Money is a subject most of the population is talking about. The main reason for this talk is that almost everyone is looking for ways to attain financial freedom, both the young and the old. One of the solutions the population has figured out to make more money and attain financial freedom is investing.
Investing entails putting money into a given venture for profit generation. There are various investments you can venture into; this article bases its discussion on cryptocurrency exchange-traded funds (ETFs). An ETF is a fund-based investment where you can buy shares, just like on the stock market. The differentiating factor of ETFs is that you can buy a bundle of shares at once. Now, crypto ETFs enable you to trade cryptocurrency assets like Bitcoin. The trading will be on a stock exchange platform instead of a cryptocurrency trading platform.
As a potential ETF investor, are you wondering how to do this? Read on to be guided on how to succeed in crypto ETFs.
Diversify Your Assets
Like any other investment, diversification is key. Diversification aims to spread your risk and minimise total loss with your investment. If one portfolio fails you, you still have another to fall back on. There are many crypto exchange traded funds in Australia involving Bitcoin and Ethereum. How do you diversify?
Your main guiding points should be the risk factor of each and the period you want to make your investment. For high-risk assets, like those whose prices keep fluctuating often, you can allocate a small percentage to this and a big percentage to the more stable ETFs. With a small allocation to the high-risk ETFs, you won’t undergo much loss should the price of these ETFs fall significantly and continuously.
Regarding the investment period, allocate more to the less-risky ETFs if you plan on long-term investing. Even if the returns aren’t quite high, they’ll accumulate over time, giving you tangible profit at the end of your investment period. If you plan on investing for the short term, go for high-risk portfolios. As most of them have high returns, you’ll get more profit over a short period, enabling you to achieve your goal.
It’s also good to point out that age can be a determining factor. If you’re young, consider investing a bigger percentage in high-risk ETFs. Should you suffer considerable loss, you have time to jump back on your feet and reverse the situation. The same can’t be said for an aged investor. Many losses in your old age aren’t ideal as you might undergo financial strain with all your responsibilities. Therefore, allocate more to low-risk ETFs.
Find An Ideal Platform
The platform you use to trade your ETFs largely impacts the success of your investment. With ETFs, it’s advisable to find a brokerage account. It’ll give you access to the various crypto ETFs and enable you to trade them.
How do you find a suitable account? It’d help to look at the features of the platform. Vendors will offer different services on their accounts; hence, there’s a need to make a comparison. One core feature is the ease of use. You want to have an easy time buying and selling your ETFs and not spend countless hours trying to navigate the system. Also, they should allow you to trade with your preferred cryptocurrency, be it Ethereum or Bitcoin.
The other aspect to check is the associated fee. Some platforms require you to pay to access their services. Others will require an expense fee, as a percentage of the profit you’ll make trading ETFs on their platform. It’s advisable to settle for a commission-free brokerage account or one that requires a small expense fee. The aim is to get a lot of profit.
Adopt Dollar-Cost Averaging
As previously stated, crypto ETFs allow you to buy many shares simultaneously. Although this is advantageous, ETFs also have some disadvantages. One such advantage is that you won’t be able to take advantage of different buying prices when acquiring the ETFs. There are times when ETFs will cost less and other times, more. Suppose you decide to buy ETFs at a time when the price is high. You’ll end up buying fewer shares. Imagine a time when prices are low. You’ll buy many ETFs for the same amount of money.
Dollar-cost averaging enables you to take such an advantage. How? Through dollar-cost averaging, you can set a budget and arrive at a figure you’ll invest in ETFs, whether weekly, monthly or quarterly. With such an arrangement, you can take advantage of different ETF market prices at different times of the year, which is desirable.
Conclusion
Crypto ETFs are an investment you should consider adopting. The discussion above has given strategies you can adopt as you make this investment. Use this guide to gain the most from your ETF investment.
Veeramachineni Lalitha
I am Finance Content Writer. I write Personal Finance, banking, investment, and insurance related content for top clients including Kotak Mahindra Bank, Edelweiss, ICICI BANK and IDFC FIRST Bank. My experience details : Linkedin