10 Moves to Make Before Investing in Dogecoin

Dogecoin (CRYPTO: DOGE) is a popular cryptocurrency that started as a meme and has seen a substantial increase in value -- in part due to social media hype.

If you're thinking about potentially adding Dogecoin to your portfolio, there are a few things that you should do before you jump into this riskier asset.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Dogecoin is a volatile investment. You don't want to have to sell it when the price is down just because you have an unexpected emergency and need the money to cover the cost of it.

By making sure you have several months of living expenses saved up before investing in Dogecoin, you can reduce the risk of your investment since you won't have to sell your coins at the wrong time due to a crisis.

ALSO READ: This Crypto Has Gained 2,800% in 6 Months. Should You Buy?

If you have high-interest consumer debt, such as credit cards or payday loans, paying off what you owe can provide a good return on your investment -- guaranteed.

Making money on Dogecoin is far from guaranteed, so you shouldn't pass up a sure thing for a risky bet. Pay off your high-interest consumer debt before taking a big risk with your money.

Workplace 401(k) plans come with generous tax breaks if you invest in them, but you are not going to be able to buy Dogecoin with money in your 401(k).

Likewise, most IRAs won't provide the option to buy Dogecoin, either, but IRAs also come with tax benefits.

When you can make tax-advantaged contributions, the government is subsidizing your retirement savings. That's a sure thing. Again, don't give up the "free" money the government is giving you to chase profits from Dogecoin that may never come.

Instead, make sure you're maxing out tax-advantaged accounts first.

ALSO READ: $226,566 in Free Retirement Money Is Available for Some Americans

If the company you work for offers an employer match for 401(k) contributions, that's free money. You have to contribute to your retirement account to get it, though.

An employer match provides a guaranteed return on investment. If your company matches your contributions dollar-for-dollar, you get an immediate 100% return on investment.

Dogecoin can't promise that. So be sure you're contributing enough to your 401(k) to get your free matching funds before putting money into Dogecoin. Remember, you typically cannot buy Dogecoin with 401(k) funds.

Dogecoin can be riskier than many other investments, such as stocks, exchange-traded funds (ETFs), mutual funds, and bonds. Not only is it more volatile, but there's less regulation in the crypto marketplace so more of a chance of falling victim to a scam or losing your coins due to unscrupulous actors.

You don't want to put all, or even most, of your eggs into one basket that's not super stable. So build a mix of safer investments with a more solid track record first, then consider adding Dogecoin for diversification if you want to.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Dogecoin is not the only cryptocurrency out there. Some other options include Bitcoin and Ethereum, both of which are more popular than Dogecoin -- and neither of which was started as a joke.

If you are simply hoping to add some cryptocurrency to a portfolio, you may find that one of these options is better than Dogecoin because it has a similar upside potential but less risk.

Of course, this may not be the case and you may decide Dogecoin is a better bet. The important thing is to make sure you compare the fundamentals of multiple cryptocurrencies before deciding which is right for you.

It's easy to get caught up in hype surrounding Dogecoin, especially when it's touted by celebrities or when you see stories of people making millions.

But with the potential for great rewards comes great risk. While there's a chance you could get rich off investing in Dogecoin, there's also a chance you could lose most of your investment's value.

By sure to consider the downsides and the likelihood of losses carefully before making an investment.

ALSO READ: Why You Shouldn't Follow in This Dogecoin Millionaire's Footsteps

You should take the time to think about why you want to buy Dogecoin and what you hope to accomplish.

If you think that Dogecoin has long-term potential and you want to hold onto it for years to come, this would be a less risky strategy than if you anticipate day-trading Dogecoin to take advantage of the wild swings in the coin's pricing.

By defining your goals, you can more accurately assess the likelihood that Dogecoin will help you to achieve them.

Because there's a nonzero chance that you will end up losing the money you put into Dogecoin, you should carefully assess how much cash you feel comfortable putting on the line.

The important thing is to make sure you are absolutely not investing money that you can't afford to lose. You don't want to damage your long-term financial picture if your investment doesn't go your way.

ALSO READ: 3 Cryptocurrency Myths That Could Cost You Big Time

Finally, you need to carefully consider where you'll buy your Dogecoin from. You'll likely need to use a specialized crypto exchange or find a broker that enables the purchase of this investment.

Make sure you research carefully to find a reliable place to buy your Dogecoin and to keep it safe once you own it.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

If you've checked off the items on this list and decided to move forward with buying Dogecoin, then you're doing so in the best possible position. Hopefully your investment will be a successful since you've gone into it prepared and with both eyes open.

Christy Bieber has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bitcoin. The Motley Fool recommends Ethereum. The Motley Fool has a disclosure policy.