How Much Should You Invest in Cryptocurrencies?

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BY AMIT GUPTA

AZERI OBSERVER CONTRIBUTOR

Cryptocurrency or digital currency is virtual money that may allow digital cross-border and peer-to-peer payments, and may have some value based on the demand and usability in the market.

When planning to invest in cryptocurrencies, you must consider a number of things so as to decide the amount to invest. These include your understanding and knowledge of the crypto industry, your risk tolerance, investment preferences, etc.

Depending on these factors, you can either decide to put just a small part of your entire investments into digital currencies or may choose to invest a lot of money for equally greater rewards.

Confused? This article will help you with tips to decide the right amount to invest in cryptocurrencies.

Invest according to your age

For most people, their risk-taking ability depends on their age. The older you are, the less risk you want to take with your money when it comes to investments, which is why people in the age group of 18 to 34 years are most likely to know about and invest in digital currencies.

It is generally a good idea to choose your investment based on your age. Since cryptocurrencies are a somewhat risky investment product, the earlier you invest the better.

Invest only what you can afford to lose

When all is said and done, cryptocurrency still remains one of the riskiest investment instruments. So, you should be very careful not to invest an excessive amount or what you can’t afford to lose in digital currencies.

Wondering how to decide what you can afford to lose?

It’s simple. Once you have kept aside the amount that you need for monthly expenses, you can theoretically invest whatever you’re left with. But again, you need to consider your risk tolerance when investing.

In other words, if you think you can afford to lose all your investments, you’re on the right track.

Digital assets are not an alternative to traditional investments

Instead of treating cryptocurrency investment as an alternative to traditional investments (stocks, mutual funds, etc.) and putting all your funds in it, one should rather try to keep a diversified portfolio, combining both fiat and digital assets.

Even a small investment in crypto can produce magnificent rewards for you or may end up in nothing.

Small crypto investment for diversification

Since digital assets like cryptocurrencies are totally unrelated and work different from other asset types, they can be a wonderful means for diversifying your investment portfolio.

However, one should not invest a lot of money right away in digital assets, as they may end up losing it all. Ideally, a 3-5% allocation in crypto is ideal for young investors just starting out in this field.

Many expert investors suggest that every person should keep 5-10% of their portfolio in digital assets, including cryptocurrencies. But that may vary depending on your personal preferences, risk tolerance and other things. This is for novice and casual investors. Those with good understanding and knowledge of the crypto market and zeal for investing can go up higher.

Amit Gupta is the CEO and founder at SAG IPL, an India-based technology firm providing a range of service/software solutions in the web development, design, app development, and SEO industries, representative of Titan Coin.