6 Golden Rules that Investors follow

Keeping up with the constantly shifting cryptocurrency market can be a challenge. If you’re just starting out, the barrage of information available can just lead to more confusion. But it’s easier than it looks! Just follow these few simple rules and you’ll find yourself sailing through.

Create a strategy

Organization and planning is the best investment of the lot. Planning ahead means you’ll be prepared for any outcome, reducing impulsive decisions and increasing chances of gains. A well thought out strategy should include the following:

a. Fixed goals and a predetermined risk level.
b. A particular purpose for each trade you enter.
c. Profit targets. Avoid being greedy as it leads to irrational decisions and high-risk situations.
d. Stop loss orders, which are orders to sell an asset once its price has fallen below a specific limit, protecting you from unnecessary losses.

A solid game plan will you a step ahead of the rest, and what better way to be organized than with a user-friendly app like ZebPay?

Practice smart investing

There’s no doubt that there is a certain amount of risk associated with cryptocurrency trading, but with a few set boundaries, you can ensure doing it in a safe manner. Rather than thinking in terms of lump sums, think in terms of percentage. How much of your net worth are you willing to put at stake? It’s crucial to not eat into necessary expenses; you don’t want to wake up one day with no rent to pay. Once you’ve decided the percentage, you can divide it further between the crypto assets you are focusing on. For example, a larger percentage for reliable currencies and a smaller one for the more volatile options. Such a strategy is suitable for beginners looking for steady returns. You may not experience windfall gains but you’ll also be protected from sudden losses.

Diversify your portfolio

As the old saying goes, don’t put all your eggs in one basket. While it might seem easy to stick to one currency, the uncertainty of the market puts your money at a higher risk. With a diverse portfolio, you lower that risk. The low transaction fees make diversification an easy and inexpensive process. A few ways to diversify your portfolio are:

a. By asset type: There are various types of cryptocurrencies, from payment coins to non-fungible tokens.
b. By risk: A split between high, medium and low-risk investments ensures a balanced portfolio.
c. By industry: Investing in a variety of industries means that changes and events in one industry won’t affect your other investments.
d. By geography: Different countries have different rules. By investing in different parts of the world, your portfolio is protected from sudden regulatory changes.
e. By timing: Spreading your investments over specific intervals of time reduces the effect of price volatility and the need to keep track of market cycles.
But remember, it’s all about balance. Too much diversification can reduce your overall returns. Stick to a middle ground and you should be fine.

Consider market cap instead of price

At the first glance, checking the price of a coin might seem like enough information to make a decision. But just because its price is low doesn’t mean it is worth investing in. What you really need to look at is the market cap. Simply put:

Market cap = Price of the coin x Number of coins in circulation

It signifies the total value of the cryptocurrency. For example, if a coin is valued at Rs.1, a company with 500 coins in circulation will have a higher overall value than a company with only 100 coins in circulation. A higher market cap means the currency is more suitable for investment, particularly a long term one.

Protect yourself

Like any other business, you should take measures to protect yourself. Using a separate email address for your crypto related work is a must. A combination of cold and hot wallets will ensure the safety of your coins. With a secure app like ZebPay, keeping track of your assets becomes even easier. Keep all your bases covered by fact checking all of the information you receive, no matter who the source. And, of course, beware of those lucrative ‘investment opportunities’ that reach you by email or text.

Stay up to date

Last but not the least, research. Keep an eye on white papers and reports published by cryptocurrency platforms. This may sound tedious but it will allow you to understand the asset and its trajectory in the market. It is also beneficial to set alerts for crypto related news and global trends. A healthy interest in cryptocurrency will help you stay ahead of the curve.

Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Each investor must do his/her own research or seek independent advice if necessary before initiating any transactions in crypto products and NFTs. The views, thoughts, and opinions expressed in the article belong solely to the author, and not to ZebPay or the author’s employer or other groups or individuals. ZebPay shall not be held liable for any acts or omissions, or losses incurred by the investors. ZebPay has not received any compensation in cash or kind for the above article and the article is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information.

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