Cryptocurrencies have become popular investments. Many people are interested in diversifying their portfolios by buying crypto because it’s a newer asset class that presents a lot of potential. Some people may also be enticed by stories of those who have made millions investing in crypto, or by social media hype surrounding certain currencies.
If you’re considering a crypto investment, it may be helpful to look at what financial experts like Suze Orman have to say about virtual coins. Orman is one of the best-known personalities in finance, and she’s provided clear advice about how much she believes it makes sense to invest in this asset type.
Orman’s advice was focused on Bitcoin, the most widely known virtual currency (although there are many options out there). But the fundamental principles behind her suggestions are relevant for any crypto investment you may be considering.
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Orman thinks you should use this approach to buy Bitcoin
On her Women and Money podcast, Orman told her listeners they should buy Bitcoin by dollar-cost averaging into it — that means purchasing the coins on a set schedule, regardless of whether the price has gone up or down at that time.
When you are dollar-cost averaging to purchase Bitcoin (or any investment), you always buy the same dollar amount. You get more or less of the asset depending on what the price happens to be when you buy.
When you invest via dollar-cost averaging, you don’t have to worry about timing your investment perfectly, which can be really hard to do — especially since cryptocurrency prices change rapidly. You inevitably end up buying some of the asset at high prices and some at low prices, getting a higher number of shares or amount of crypto per purchase when prices are low.
So how much should you devote to crypto investing?
Orman also provided some advice to listeners about exactly how much they should spend on Bitcoin as they use dollar-cost averaging to acquire it, suggesting an investment of $100 per month.
There was a caveat: Orman said, “Do $100 per month and dollar-cost average into it — as long as you know you can lose that $100 a month and won’t care.”
Her warning that you should only invest as much as you can afford to lose was prompted by her concern about cryptocurrency’s volatility. While she personally has invested in Bitcoin, and says she loves the cryptocurrency and believes it is a solid long-term investment, she’s also described investing in it as “seriously risky.”
She believes Bitcoin’s price is likely to fluctuate, perhaps widely, but she sees it as a legitimate investment worth buying into. That said, she doesn’t believe in its future as a currency that people will use to purchase goods and services — paying with it is likely to remain impractical. Instead, Orman thinks of it more like gold: an asset that is a store of value rather than money you shop with.
While Orman’s advice is helpful, ultimately only you can decide how much risk to take on — and how much money you can afford to lose. Her $100 suggestion may be right for you, but you could buy more or less, depending on how much spare cash you have to invest in a relatively untested kind of asset.