Cryptocurrencies have become popular investments. Many people are interested in diversifying their portfolios by buying cryptocurrencies because it is a new asset class that has great potential.
Some people may also be enticed by the stories of those who have made millions by investing in cryptocurrencies or by the social media hype surrounding certain currencies.
If you are considering invest in cryptocurrencies, it might be worth taking a look at what financial experts like Suze Orman have to say about virtual currencies. Orman is one of the best known personalities in finance and has provided clear advice on how much he believes it makes sense to invest in this type of business.
The direction to take
Orman's board focused on Bitcoin, the best-known virtual currency. But the fundamental principles behind his suggestions are relevant to any cryptocurrency investment you might consider.
On her Women and Money podcast, Orman told her listeners that they should buy Bitcoin based on the average dollar cost, which means buying the coins on a set schedule, regardless of whether the price has increased or decreased at that time. .
When you average the dollar cost to buy Bitcoin (or any investment), you always buy the same dollar amount. You get more or less assets depending on what the price is at the time of purchase.
When you invest via average dollar cost, you don't have to worry about perfect timing for your investment, which can be really hard to do, especially as cryptocurrency prices change quickly. Inevitably, you end up buying part of the asset at high prices and part at low prices, getting more shares or an amount of cryptocurrency per purchase when prices are low.
So how much should you devote to investing in cryptocurrencies?
Orman also provided some advice to listeners on exactly how much they should spend on Bitcoin as they use the average dollar cost to acquire it, suggesting an investment of $ 100 per month.
Warning: Orman said, "Make an investment of $ 100 a month - as long as you know you can lose that $ 100."
His warning that you should only invest as much as you can afford to lose was prompted by his concern about the volatility of the cryptocurrency. Although he has personally invested in Bitcoin and believes it is a solid long-term investment, he has also described the investment as "seriously risky".
He believes Bitcoin's price can fluctuate, perhaps widely, but sees it as a legitimate investment worth buying. That said, he doesn't believe in its future as a currency that people will use to buy goods and services - paying with it is likely to remain impractical. Instead, Orman sees it more as gold: an asset that is a store of value rather than the money you shop with.
While Orman's advice is helpful, ultimately only you can decide how much risk you take and how much money you can afford to lose. His $ 100 tip might be right for you, but you could buy more or less, depending on how much reserve money you have to invest in a type of business like this.
