Nowadays cryptocurrency seems to have entered into the world completely. From successful Coinbase Super Bowl to celebrities like Gwyneth Paltrow and Justin Bieber and are seen collecting NFTs. It shows that everyone is trying to get into the action. But, it may be tempting and super risky to dive headfirst into the volatile crypto market.
Before taking the plunge, just read about three steps that can dip your toes into the crypto pool:
1. Make sure to have a strong financial background
Before investing your valuable money into crypto, make sure that you have a solid foundation of the financial background that withstands the risk and potential loss that comes along with the crypto investment.
Beyond emergency funds on the hand to fall back on, you will also want to be sure about ticking the boxes of financial goals like paying off for the high-interest credit card that can consume investing returns. And you will be wanted to put the money into your retirement accounts such as Roth IRA, and others. And if the employer in your company does a company match of 401(k), then make sure that you are contributing to meet the match before your investment in crypto, since your match is essentially about the free money. For instance, if your company is matching up to 6% of the salary, then contribute 6% more, so double what you are able to put away before you are strategizing the investing elsewhere.
If you want ownership over cryptocurrency after purchasing it from a centralized exchange like Coinbase, then transfer your assets to the crypto wallet that has your direct ownership.
2. Crypto Trusts
People who want to get exposure to crypto, using a more traditional account of the brokerage, can consider doing this using the crypto trusts. A crypto trust is almost similar to another financial trust, excepting it to hold cryptocurrency exclusively.
Crypto trusts are a very good option to manage and safeguard the cryptocurrency and pass on the wealth from coins to later down. Wealthfront, Robo-advisors allows you to invest nearly 10% of the portfolio in trusts and eliminate some risk.
3. Beyond crypto, diversify your investments
The rule of thumb from Molina is to allocate a maximum of 10% of your portfolio, then use a passive investing strategy for your financial assets. It is important to understand the crypto well it is another part of the long-term investment strategy.
Diversification makes you sure that you are spreading out at your risk effectively. The Crypto market experiences some volatility as you have many more opportunities to other pieces of the portfolio that make money to offset any kind of loss.
To start doing investment in the crypto responsibly, initially make sure that you have met the financial goals to take on substantial risk. You can also shop around for the efficient crypto platform that will works for you want, knowing that you would not allocate more than a 10% investment in your portfolio to buy crypto coins.