When it comes to our retirement portfolios, we all want to make sure that we are making the right choices. But it is also the case that we all have different needs and interests, and we all have different comfort levels when making those investments. Some people prefer to put their money into real estate, trusting the old wisdom that it is the most stable option. Others enjoy playing the stock market, trusting their knowledge and their nerve to make the most of high-stakes gambles. And then there are those who play it safe by spreading their investment across a varied portfolio.
The truth of the matter is that there is very rarely a sure thing when it comes to investments. We have seen the property market go through a remarkable inflation over the last couple of years, and now we are all waiting for it to come back to earth. Things have been incredibly turbulent in the markets since 2020 and it does not look as though things are going to change any time soon. In short, there are a lot of questions and very few answers.
In recent years, we have seen more and more people look at cryptocurrency as an option for investment for their retirement plans. It seems like barely a week goes by without cryptocurrency being in the news for one reason or another. Sometimes it is because the value has suddenly skyrocketed. Sometimes it is because a tech leader like Elon Musk has Tweeted something about it and the markets have reacted accordingly.
If you do not really have much of an idea of what cryptocurrency is or how it works, it can be difficult to know where to begin. There is an awful lot of jargon and information specifically related to software that it is easy to get lost in the chaos. If you are thinking about whether to invest in crypto for your retirement, here are a few things that you should know and a few tips to help you get started.
First Things First: What Is Cryptocurrency?
Let’s start with the very basics, shall we? Cryptocurrency is a decentralised, digital form of currency. That means that banks generally have nothing to do with cryptocurrency transactions and trading. Cryptocurrency is instead traded peer-to-peer. These transactions are conducted and logged online, and you have no physical assets when you buy cryptocurrency.
The decentralised element is one of the biggest reasons why cryptocurrency trading has taken off to the extent that it has. Think about the transaction fees you have to pay when you are transferring money abroad or the bank fees that need to be paid if you hire freelancers for your business. The only transaction is between you and the person sending or receiving your coin with cryptocurrency. This has also been heralded as one of the reasons why it can be so useful in countries where the security of banks is tied to the local governments.
When your investments are in cryptocurrency coins, you do not need to worry about the bank suddenly failing and losing all of your money. Cryptocurrency is also tied to tech growth, which is why the government is pushing for more industry support. While there has long been a myth that crypto is a flash in the pan, it is not going anywhere.
Are Cryptocurrency And Bitcoin The Same Thing?
This is a common question, and the reason why it gets asked so frequently is that Bitcoin gets talked about so much in the media and in pop culture. Bitcoin is a form of cryptocurrency, and it is arguably the best known. However, it is far from the only one. Ethereum is also extremely popular, but we’ll get to that in just a moment.
What Is Blockchain Technology?
If you have been reading around cryptocurrency, you have probably heard the word blockchain before. Blockchain is the technology that is used to record cryptocurrency transactions. Every time a specific coin is traded, the process is marked down on a block, and it is given a time stamp. This means that no coin can be bought or sold without some record of the transaction, and the ledger of these transactions is public.
Blockchain technology is one of the biggest reasons why so many tech entrepreneurs and leaders are so heavily invested in cryptocurrency. We are still only beginning to scratch the surface of what this technology could mean to a wide range of different industries, and it is one of the major forces driving the sector forward.
What Are The Different Types Of Cryptocurrency?
We mentioned earlier that there are many different cryptocurrencies out there, and that number is growing very rapidly. Right now, it is estimated that there are close to 10,000 different cryptocurrencies on the market. However, it is important to note that many of these currencies are not being traded by very many people. It’s easy enough to create a new cryptocurrency, it is quite another to make it something that people actually want to invest in. It is true that Bitcoin is still the biggest cryptocurrency on the market. It has been the leader of the pack since its creation, and it will probably continue to be so for some time yet.
However, there is a key difference between Bitcoin, a cryptocurrency created purely as a currency, and Ethereum. Ethereum is the second-largest cryptocurrency out there and a big reason for that is the network that the currency runs on. Ethereum has attracted a huge amount of interest from some of the biggest software innovators in the game, who are drawn to the potential for its blockchain technology. After Ethereum and Bitcoin there is something of a drop-off, but other coins that have a lot of popularity include Cardano, Litecoin, Stellar and Polkadot.
