When it comes to a fight, there are really only two ways to win.
The first way is the way that most people think of: Beat them. Crushing (metaphorically) your opponent, leaving absolutely no doubt who triumphed.
The second way, though, is something that doesn’t occur to many people. It’s to bring your opponent into the fold. You make the adversary a friend, and, in that way, you end the conflict. And both sides benefit from the cooperation.
Well, in the fight to bring cryptocurrencies mainstream, while a few people are still trying (and failing) to go with option one, the major players are going with option two.
Who is bringing crypto into the fold?
Major brokerage houses have long focused on “traditional” investments such as stocks and bonds for the trades that they offer.
But that’s changing, and one of the biggest brokerages is now talking about how cryptocurrencies are already mainstream. Avery Heeringa and Matt Severino with Charles Schwab write:
“Early on, crypto was very short-term,” says Joe Vietri, Schwab’s head of digital assets. “As people understood the use cases and what problems it’s solving, that shifted toward a long-term view. People are now viewing and owning digital assets through the lens of portfolio diversification.”
“Long-term view” and “portfolio diversification.”
Exactly what I’ve been advocating for for some time now, and exactly how I would recommend you approach crypto.
Crypto is no longer a fringe investment. It is no longer something that everyone approaches as a gamble or something to flip for a quick buck.
Cryptocurrencies, when approached intelligently, are a long-term asset class which many smart investors see as smart to diversify into.
Which may lead you to ask…
What is the smartest way to invest into cryptocurrencies?
It’s a great question to ask because understanding this is the starting point to making a smart move into crypto when that’s appropriate for you.
The first thing to point out is that, for the majority of people, diversifying into crypto is what they will choose to do instead of putting their eggs all into one basket (of crypto).
Diversifying a portfolio across multiple asset classes has long been considered a sound strategy, and when it comes to crypto, diversification is the way that I recommend for people to make that move. With that in mind, Gabriel O. Rodriguez Cruz with Money has some smart suggestions on how to go get started investing in cryptocurrencies.
That guidance can be summed up in the following five steps, with my comments on each:
1. Start with a clear goal and realistic expectations
As with any investment planning, knowing where you want to go is the first and most important step. After all, to reference the Cheshire Cat from Alice in Wonderland, if you don’t have a specific place that you’re trying to go, then any direction that you go is as good as another.
So, know where you’re going (and why), and make plans to get to that goal.
From there, remember that, like any other investment, crypto isn’t a magic potion to instant wealth. That type of thinking is gambling thinking. However, crypto does show longer-term trends that you should pay attention to and use for your planning towards reaching your investment goal(s).
2. Understand what you own
Like any other investment, it’s important for you to understand the risks of each type of coin that you invest in so that you can choose the right coins for your investment goals.
And it’s worth a quick side note to say that I don’t recommend investing into gimmick coins such as memecoins. I recommend treating crypto as an investment, not as entertainment. (That’s what NFTs are for.)
3. Build your position gradually
I’ve talked about taking the dollar cost averaging investment strategy often applied to stocks and applying that same thinking to your investments into cryptocurrencies.
In short, consistency of investment is more important (and often safer) than dumping a huge lump sum in at one time. Although, as we discussed previously, lump-sum investing outperforms cost averaging 68% of the time… Outperformance isn’t the only consideration. Dollar-cost averaging removes the risk that you invest near a price peak, spend a few days or months watching your assets slide and then sell in disgust. Dollar-cost averaging is psychologically safer, even if lump sum investing usually outperforms.
Decide how much that you want to invest monthly or annually, and do just that: invest what you decided to invest into crypto monthly or annually.
4. Prioritize security and account setup
This should go without saying. Your digital assets, just like your physical assets, need to be secure so that no one else but you can access them.
That’s something that we absolutely prioritize here at BitIRA. There’s a reason we’ve been called “The World’s Most Secure Digital Currency IRA” after all!
5. Plan for taxes and ongoing asset management
Taxes are one of the two things that it’s usually said can’t be avoided, and it’s true that governments want their pound of flesh.
But, at least in the U.S., there are ways to invest into cryptocurrencies that are tax advantaged meaning that, depending on how you set up your investments into crypto, you may be able to legally reduce your taxes on the funds that you put into your investments or on the funds that you finally withdraw from those investments.
Of course, only you can decide if investing into crypto is the right move for you. As with all financial decisions, the right answer depends on your goals and on your investing strategies.
If you are considering diversifying into crypto, though, the first step in your due diligence is education, and you can find out more about how to diversify into cryptocurrencies in a tax-advantaged way by getting our free Essential Guide to Digital IRAs.
And if you already know that you want to diversify your savings with cryptocurrencies now, you can open your own digital IRA with BitIRA at any time. Account set-up takes less than ten minutes.
