If you have an aim in life (which you probably do), then you probably also know that to succeed you usually need money, which might only appear if you invest. Currencies have been around humans for thousands of years in many different forms, however, their use has always been the same; provide comfort to your family and yourself through food, clothes and other useful assets. Hence the importance of money. But how do you gain high amounts of money? There are many ways to do so, but the easiest and most common way is investing.
Most of us start with small investments for two reasons. The first one is because we still do not know how to invest our cash correctly. The second is because we are starting and we usually do not owe much cash to invest. Want to know how to invest a small amount of cash wisely?
Why you should only invest a 5% of your net worth
The act of investing can be intimidating at first, the reason being the fear to risk some of your money. What you have to think about, is the profits you can gain with that risk. If you don’t risk it, you will never have more cash. So why investing only 5% of your net worth? You may invest up to 10% but no more because you have to remember that you are putting that money at risk. If you place 10% and you lose all, you still have 90% to pay off your expenses, but also you can give another chance to your investments.
Let’s say you have $1000. Take 10% of that, which is $100, and invest it. In the meanwhile, you have $900 which you can use for your rent, food… If you then lose those $100, then you are able to take the 10% of $900 ($90), to invest again. So basically, the reason behind only investing 10% of your net worth is to have a “backup”.
1) Safe play
This is my favorite way to invest my money, I call it the “Safe Play”. It consists of placing half (or less) of your investment cash on the most stable cryptocurrencies, and the rest of the cash it’s placed on more volatile “young” cryptocurrencies. By young, I mean new, a cryptocurrency that has recently entered the market.
With the previous example of investing $100, let’s create a simple plan so that you get a feel of what “Safe Play” is. At the moment, the two most stable cryptocurrencies (and actually most expensive (however expensive does not mean more stable)), are Ethereum and obviously Bitcoin. These have been in the crypto market for a while now, and they have gained a stable pattern. It is hard to see great differences in their prices in a short amount of time (non-volatile). We would choose one of these two, in my case, I will pick Ethereum, and buy $50 worth of Ether. We will leave this invested capital on Ethereum and we will not exchange it. The rest $50 will be placed in more volatile crypto coins. Usually these are the cryptocurrencies with low prices, however, that is not always true. In my case, I will pick DigiByte. The beauty of this way of investment is that this $50 are for you to exchange as you please. You can leave them on 1 cryptocurrency, or invest it in smaller amounts between 5 different cryptocurrencies. Then you can exchange them if you want as well if you think it will go down, and invested on another crypto coin that you think will rise in price. You basically play with rises, short-term investments.
This one is one of the most common ones. As the name suggests, the aim is to place all of your investment cash ($100 in our case) on a cryptocurrency that is stable and “safe” (hard for it to lower much in price).
This one is very easy to understand. You have to pick a cryptocurrency with high market capitalizations and medium to a high price, which usually means that the community receives the coin as being a valuable asset. Check here the Best Cryptocurrencies in Terms of Market Capitalization. In my case, I would place the $100 on Ethereum since I believe that currently, it is the cryptocurrency with the greatest potential in the whole crypto market.
3) Short term investment
This one is also a very common way to invest capital, however, it is the riskiest of the three if you are beginning with investments. Despite the fact that it is the riskiest, you probably know that the more you risk than more you can obtain in return. In this way to invest, the key is to always have the track of what is happening with each of the cryptocurrencies you currently have money into. You must know what is happening around the world, and the possible effects that it may have on the cryptocurrency itself. For example, let’s say that a large bank (HSBC Holdings) has recently bought millions of Ripple coins. This is interesting since it means that the bank trusts and believes that the price of XRP will rise. Because of this, the community will start to be interested in the coin, hence the price will rise. In this case, you would have to be quick and buy some Ripple in order to increase your investment capital. You should leave for a week and two, or until you observe that the coin stops rising. You then exchange XRP for USD, and invest the USD on another coin you saw had potential to rise in the short term.
That is it for today. I hope you found this post useful and tell me your own Investment appraisals in the comment section down below.
And as always…