How to Invest in Bitcoin: A Conservative Approach
Here are some ground rules and assumptions.
- Your debts are paid off.
- You have emergency money to pay for 3 months of unemployment.
- You are already investing in a 401K/IRA.
- You have Life Insurance.
- You have a house.
- You have extra money left over to invest in Bitcoin.
By having the first five things in place you are in a position to put your money into a more volatile asset and Bitcoin is volatile asset. Historically speaking anyone who bought Bitcoin and held it for five years has made enormous gains. Bitcoin holders who did not foolishly day trade it or panic sell it after buying at the top of a bull market have historically made a lot of money. The rule so far has been to hold it for atleast three years and preferably five years.
On December 3rd, 2015 you could have bought Bitcoin at 361 Dollars. Today you could easily sell it for 18,000. That would be a 49x gain! In other words put in 1 Dollar get back 49 Dollars 5 years later. That’s an amazing deal!
Keep in mind, to adequately take the bet that Bitcoin will have a huge rise in value over the next 5 years you must be in a financial position to hold it. If in 6 months you are likely to need the money you could take a huge loss when you sell. Whatever money you put into Bitcoin needs to be money that you don’t plan on seeing again for a few years. You must also keep in mind that past performance does not guarantee future performance. It’s possible the Bitcoin market will not get to the large numbers that many Bitcoin fans are predicting. Whatever money you put in needs to be money you can afford to lose; after all we are conservative investors.
Educate Yourself
Never invest in what you don’t understand. If you have not educated yourself on Bitcoin you should not buy it. You need to understand how it works, what it’s use case is and why it has value. If you need to educate yourself on this I highly recommend checking out this page from OKEx. Don’t buy a large amount of Bitcoin until you know how to use a Bitcoin wallet, and how to use a Bitcoin exchange. In the beginning start out with tiny amounts of Bitcoin that you don’t care about. Don’t do anything experimental with money you can’t afford to lose.
Dollar Cost Average
Don’t buy all of your Bitcoin on one day for one amount. Spread it out over the course of year. This way you will get the average price of Bitcoin for year rather than the price of Bitcoin for one day. The odds that you will perfectly time the market are very low. You will get a better price if you Dollar cost average.
