Billionaire Mike Novogratz, founder and CEO of Galaxy Digital, recently shared his best advice for those interested in cryptocurrency investment: start with a small portion of your portfolio. At CNBC’s Financial Advisor Summit, he suggested allocating 2 to 5 percent, or even as little as 1 percent, to get started.
Novogratz emphasized the importance of engagement, saying, “Once you have a little bit of an allocation, you start following the story. You learn about things by putting a little money on the line. Then you pay attention to the article, you pay attention to the interview.”
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Despite challenges like the failure of Silicon Valley Bank, Novogratz remains optimistic about cryptocurrency, even predicting that Bitcoin will surpass gold, bolstered by the financial power of baby boomers.
Supporting Novogratz’s approach, Brian Vendig, president of MJP Wealth Advisors, advised, “I’d say 1 percent on the more conservative side, and no more than 5 percent of your total portfolio if you’re a growth-focused investor.” Vendig also stressed the importance of aligning crypto investments with your financial goals.
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Ivory Johnson, financial planner and founder of Delancey Wealth Management, echoed this sentiment, recommending an allocation of two to three percent, noting, “The more volatile an asset class is, the less of it that you need.”
By starting small and staying informed, investors can gradually learn about the crypto market and make more educated decisions.
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Top 5 Methods to Strategically Invest in Cryptocurrency
Investing in cryptocurrency can be lucrative if done strategically. Here are five key methods to help you make informed decisions and maximize your returns.
1. Diversify Your Portfolio
One of the most effective ways to invest in cryptocurrency is by diversifying your portfolio. Instead of putting all your funds into a single cryptocurrency, spread your investments across multiple digital assets. This approach reduces risk and increases the potential for profit as different cryptocurrencies can perform differently under various market conditions.
2. Research and Stay Informed
Thorough research is crucial when you invest in cryptocurrency. Stay updated with the latest news, trends, and developments in the crypto world. Follow reputable sources, join crypto communities, and read whitepapers of projects you’re interested in. Understanding the technology, team, and vision behind a cryptocurrency can provide valuable insights into its long-term potential.
3. Use Dollar-Cost Averaging (DCA)
Dollar-cost averaging (DCA) is a strategy where you invest a fixed amount of money at regular intervals, regardless of the cryptocurrency’s price. This method reduces the impact of market volatility and helps you avoid the pitfalls of trying to time the market. By consistently investing over time, you can average out the cost of your investments and potentially achieve better returns.
4. Secure Your Investments
Security is paramount when you invest in cryptocurrency. Use reputable exchanges with strong security measures for buying and trading. Consider storing your assets in hardware wallets, which are offline and less susceptible to hacking. Enable two-factor authentication (2FA) and use strong, unique passwords for all your crypto-related accounts. Regularly update your software to protect against vulnerabilities.
5. Set Clear Goals and Take Profits
Having clear investment goals is essential. Decide whether you’re in it for the long term or looking to make short-term gains. Set profit targets and consider taking profits periodically to lock in gains. The crypto market can be highly volatile, so having a strategy for when to sell can help you avoid emotional decision-making and ensure you realize your profits.
Conclusion
To invest in cryptocurrency effectively, it’s important to diversify your portfolio, stay informed, use dollar-cost averaging, secure your investments, and set clear goals with a profit-taking strategy. By following these methods, you can navigate the volatile crypto market with greater confidence and potentially achieve significant returns on your investments.
