrency is somewhat similar. Though the industry is growing at a rapid pace, it is relatively new, only a decade old, and mostly amateur investors are drawn to it as they see a way to grow their wealth quickly. Some institutional investors have lately warmed up to the idea but most of them have maintained a studied silence. Then, given the extreme volatility of crypto coins, how should new investors decide what amount they should invest and in which coin?
As this industry leverages technology in a big way and all trades are done online, it’s tempting to dive right in. However, you should factor in your financial situation and appetite for risk before joining the trade. Keep in mind the following points before you set out to invest in this industry.
1. Financial Safeguards
First and foremost, every investor needs to prepare themselves for the time when things don’t go according to the plan. With cryptocurrency, it happens often. The price of these virtual coins fluctuates frequently and wildly. So having a backup plan or an emergency fund for those rainy days when prices drop is a wise move. Though this industry has rewarded some investors quickly with handsome returns, investors should plan for the long term.
2.The Right Crypto Coin
All investors should explore their options and choose the asset that could best serve their needs. There are several coins that are giving better returns than Bitcoin but they have to remain in the shadow of the world’s largest cryptocurrency. Get going and sift through the papers to know what options you have.
3.Exchanges
All crypto trades are processed via online exchanges. They are the facilitators. So they also charge a fee or commission for each transaction. Some give rewards for hitting a milestone, some give them as a joining bonus. This policy may differ with each exchange. So, review the services offered by most of the exchanges and then decide which one suits your needs.
4.Diversify
You will be tempted to invest in more than one coin. Most experts believe it is a good strategy. Diversifying the portfolio reduces the risk. And you can invest in more than one coin via the same exchange and its mobile application.
5.Define goal
New investors must be clear about what they want to achieve with their investment. That goal should be realistic, based on the market condition. Also, a clearly defined goal helps in making quick decisions – like when to sell an asset or when to purchase more of the same.
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