With few taps of ones smartphone, with the social media space awash with crypto musings, in conversations with acquaintances, family and friends, one may be tempted to dive in immediately in cryptocurrency investment.
It appears like a fairy tale means of making money but it could as well be a poisoned chalice if you do not follow the trips and deals of the digital currency. This is where you would know if Crypto is either an appropriate investment for you now or ever, depending on your financial leverage and appetite for risk investment.
So caution is important before one envelops oneself in a regrettable venture. Despite heading a cryptoassetplatform for registered investment advisors, Tyrone Ross, Onramp Invest CEO shared this sentiment when he advised: “I am the biggest crypto hippie you’ll talk to in a very long time”.
He further goes on to caution against it when he said: “I don’t think the general public should be investing in crypto.”
But it’s not all that gloomy, lest we scare you out, we are only preaching caution and sermoning you on three things to be sure of before dipping your hands into crypto investment.
Here are four steps we have compiled for you before you make that crypto investment decision:
Crypto investment is a risk, things may go that awry that you can lose a large part or even all of your investments, you hence need to be prepared for times things do not go on as planned.
The COVID-19 pandemic for example had a terrible hit on workers finances that they lost income and began to tap in to their savings, exhausted them all and entered into excruciating hardship, a stark reminder of the benefits of having an emergency fund
Theresa Morrison, a financial planner in Tucson, Arizona corroborated this point when she opined:
“When you’re young, you can feel like Superman or Superwoman, but when the bubble happens, you could easily be out of a job for nine to 12 months. Don’t underestimate systemic shocks to the market.”
She further recommended saving up six months of living expenses for single workers or three months living expenses with those who have working partners.
So any newbie investing in Crypto should take the COVID-19 experience, when the unexpected happens around theworld to prepare for unexpected hassles when trading in the digital currency.
After setting aside money for emergencies, it is important to begin to think about your short-, medium- and long-term financial goals. It is important you match this with the amount you plan to invest in crypto and the possible losses incurred if things fall south. It is therefore expedient you already save extra cash for future plans as your investments in crypto can vanish any time.
“Most people want to travel every year, buy a house in 10 years, get married in 10 years. These things cost money,” Morrison says. “Put down how much it’ll cost in today’s terms and figure out how much to save out of your paycheck every month. From my experience, that alone can be $1,000 a month.”
You can proceed to link Morrison’s charge to your mind as you take the risky leap into the crypto world.
With the fairy tales of those who have had their fortunes raised by crypto, you begin to feel you have the money and can then jump on the crypto bandwagon.
Hey there, be careful or else you fall flat.
You have to start with the basic ideas of how one buys crypto and how it would fit into your overall financial plan.
Be educated on the new firmament and it is damning to do anything with your money that you yourself do not understand. Dedicate some of your personal time to learn all you can about digital currency and crypto, make sure you understand the mechanics of the currency, know the kind of investor you are, as it will determine the kind of crypto investment that would be suitable for you.
“There’s a process you have to go through to determine if this new asset class is right for you. What’s your plan? How old are you? What are your goals? How tech-savvy are you? Do you understand what it means to hold these assets and have them not be insured? If something happens to you, who in your family knows about this stuff to retrieve it?” Ross says. “People don’t do the right due diligence before dumping money into something. I know that’s not the sexy answer, but it’s the truth.”
Having taken cognizance of number 3 and knowing how crypto works, you can then begin to allocated part of your cash (make sure they are money you can afford to lose) into crypto. But don’t because of immediate prospects rush to invest heavily.
In your first try, make sure your investment is small and manageable so that in case you lose it all, it won’t take a toll on your mental health and finances, as crypto can at times run one roving mad.
Danny Lee, One of Denver’s financial partners echoed this charge when he said:
“If you invest in crypto, think of it as dead money. Money you’ll never get back. At the end of the day, it’s going to be a speculative investment.”
Cryptocurrency has made peasant millionaires, but can also be a poisoned chalice if you are not smart about investing and understanding the intricacies of how its been done. Be careful!
