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Nervous to Invest in Crypto? Do These 4 Things to Ease Your Fears

The Motley Fool
The Motley Fool
 2022-01-16

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These days, many investors are enjoying success with cryptocurrency . And crypto could end up being a money-maker for you, too. But if you're anxious about the idea of investing in it, here are a few steps to take.

1. Have a fully loaded emergency fund before diving in

Whether you're buying cryptocurrency, stocks, bonds, or other assets, you only lose money as an investor when you sell something at a lower price than what you paid for it. And a good way to avoid having to sell is to have plenty of money set aside for emergency situations. If you have savings to tap in a pinch, you won't be forced to sell off your cryptocurrency holdings at a time when their value has declined.

Ideally, you should have enough money in emergency savings to cover three to six months of essential bills. If you're not there yet, you may want to hold off on buying cryptocurrency until you've hit that goal.

2. Make sure your portfolio is well diversified

Investing all of your money in cryptocurrency is a move you might regret. The cryptocurrency market can be very volatile, and if you sink too much money into digital coins, you could end up with losses.

Generally speaking, it's a good idea to have an investment portfolio that's diverse. That could mean owning some digital currencies, a bunch of different stocks , and some bonds. If cryptocurrency is only a portion of your portfolio, you won't take as hard a hit if its value plunges.

3. Start slowly with a small investment

When it comes to a risky asset like cryptocurrency, starting small is a good bet. Rather than sink thousands of dollars into digital coins, you could invest a few hundred dollars and see where that gets you. If you can handle the ups and downs of crypto, you can start putting more money into it over time.

4. Put your money into a few different currencies

There are certain cryptocurrencies that you read about all the time. But did you know that there are thousands of digital currencies you could potentially own?

If you're going to invest in crypto, it pays to consider putting your money into a few coins rather than limit yourself to just one. That way, if, say, Bitcoin sees its value decrease, but it's only one of five currencies you own, your portfolio value may not drop too drastically if your other coins hold steady.

Remember, it's always a good idea to branch out within each asset class you own. Just as it's smart to own a bunch of different stocks rather than a single company, so too can you take the same approach when it comes to owning cryptocurrency.

Investing in cryptocurrency isn't necessarily the best idea if the thought of doing so makes you break out into a sweat. But if you think you can handle the volatility of the cryptocurrency market, these tips could help you incorporate it into your portfolio with less stress.

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We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team. Maurie Backman has no position in any of the stocks mentioned. The Motley Fool owns and recommends Bitcoin. The Motley Fool has a disclosure policy .

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