Should I invest in cryptocurrency if I don’t have a lot of money to invest right now, or play it safe?
While cryptocurrency continues to surge in popularity and seems to be a buzzword online and in the global economy, is it a smart investment for everyone?
We all know people who have made a lot of money on crypto, and people who have lost a lot of their fortune on the same kind of investment. Investing in cryptocurrency is trendy, seems risky, but is very attractive due to its relatively new nature and the potential it has for massive ROI.
If you’re considering investing in cryptocurrency, but are hesitating because you’re not sure if it’s a safe bet, it’s wise to step back and consider a few thighs before taking the plunge. If your funds are limited, that only adds another layer to your financial considerations.
Here are some things to consider when exploring cryptocurrency and debating whether it’s a good investment opportunity for you.
What Will You Do With The Money?
The first thing to consider is what your goals are for the money you invest. What do you want that money to do for you? This is especially relevant if you don’t have much to invest with initially.
If your goals are to use the invested money for something crucial, like purchasing a home, paying for an important vacation, or funding your retirement, then it might not be the best idea to put your money into crypto. Cryptocurrency is a volatile investment, so risking your life savings or tying up your ability to access important life goals isn’t a smart avenue.
Cryptocurrency Is a Volatile Investment
Investing in crypto is, in essence, a form of gambling. It’s a volatile investment opportunity that can potentially make you a lot of money…or lose you a significant amount of money. It is also very speculative at the moment–the value of cryptocurrency is driven by what someone is willing to pay for it. For that reason, the value fluctuates wildly. Since they have to be mined, and there are limits on how much of a given type there can be on the market at any time, there is a fairly limited supply of available cryptocurrencies.
In short, it’s a bit riskier in terms of an investment opportunity, and the return on investment is difficult to predict.
Think About Your Timeline
If you need money in the short term (3 years or less), I normally suggest that you put your money in some variation of cash. That might mean a high-interest savings account or a short-term bond that will give you some income to hold onto for three years. While it won’t give you much growth, it’s more secure and will keep your cash easily available and steady.
If your goal horizon is a little longer, between 3 years and, say, 10 years, then you can look into a combination of stocks and bonds. Other options that work well in this timeframe are simple mutual funds or an exchange-traded fund that invests in larger companies. These are more secure, well-established stocks and bonds–a less speculative investment than cryptocurrency.
If You Really Want to Get in on the Action
If you still want to take advantage of the cryptocurrency trend and participate, I suggest you take 10% of your total savings and allocate that toward investing in crypto. That way, while you enjoy the excitement of playing the game and seeing if you can make some money, you don’t tie up your life goals into this riskier investment.
At the end of the day, you want to be smart with your investments–but you also learn by trying new things. If the risk–and potential reward–of cryptocurrency is calling your name, then by all means, try it! However, use 10% or less of your money so whether you win big or lose big, you have the peace of mind that you will still be financially secure.
If you have any other questions about investments, either in cryptocurrency or more secure options, Grow Your Wealth is here to help! We love guiding new investors in how to grow and manage your finances, and encouraging you to try new things while being smart with regard to your goals!