I'm Considering Buying Crypto -- but These Are the Rules I'm Setting First
by Maurie Backman | Published on Aug. 27, 2021
Though I've shied away from digital currencies so far, I may be ready to change my mind -- but only under these circumstances.
Cryptocurrency scares me. I'm not ashamed to admit that.
Though I've been buying stocks in my brokerage account for many years, I've yet to dabble in cryptocurrency, because to me, it's a whole different ball game. Not only is the cryptocurrency market far more volatile than the stock market, but there are still so many unanswered questions about digital coins that make me nervous to buy it.
For example, will cryptocurrency become a widely accepted means of making payments, the same way we can all whip out our credit cards to complete transactions now? And if not, what future value will cryptocurrency have? (My fear is that the answer to that question is "none.")
Still, at this point, I do think I'm ready to at least start thinking about buying cryptocurrency. But before I invest there, these are the ground rules I'm establishing.
1. I'm setting a loss-tolerance threshold
I'm far from ready to go all in on cryptocurrency just yet. So my first rule is that I'm only willing to invest money in digital coins that I'm willing to lose. That figure, frankly, is not a lot. The way I see it, I work really hard for my money and have different savings goals I want to meet. And I'm not confident that cryptocurrency will help me achieve them. As such, I'm looking to start slow.
2. I'm researching different coins
At this point, I've heard a lot about Bitcoin, Dogecoin, and Ether. But there are thousands of digital coins out there, and I'm not convinced that just because some coins get more media coverage than other types of cryptocurrency, it means they're the best bet for my money. As such, I really need to do more research before making an investment.
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3. I'm figuring out whether this will be a long- or short-term investment
My plan with the stocks I own is to hold them for many years. In fact, if all goes well, I'd like to carry them with me all the way into retirement. The stock market has long rewarded investors who keep their stocks for many years. But because cryptocurrency is so new, it doesn't have that same history. And, as I mentioned earlier, its future is also uncertain. As such, I don't know that I can really take the same approach to crypto as I can with stocks. That's something I'll need to determine before I dive in.
I know a lot of people have made money with cryptocurrency, and to be clear, I don't think it's a bad investment. If I felt that way, I wouldn't even be thinking about buying it.
At the same time, I want to approach this decision with caution. I've never been the type to throw my money away. So before I invest in digital coins, I need to make sure I'm really comfortable with what I'm doing. If I decide that I'm not, I'll stick to my original plan of staying away from cryptocurrency until my feelings change.
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