I can’t tell you whether or not the crypto craze is over or not, it seems these last several months have been slow at the best of times and scary at others. This is why I wanted to share my method of investing into crypto as we enter into the new year which may or may not be plagued by the ongoing pandemic.
While investing in cryptocurrency is wildly different compared to more traditional assets such as stocks, bonds, ETFs or even real estate there is a real benefit to applying more traditional methods to this new form of investment. Enter in, Dollar-Cost-Averaging! DCA for short means you invest smaller amounts of money over extended periods of time at a consistent frequency. Meaning you could choose to invest $50 every month into crypto and you’ll be using DCA. The method behind this idea is to even out all the fluctuations that happen with the market, sometimes you’ll be able to buy the dip, sometimes you’ll be buying the peak, neither is necessarily bad, and by using DCA you’ll be able to smoothly increase your net worth over time leading towards a stress free crypto investment plan!
This rule is more so my own, that’s not entirely based on any meaningful man or statistics. Instead of going all in on the crypto future, I’ve decided to focus on placing 5% of portfolio into the crypto world. My reasoning behind this is that I certainly do want exposure to crypto, but I also can’t convince myself that it is a completely safe investment. As with all investments, they could come crashing down at any moment without any notice, the problem with crypto is that it’s so new, that that moment seems a lot more likely compared to a stock is Coca-Cola or some other behemoth. Being too big to fail is a real idea, and while platforms like Bitcoin and Ethereum are certainly up there in value, I feel better keeping these investments at 5% for the time being. All that said, I’m certainly open to the idea of changing this percentage in the future, perhaps by the end of 2022 I’ll be interested in a 10% or even 20% cryptocurrency part of my portfolio. Only time will tell!
In case you missed it, this isn’t some sort of get rich quick scheme, this is me, taking my income, and slowly developing my wealth through cryptocurrency (and of course more traditional assets for the other 95%). I lump sum invested into crypto at one point in time and while that transaction would have made me a lot of money in the long term I got too stressed watching the value fluctuate so rapidly, so this is the method that not only makes me money over time but also helps me sleep at night! What’s your crypto plan?