How Do I Buy Cryptocurrency?
If you want to add one of these cryptocurrencies to your portfolio, the first step will be signing up to a cryptocurrency exchange. There are a lot of different cryptocurrency exchanges out there, but the basic thing to know is that they connect coin traders. However, it is also important to remember that every exchange may have its own specific requirements.
You will need to be able to verify your identity before you register with any reputable crypto exchange (your passport or driver’s license, for example), but you will also need to make sure that your platform of choice supports your country and your currency. If you want to learn more about how to buy Ethereum, visit Wealthsimple. Their detailed guides and easy-to-use software help you get to grips with a wide range of financial options.
What About Safety And Security?
One of the biggest myths out there about cryptocurrency is that trading it is inherently unsafe, but nothing could be further from the truth. Security is at the forefront of every cryptocurrency transaction, and the fact that they are recorded on blockchain is just one of the things that makes it very hard for criminals to hide. Cryptocurrency transactions also require two-factor authentication, which means that the chances of someone being able to trade your coins without you knowing it are very slim indeed.
Now, it is very important to make a distinction between the lack of inherent risk when dealing crypto with the very real risks that we all face when conducting financial business online these days. We have seen a massive boom in cybercrime statistics over the last couple of years. Everyone from the owners of the world’s biggest businesses and government institutions to pensioners have come face to face with cybercrime in recent months. Governments around the world have announced that they are taking measures to crack down on this epidemic, but it does not appear that this trend is going anywhere yet. There are steps that you should take if you want to make sure that you are looking after your information and your finances.
What Are Hot And Cold Wallets?
Crypto wallets are the safest way to store your cryptocurrency. A hot wallet is the best one to use if you are actively trading, as it is connected to the internet. In essence, a hot wallet is a piece of software that allows you to access, store or trade your cryptocurrency. You will need your own private “key” to access any coins that are in your hot wallet. There are many kinds of hot wallets on the market, so if you are looking for one, it is well worth doing your research to make sure it is up to the security standards that you are happy with.
A cold wallet is safer than a hot wallet because it is less accessible. Whereas a hot wallet is an application on your computer, a cold wallet is a physical USB drive that you can transfer your crypto coins onto. You can unplug it from your computer to remove the risk of anyone hacking in and stealing your coin. If you want to make sure that you are being as safe as possible without losing any flexibility while you are trading, then it would be worth investing in both a hot and a cold wallet.
Is Cryptocurrency Volatile?
The short answer to this question is yes, cryptocurrency values can be extremely volatile. Of course, this is one of the biggest elements of its appeal to a lot of traders. These currencies are capable of seeing enormous increases in value at very little notice. However, the opposite is true, and you could see your investment tumble in seconds. If you want to make sure that you are minimising the risk to your wallet, you should start by doing as much research as you can on any coin you are thinking of investing in.
The principle is the same as any other stocks that you might be investing in. If you don’t understand what it is and don’t know its history, then you should remedy that before you put any of your money into it. You should also beware of any so-called crypto gurus who are trying to sell you on a coin that you have never heard of. There are always going to be people out there who want to make a quick buck by convincing people to invest in their scheme, only to vanish off the face of the earth as soon as they feel like they have earned enough, and cryptocurrency is no different.
The next thing to remember is that you should not make any sudden rash decisions. This market is volatile, and just because it is down one minute, does not mean that it won’t be up the next. It is always important to listen to your gut, but make sure that you listen to your head. Finally, do not invest in cryptocurrency if you have very little time to dedicate to monitoring the markets. If you do not have several hours in the day to do this, then it would be sensible to invest in the better known, more reliable coins.
Should I Add Cryptocurrency To My Retirement Investment Portfolio?
The answer to this question largely depends on your response to all of the information above. It is very clear that there are profits to be made from investing in cryptocurrency, and that those investments can be very sizable indeed. However, there is a lot of learning to be done if you want to do it right, and the volatility of their value is not to be underestimated.
If you are unfazed by this, cryptocurrency could be a valuable addition to your portfolio. But the best idea when banking on your retirement is always to diversify. Investing all of your savings into cryptocurrency right off the bat might be asking for trouble. Instead, start small and see how your initial investment pays off. As you get to grips with it, you may want to put more into this.