Many people like the idea of investing in cryptocurrency nowadays. But they do not know about crypto. Without proper guidance, investors may make the wrong decisions rather than benefit, and they may lose their money.
So, if you want to be a successful crypto investor and gain higher returns when you buy crypto, below are the points to note on how to plan your investments with crypto investments.
Start by Choosing Currencies You Want to Invest in
Many factors affect the profitability of a cryptocurrency, including its supply and market value. First-time investors can start with cryptocurrencies that have high liquidity value but at the same time are cheap. These elements play a role in choosing which currencies you want to invest in.
Determine the Fund Allocation for Each Investment
Once you have chosen the currencies you want to invest in, it is time to create groups of similar currencies. For instance, if you invest in three cryptocurrencies based on different technologies, group them under one category and choose the crypto with the highest ROI (return on investment). Once you have factored in the profits from each currency, allocate a certain percentage of funds to each currency.
Keep Your Investments Realistic
Once you have determined the currencies to invest in and their percentage ratio, it is time to start investing. However, before sending your investment request, make sure your allocations are realistic.
Diversify your investments and choose only three currencies that have the potential to grow and gain higher returns. For instance, selecting a single cryptocurrency with one-third of all funds is not advisable because it can severely affect the total ROI. It is also safe to invest in a few cryptocurrencies each time you add funds to your portfolio.
Avoid Day Trading
Day trading is another common mistake many investors make when investing in cryptocurrencies. Although it may seem like an easy way to make money, some risks are involved in day trading. For instance, cryptocurrency prices can change drastically in the day while you hold your investments. If you choose this type of investment strategy instead of holding your investments, the next thing you know is that your crypto value has dropped, and you have to reinvest.
Avoid Selling All Your Investments at Once
Similar to the mistake of keeping all investments in crypto, it is also inadvisable to keep your funds in just one currency and sell them when you need fiat currency. It will not only hurt your ROI but can also significantly lower your profits. For instance, if you own 1 LTC (Litecoin) that costs $100 each and choose to sell all of your coins, you will lose a great deal of money if the value drops to $80.
Therefore, avoid this mistake by investing in different currencies with different values so that when one currency loses its value, the value of others can compensate. For instance, an investment in three cryptocurrencies based on different technologies can reduce the risk of losing profits.
On the other hand, investing in just one cryptocurrency is highly risky since it might not bring enough ROI. Also, if you want to benefit from short-term investments, consider using CFDs.
Backup Your Wallet
A great way to protect your cryptocurrency investments is by backing up your wallet. However, there are two types of wallets: hardware and software wallets.
A software-based wallet can be installed on a PC or smartphone, and the hardware version is stored offline in a device similar to a USB. When you back up your wallet, make sure that you write down or copy its backup phrase. Your wallet’s backup phrase is a long string of symbols that shows the path to your wallet in your hard drive. It provides the critical information needed to access your wallet, so it must be kept in a safe place to avoid being stolen.
Watch Out for ICOs
ICO (Initial Coin Offering) is a method to gather funds and allow investors to buy crypto coins of a company at their early stages. Although ICOs can effectively raise money, you must know precisely what currency you are investing in. For instance, most ICOs promise high ROIs but fail to specify how long it will take investors to see profits. Some ICOs do not even have a product or service to attract potential customers and only offer coins for crypto with questionable value. Such ICOs may only benefit the founders who sell their coins once it starts trading in the market.
Therefore, avoid this mistake by researching every cryptocurrency before investing in it. Also, avoid investments that promise huge returns within a few months since most are scams or unviable products/services.
Although ICOs can be difficult to investigate, some are worth backing up since they have some value. For instance, you should invest in an ICO project if a working product or service generates revenue. Buy crypto and earn profits in no time when you plan wisely.
