4 Steps to Safely Buying Solana (SOL)
by Emma Newbery | Published on Nov. 5, 2021
Considering buying Solana? Here's how to do it safely.
- Before you buy Solana, research the competitive environment and its long-term prospects.
- Think carefully about how much you want to invest and only spend money you can afford to lose.
- Pick the right cryptocurrency exchange for your investment needs.
Solana has taken the crypto industry by storm. Its price is up 13,300% since January 1 as the super-fast crypto continues to grow and announce new partnerships and integrations.
Thanks to the explosive growth of cryptocurrencies this year, it has never been easier to buy Solana. Here's how.
1. Do your research on Solana
Cryptocurrency investment can be risky and volatile. People are attracted by the potential for high rewards, but there's also a danger of dramatic price falls. Some coins may fail completely, leaving investors with nothing.
In addition, because it is a pretty new and untested market, there are a lot of fraudulent cryptocurrencies out there. Scammers want to take advantage of the high levels of investor interest and the relatively low levels of knowledge. With limited regulation to keep bad actors in check, crypto investors need to be extra vigilant.
Research is the most important tool in your armory, especially if you invest for the long term. Before you buy Solana, it would be good to understand:
- The risks associated with buying Solana and how they fit with your overall investment strategy and tolerance.
- What blockchain technology is and why it matters.
- What smart contracts are and how Solana might challenge Ethereum for dominance.
- Who Solana's management team is, what sets the network apart from its competitors, and how wide its potential user base could be.
- Where you believe the cryptocurrency market as a whole might go -- some believe it is a bubble that could fall to nothing, while others believe this is just the beginning.
- The tax implications of cryptocurrency investments. Every time you trade your SOL, you need to keep a record for tax purposes.
It is always difficult to evaluate the long-term potential of a crypto investment like Solana that has just gone from all-time high to all-time high. This makes it all the more important to know exactly what you are buying and why.
Our top crypto play isn't a token - Here’s why
We’ve found one company that’s positioned itself perfectly as a long-term picks-and-shovels solution for the broader crypto market — Bitcoin, Dogecoin, and all the others. In fact, you've probably used this company's technology in the past few days, even if you've never had an account or even heard of the company before. That's how prevalent it's become.
Sign up today for Stock Advisor and get access to our exclusive report where you can get the full scoop on this company and its upside as a long-term investment. Learn more and get started today with a special new member discount.
2. Make sure your retirement and emergency savings are in good shape
Another way to mitigate the risks involved in crypto investing is to only invest money you can afford to lose. We're not only talking about the money you need to cover your day-to-day living costs. You should also prioritize your retirement savings and emergency fund over a Solana investment.
It's easy to get tied up in the hype and believe that if you don't buy Solana today, you're going to miss out on an opportunity for riches. But your emergency fund is what will cushion you in the event of a financial crisis. Imagine if you lost your job at the same time as crypto prices crashed again. If you didn't have a fully stocked emergency fund, you might be forced to sell your SOL at a loss to cover your rent or mortgage payment.
Similarly, if the price of Solana fell to nothing, you'll be glad you put your retirement savings ahead of any crypto investments. Ultimately, your crypto should only make up a small percentage of your overall portfolio. That way, if something goes wrong, you'll have other assets to fall back on.
3. Choose a reputable cryptocurrency exchange
There are a number of excellent cryptocurrency apps and exchanges on the market right now. Shop around to find the one that's right for you. Different people will look for different solutions, but here are some factors to consider.
- Fees: Exchanges charge fees for various transactions, such as depositing money, trading, and withdrawing funds. Think about how you plan to deposit your cash and make sure that method is available and reasonably priced. Test out some sample trades to see how much you'd get (some platforms say the trades are free but they hide the costs in poor trading rates). Don't forget about the withdrawal fees -- you might find it's cheap to fund your account, but then you'll be charged for withdrawals.
- Security: There have been several high-profile cryptocurrency exchange hacks, so you want to choose a platform that will protect your money. Look for an exchange that keeps the majority of its assets offline in cold storage. Also, see if it has third-party insurance to give you an extra layer of protection.
- Ease of use: Beginner investors might want a straightforward interface where they can convert their fiat (traditional) money into crypto, or trade one token for another. More experienced users may want additional -- and more complicated -- features.
- Availability of cryptos: If you're only interested in buying Solana, you just need to find an exchange that lists SOL. But if you're planning to buy a wider selection of cryptocurrencies, it's worth finding an exchange with lots of tokens.
4. Open an account and deposit money
The final step to safely buy Solana is perhaps the easiest. To open an account, you'll need to fill in some basic personal information and potentially upload a photo ID and proof of address. Once the account is verified, you can move money (or crypto) into your account. Then use the "Buy crypto" function to purchase the SOL you want.
Some long-term crypto investors prefer to move their assets into an external crypto wallet that they control. This reduces the risk of hacking and gives more control over their funds. Many beginner investors leave their coins on the exchange where they bought them. It depends on the type of investor you are, your level of technical ability, and the amount of money you invest.
Once you've bought Solana, do some research into the benefits of opening a crypto wallet. You can also investigate ways to earn interest on your SOL tokens through staking. Learn more about staking here.
Solana is an exciting cryptocurrency with a lot going for it. But all investments can carry risk, and the above steps will help you to make the process as smooth as possible.
Our Research Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
Emma Newbery owns Solana.