- Tram Ho
Despite recent criticism of Bitcoin mining and its environmental impact, billionaire Elon Musk has confirmed that he owns some Bitcoin and has held it for a long time. Although he did not specify how much, he said Bitcoin is the largest digital currency he holds, more than Ether and Dogecoin.
During Wednesday’s “The B-Word” event, the Tesla CEO shared that he has no plans to sell Bitcoin in the near future. He said: ” If the price of Bitcoin goes down, I will lose money but I won’t sell. I certainly don’t work waiting for high prices to sell or anything like that. I want to see Bitcoin succeed .”
Understand the risks
Before deciding to invest in Bitcoin or any other digital currency, you should learn to understand the risks involved.
Anjali Jariwala, financial planner and founder of Fit Advisors, said: ” For someone new to investing, it’s important to understand that this is an asset class that depreciates very easily. You have to feel it. comfortable with that change and not too surprised to lose money .”
She added that the crypto space is still largely unregulated and not mainstream. Therefore, when investing, you must ensure that you can cover the amount you will lose.
Then, if you decide to invest in Bitcoin, experts recommend that you stick with a long-term strategy, not just short-term trading.
Amy Arnott, portfolio strategist at Morningstar, said: ” It’s definitely the most effective strategy if you’re planning to own Bitcoin. The problem with trying to trade on daily price movements or week is your money is easy to ‘evaporate ‘.”
According to Arnott, you should plan to hold for at least 10 years. In addition, the transaction costs of cryptocurrencies can be relatively high, so buying and holding for the long term can also be beneficial in this respect.
Jariwala concurs with the above view: “ To alleviate stress and concerns about large price movements, a better approach is to treat Bitcoin as something that you will hold for a long time .”
While the comments on social media will make you waver, experts warn against this. ” You should have a consistent approach and not have to constantly monitor the market to make investment decisions, ” explains Jariwala.
Keep the value of your investment low
In addition, it is important to diversify the portfolio, limiting cryptocurrencies to a relatively small fraction.
When clients share an interest in investing in cryptocurrencies, Jariwala said she first assesses their financial viability. “My general rule of thumb is to allocate no more than 3% to this asset class, ” she said. This, she explains, helps you not to worry too much in the event that the investment goes to zero.
Similar to Jariwala, Arnott also advises investors to only hold Bitcoin with a low value. “ This is an asset class that is prone to losing value even if it makes up a small portion of your portfolio,” she said. Bitcoin can increase your risk premium and potentially cause your portfolio to fall. value .”
Choose a slow start
Once you’ve determined your Bitcoin investment, you shouldn’t rush to spend it all at once.
” Just like any other investment, you don’t realize what the real value or performance is until you actually put your time in it,” says Jariwala. year, you’ll really see the impact and performance of that investment .”
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Source : Genk