If last year has taught us anything, it’s that some markets are too volatile, too unpredictable to navigate. Yes, I’m talking about cryptocurrency which appears to have had its time in the sun with the bull run finally over. For those invested, it’s been an unfortunate time over the last few months as countries push to regulate digital currencies forcing many to abandon ship.
Crypto has always been one of the riskiest forms of investing and now more than ever, people are starting to realise it. There’s no denying the importance of looking at other options, diversifying your portfolio and avoiding putting all your eggs in one basket. This is why smart investing is key and like any investment, you should always do your research first. However, before we discuss smarter ways to invest, let’s briefly go into why the cryptocurrency world is in decline.
After Bitcoin became a household name, countless people wanted to jump aboard the hype train and invest in digital currencies. This resulted in a surge of developers creating their own tokens and whilst some served a purpose such as XRP and Ethereum, other tokens known as Altcoins or meme tokens did not. Now, the problem with a lot of these coins is the insane market caps which have prevented them from ever reaching the highs of Bitcoin. Furthermore, when an investor holding a large bag of a certain token (known as a whale in the crypto community) decides to sell their coins, the value of the token drops exponentially. This is why cryptocurrencies are such high risk, the movement is unpredictable and the losses can happen without forewarning. Smart investing on the other hand is an entirely different ballgame.
What is Smart Investing?
Smart Investing is taking the basic principles of investing and making the right choices that are suitable to you. This form of investing helps you create an additional passive form of income as well as generate wealth for retirement.
When it comes to smart investing there are a few steps you should consider as you get started and continue to invest:
- Clear your debts before investing: Money owing on credit cards, personal loans etc.
- Make a plan: Know what your goals are, assess the risk and look at time frames.
- Do your research: Educating yourself is critical, just like step 2, you need to understand the risk and the potential returns. It’s imperative to make sure what you’re investing in is worthwhile.
- Diversify: This relates back to what I said earlier about not putting your eggs in one basket. Spreading your money across different assets lowers your risk.
- Track Investments: Always keep your finger on the pulse and ensure everything’s on track.
- Patience is key: It’s not a get rich quick scheme, smart investing involves waiting for healthy profits to build over time.
Now when it comes to diversifying your portfolio, look at alternative investing, which includes a wide variety of assets and strategies. Simply put, the term alternative investments is broad but includes asset classes that don’t fall into the conventional categories such as stocks and cash. These assets include art and antiques, commodities, managed futures and derivatives contracts. Even real estate is often classified as an alternative investment. Due to their diversity, they provide a reduction to overall portfolio risk.
A major alternative investment type worth looking into are sustainable projects. Sustainable investments are fantastic opportunities that you should give careful consideration to as many businesses and organisations are trying to go green. The focus is on investing in projects that are environmentally conscious or going to have a positive impact on our planet.
Sustainable investment projects include:
- Solar Energy
- Electric Transportation
- Geothermal Energy
- Pollution Controls
- Waste Reduction and Repurposing
The bottom line
It’s not about avoiding risk, remember that all forms of investing come with a degree of uncertainty and it’s not something to be afraid of. Just exercise caution and you’ll find the stability of returns greater than anything cryptocurrency can offer. If cryptocurrency is still of interest to you, just follow the above steps and proceed with caution. Do your research and make sure you know the risks of the coin you’re investing in.