Growth and dividend stocks make up most of my portfolio, as is the case with many dividend-focused investors. Using my free dividend tracker, it’s easy to get your portfolio into good shape to weather financial storms and build your asset wealth with reliable passive income. But what about cryptocurrency? This phenomenon is still going strong to this day, which is why I set aside 2% for digital currency.
How much to invest in crypto
This question is fairly difficult for me to answer since it depends largely on your portfolio. There are a variety of factors and variables that can affect one’s tolerance for risk with the potential of losing a substantial amount of digital coin (and fiat money). If you’d like to be on the safer side of the fence, you can look to follow suit and set aside 2% of your portfolio to cryptocurrency.
Just 2% isn’t much. If your portfolio is worth £100,000, that’s £2,000. If cryptocurrency that you own performs well in the coming years, you can look for quite the profit. If it doesn’t do well but holds value over time, you can utilize it much like one would a valued asset like gold — to store wealth.
As is the case with investing and saving as a whole, you should never spend more than what you can afford to lose. Crypto, in my humble opinion, isn’t as safe for long-term investments like the stock market with dividend returns. Crypto is much like Tesla stock and is affected by frequent gains and crashes.
Cryptocurrency is still quite an unknown venture. No one truly knows where it’s going to be in … say 10 years. While there’s always the risk of losing your money, you could see upwards of double-digit returns. As is the case with investments in stocks, you’ll always want to keep cryptocurrencies in mind with regards to the news cycle.
Hedge fund manager Paul Tudor Jones went on record to state Bitcoin alone is great speculation and that he has more than 1% of his assets in cryptocurrency. He’s betting on the success of Bitcoin, but he still has a smallholding compared to the rest of his portfolio, which is precisely what I wish to recreate.
How to invest in crypto
I’ve selected Bitcoin as the cryptocurrency to convert some of my money into. It’s the digital coin that has been around for more than a decade, and one I considered buying when it was less than £100 per coin. Alas, I didn’t and now look at where the price is. That’s what I love most about investing — the power of hindsight.
How does one go about investing in crypto? It’s quite simple, actually.
- Choose a wallet (be it digital or physical).
- Choose an exchange to buy and sell.
- Deposit fiat money.
- Buy Bitcoins.
- Store in your wallet for safekeeping.
A digital or physical wallet for crypto and digital currencies act a little different from your traditional leather wallet for paper notes. You can store all your digital coins in a smartphone app or a small physical key. This is because there’s no banking system that supports these currencies. It’s all peer-to-peer using exchanges and you’re in full control of your wallet. This also means it’s possible to lose everything should you lose your wallet (or access to it).
For my wallet, I’m using the Coinbase Wallet, which stores all my purchased digital coins. The exchange I use is CEX.io to convert my fiat currency into Bitcoins through trades. The fees are fairly low, aside from when I’m wanting to move currency between the exchange and wallet. I then monitor the price of Bitcoin. Sometimes I’ve sold a little when it’s hitting an all-time-high price, then I’ll buy considerably more once it contracts.
But every month I’m adding a little more to my wallet, using the same dollar-cost average approach as my investing. There’s the possibility I could lose everything should Bitcoin collapse and disappear tomorrow, but I feel confident that we’re seeing some form of adoption with PayPal, Visa, and other companies finally see the currency as an asset of sorts.
Should you invest in crypto?
That’s entirely down to your personal beliefs about cryptocurrencies. Do you see them as an area of growth with future adoption looking strong? Go right ahead and save a little in some form of the digital asset. If not, and you feel like this is simply a bubble that’s set to burst, stay well clear. Just like investing, you need to believe in the cryptocurrency.