If you’ve decided that cryptocurrency is an asset you want to add to your portfolio, I’m psyched. To get you ready to hop in, here’s a brief overview of how to dip your toe in and start investing.
Note: There are definitely other ways to invest in cryptocurrency and many resources available that you can check out. There isn’t one way to invest, but these steps reflect (what I think) is the easiest foray into cryptocurrency investing for non-tech peeps.
First things first: Decide what you’re willing to invest. As mentioned in our previous post, the cryptocurrency market is hard to predict. Given the volatility of the space, you probably don’t want to invest your entire savings in cryptocurrencies. However, it’s a great asset to add to your portfolio given the high returns and its promising future. Think about how much you want to invest and what strategy you want to use.
Learn about the coins you want to buy. Before you invest in any cryptocurrency, make sure you’ve done your research. Litecoin, Ether and Bitcoin are well-known and trusted, but there are tons of other altcoins in the space and not all will be viable. You don’t want to go in blind and risk losing everything you invested, and it’s best not to invest in coins that you know nothing about. If you’re going to invest in an altcoin, think about whether or not you can explain its purpose to someone else. If you can’t, it’s probably best not to invest yet. To honor this point, here’s some basic information on Litecoin and Ether.
Now that you’ve planned your investment amount and did your research, it’s time to start investing! Here’s what you’ll need to do.
Get a wallet. The easiest way to do this when you’re just getting started is to go through the site Coinbase. This is a popular platform that hosts your wallet and allows you to buy and sell cryptocurrency with USD or trade cryptocurrencies for one another. Currently, Coinbase only supports Bitcoin, Litecoin and Ether — the top three coins in the cryptocurrency market. To set up an account, visit the Coinbase website, connect your bank account or card and, once Coinbase verifies your information, you can start building your investments.
Tip: While Coinbase charges a small fee for all transactions, this fee is less when you use your bank account to buy and sell cryptocurrency vs. using your debit or credit card.
Buy your first currency. For the sake of simplicity, we’re going to focus on buying coins on Coinbase. It’s one of the most secure and trusted exchanges and is an easy-to-navigate interface, particularly for first-time buyers. You can buy cryptocurrency however you decide to invest. Coinbase lets you use USD to buy those three different currencies. You can set recurring deposits so that you’re investing regular amounts over time and you can also buy currencies outside of these deposits. Keep in mind that the market is quite volatile, so the dips and surges will be more extreme than in the stock market. If you’re in it for the long haul, try to ride these extremes out.
Consider adding some diversity. Once you’ve gotten your feet wet with buying cryptocurrency, think about whether you want to spread your investments across coins. While Bitcoin is the leading cryptocurrency and most attractive to investors, consider investing in other top cryptocurrencies like Litecoin or Ether (both of which you can buy on Coinbase). The benefit of this is just like regular trading: You mitigate your losses by putting funds in a variety of assets. Again — do your research and find out what’s the best strategy for you.Investing in cryptocurrencies can be pretty simple, just make sure you have a basic understanding of the market and the coins in which you want to invest. Don’t let the technicality of cryptocurrency prevent you from adding it to your portfolio. Educate yourself and you’ll see that investing in cryptocurrency isn’t quite as scary as you may have thought.
Laura Porter is a digital media consultant based in Washington, D.C.