Given the success stories we have all heard about cryptocurrencies, it is hard to not want to join the fray. While it doesn’t take an expert to get going, take the time to do some research before jumping into the mix.
Before you can worry about conversions like 0.08 ETH to USD, there are a few basic things to cover. Here are a few simple tips that can go a long way when it comes to investing in Ethereum for the first time.
ETH vs. Other Investments
The single most important thing you can do when investing in Ethereum is to know how it differs from other popular investment types. On the surface, it can seem like cryptocurrencies are all the same. In reality, there are key differences between them, especially Ethereum and other popular cryptocurrencies like Bitcoin.
Know the differences in ROI between Ethereum and those other investments. Know more about the decentralization of Ethereum compared to Bitcoin. It also helps to know that investors in Ethereum can be far more involved in the development of the platform going forward (because it is open-source code). These things can make a big difference when it comes to investing in Ethereum versus other investments.
Risk Tolerance is a Key Factor
This is a good consideration for investing in anything, not just cryptocurrency. Going into an investment strategy, know what kind of risk tolerance you are okay with. Some are okay with getting a bit riskier in the hopes of garnering a larger return. Others hope to see a steady return over a longer period.
Risk tolerance is simply the level of risk that investors are willing to undergo in comparison to the volatility of the investment. For cryptocurrencies, that risk level is inherently higher because of the investment type. Risk tolerance can be varied by things like financial situation or even emotional state, so try to go into the planning phase with as clear a mind as possible.
Diversify
One of the worst things any investor can do is to put all of their eggs in one figurative basket. We have heard plenty of stories about investors who put everything into Bitcoin and walked away rich. That doesn’t happen all that often and we don’t hear about the horror stories where investors lost it all.
Not every investment opportunity will turn out well. Having a diverse portfolio will help navigate the volatile market – especially one like cryptocurrency – while also providing a learning experience about what it’s like to invest in cryptocurrency. Think of it as insulation against a total investment loss.
Know When to Sell
While there are no rules for selling when it comes to Ethereum, your strategy can play an important role in knowing when to sell. One of the worst things investors can do is sell in a state of panic, getting out just because there has been a drop in price. While there are instances when the price could continue to drop, cryptocurrency has shown that it will rebound given time (at least the big ones do).
Cryptocurrency is a long game. Those looking to make a quick flip are likely going to find nothing but disappointment waiting. Part of investing in cryptocurrencies means enduring the short-term losses and hoping for a rebound over the long run. It might not necessarily be the most fun thing in the world, but investing is about patience and knowing when it is time to move on. The first loss since you invested is not necessarily that time and knowing that can wind up saving you a ton of money.
