When it comes to investing, diversification is critical. You’re less likely to suffer a devastating financial loss if one of your investments doesn’t pan out if you dole out your money. And when it comes to cryptocurrency, diversification is just as important.
While Bitcoin is the most well-known digital currency, there are actually thousands of different cryptocurrencies out there. You can buy Tether (USDT) with credit or debit card or any other coin in just several easy steps. And while Bitcoin remains the leader in terms of market capitalization and value, that doesn’t mean it’s the best investment for everyone.
Many crypto experts state that Bitcoin is too volatile to be considered a long-term investment and that investors would be wise to diversify their portfolios with other digital assets. The mix of ideas is what makes your portfolio fascinating. Diversifying your portfolio is always a smart move, but even more so now for many reasons. So, if you’re thinking about investing in cryptocurrency, here are a few things to keep in mind.
Buying a fund
For people of modest means who are looking for the simplicity of a professionally managed fund, there aren’t many options. The few that do exist track baskets of cryptocurrencies, rather than picking individual winners. The Goldman Sachs Group Inc. is said to be considering a cryptocurrency fund, but nothing has yet materialized.
John Frank, the chief legal officer at Ripple, recently said in an interview with CNBC that he believes big financial institutions will begin offering crypto products within the next 12 months. If that happens, it could bring in a new wave of investors and help legitimize digital assets as an investment class. So here’s where you can get some crypto for your portfolio:
- Coinbase: An exchange for buying, selling, transferring, and storing digital currency. It’s the most popular exchange for U.S. customers.
- Bitstamp: One of the oldest exchanges still around, it’s based in Luxembourg.
- Kraken: Another established exchange that also allows margin trading.
- Huobi and Okex: Two of the largest cryptocurrency exchanges by trading volume.
- Binance: A newer exchange with a rapidly growing user base.
Building your own portfolio
Another disadvantage of funds is that investors do not have full control over their investments. For those who want more control, building a portfolio of individual assets may be the way to go.
When buying individual assets, it’s important to keep in mind that some digital currencies are more volatile than others. For example, Bitcoin Cash and Litecoin have both experienced large price swings over the past year. If you can stomach the volatility, these coins could potentially offer more upside than Bitcoin.
Ethereum, the second-largest cryptocurrency by market capitalization, is another asset that has generated a lot of buzz recently. Unlike Bitcoin, Ethereum is not trying to be just a digital currency. Instead, it’s a platform that allows developers to build decentralized applications.
Many people believe that Ethereum has more upside potential than Bitcoin because of its utility. Ethereum’s native currency, Ether, is used to power the network and is also used by developers to pay transaction fees.
Ripple is another cryptocurrency that has been gaining traction with investors. Ripple’s technology is being used by a growing number of financial institutions to process international payments. Ripple has also partnered with American Express and Santander to offer blockchain-based payment solutions.
While there are many different digital currencies to choose from, these are just a few of the most popular. When deciding which assets to add to your portfolio, it’s important to do your own research and consult with a financial advisor.
Consulting an advisor
Some financial advisors advocate for caution when it comes to cryptocurrencies, and some people avoid making specific portfolio recommendations. That’s not surprising, given that digital assets are a new and largely unregulated asset class. Many financial advisors are still getting up to speed on the basics of cryptocurrencies.
That said, there are a few financial advisors who have been actively involved in the space and are comfortable making recommendations. If you’re working with an advisor who isn’t comfortable discussing digital assets, you may want to consider finding one who is.
When talking to a financial advisor about investing in digital assets, it’s important to be clear about your goals. Are you looking to invest for the long term, or are you trying to make a quick profit? How much risk are you willing to take on?
These are important questions to answer before investing in any asset, and they’re especially important when it comes to digital currencies. Cryptocurrencies are speculative investments, and their prices can fluctuate wildly. If you’re not comfortable with that level of risk, you’d better not invest in something like crypto.