Could this be the recipe for successful cryptocurrency investing?
Cryptocurrency can be a risky investment because of its volatility, but it's also become an increasingly popular one. And many financial experts have endorsed investing in it -- including Suze Orman.
However, Orman has some specific advice about exactly how you should go about the process of investing in cryptocurrencies. Here's what she suggests, based on how she purchases her own cryptocurrency investments.
1. Buy with PayPal
Orman says she makes her cryptocurrency purchases through PayPal for two reasons.
The first is that it's simpler, as figuring out how to navigate the process of buying virtual coins can be a challenge. That's because, while a growing number of mainstream brokers are making it possible to buy cryptocurrencies on their trading platforms, there are still limited places where you can buy most coins.
And the second reason she advises purchasing through PayPal is that doing so means it's possible to invest without the need of a crypto wallet. A crypto wallet allows you to store digital currencies. They can be hacked or you could permanently lose access to them if you lose your private key.
2. Stick to the most popular cryptocurrencies
Orman also advises sticking with the more popular cryptocurrencies when investing in virtual coins. Specifically, this includes Bitcoin and Ethereum.
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These coins are more well-established than other types of cryptocurrency, which means that while they are still volatile, they are less subject to extreme swings in price -- and less likely to go down to $0 if the coin turns out not to be viable over the long term.
3. Fulfill other financial priorities first
While Orman thinks crypto should be part of your investment portfolio, she also believes that you shouldn't purchase virtual coins until you've already taken care of some other key financial priorities.
Specifically, she believes that before investing in cryptocurrencies, you should:
- Fully fund your emergency fund
- Repay all of your high-interest debt
- Invest in a retirement savings plan such as a Roth IRA
An emergency fund is crucial before investing in cryptocurrency because you need to be able to cover surprise costs without having to sell your investment (or go into debt). Saving for emergencies before investing is always important, but especially with a more volatile investment such as cryptocurrency.
Paying off high interest debt first also makes sense as you get a guaranteed return when you do that. That is definitely not the case with a crypto investment. And investing for retirement needs to be high on your list too, as it's crucial to be prepared for the future.
4. Only invest money that you can afford to lose
Finally, because of the risks that cryptocurrency presents, Orman believes you should only put money into it that you could afford to lose.
Unlike other more-established investments, there's a greater chance that your investment could go to zero when investing in virtual coins. So you don't want to put money on the line that you absolutely need.
By following this advice from Suze Orman, you can find a safe way to put some of your cash into cryptocurrency and could potentially benefit from this innovative investment if the coins grow their value over the long term.
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