This is especially true for Bitcoin, with even the worst possible purchase yielding a minimum annual return of +27 percent.

However, this only applies if you held it for at least 5 years. Over those five years, this equates to a +230 percent return, demonstrating the true power of long-term investing.

This article is intended to assist you in cutting through the noise and seeing past the short-term negative media hype.

If you follow the five simple investing rules and principles we’ve laid out, you’ll be able to navigate these fascinating times.

While others may make rash and ill-informed short-term decisions, adhering to these guidelines will keep you calm and level-headed as you navigate the crypto investing world.

1 Compound interest — the 8th wonder of the world.

Would you prefer a daily payment of $1 or a daily payment of $0.01 that doubles every day? “Of course I’d choose the dollar because it’s 100 times more valuable!”

Compound interest, the world’s eighth wonder, is something most people are unaware of when it comes to investing.

If you chose the dollar, you would be $16 richer after 16 days. You would be $327.68 richer if you chose the 1 cent. You may inquire as to how. Compounding.

The $0.01 would have doubled 27 times in just 28 days and would be worth $1 342 177.

What can we learn about investing from this?

What matters is consistency, not how small your initial investment is. Invest on a regular basis, and your money will compound and grow in the same way that the original 1 cent piece did.

Compound interest works like magic, but only if you leave it alone for an extended period of time.

But how do I invest my money for such a long period of time?

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That brings us to the next point.

2 Don’t invest money you can’t afford to lose.

Knowing your ideal position sizing is the key to being able to leave your money invested for long periods of time.

The process of determining how much to invest in a specific asset is known as position sizing. This is a critical ability that allows you to invest for the long haul.

If you have an overabundance of investments and an unexpected accident or expense occurs, you will have to sell some of them to make these payments. As a result, you should not invest money that you require to meet your normal obligations. This act of selling disrupts the process of compounding interest and reduces the power of long-term investing.

You risk not capturing the full return on your investable cash if you’re under-invested, but you do have the option of increasing your investment size by buying small amounts on a weekly or monthly basis.

Depending on their situation, everyone’s golden amount to invest is different. But one rule applies to all investors: don’t invest more than your financial situation allows.

Dollar-cost averaging is an investment strategy that can help you strike the right balance.

3 Strategy: Dollar-cost averaging.

I’m sure we’ve all experienced the situation where you put your extra money into an investment and it’s down -10% a week later. You’re now sitting in your chair wishing you had more money to invest. Dollar-cost averaging (DCA) becomes a crucial part of being a successful investor at this point.

DCA is an investment strategy in which you divide the total amount of money you want to invest into small, frequent purchases of the desired asset over a period of time. The most common DCA schedule is for the assets to be purchased at the start of each month. The goal is to minimize the impact of price fluctuations and make investing a habit.

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Does Dollar-cost averaging work for crypto too?

If you take a look at the graph below, we compare $100 invested monthly into BTC and Gold. Over the 5 year period, you would have invested $100 60x making your total invested capital $6 000.

We can see that this strategy not only works for Bitcoin, but it also significantly outperforms its yellow metal counterpart. Your portfolio would be worth $67 176 (+1 019.61 percent) if you DCA into Bitcoin instead of Gold, whereas your Gold portfolio would only be worth $7 307 (+21.79 percent).

4 Understand the asset class.

Crypto is similar to early-stage technology investment.

Volatility is a part of the growth process for any early-stage tech startup fighting for market share and adoption.

A whole paralleled financial ecosystem is being built right in front of your eyes with crypto. A financial ecosystem that is created by and for the people.

An environment that promotes openness, collaboration, and free markets. Of course, there will be growing pains, mistakes, and failures — but true progress comes at a cost.

Now that we know what it is, we need to figure out what problem it might solve and how much value it adds.

Crypto allows a financial system and products to become more transparent, faster, and efficient while also protecting many people from inflationary practices and corruption.

It enables the transfer of value from one person to another without the use of middlemen who profit handsomely from the movement of our money.

Humans, for the most part, despise change.

Humans initially resist most innovative technological advancements. Then they object to the necessity of it. They eventually try to destroy it.

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In the late 1990s, this happened to the internet.

Many people thought that using email or a website was pointless because we had a functioning postal service and brick-and-mortar stores at the time.

It’s happening again, as we can see below.

Several people and sources have attempted to persuade the world that cryptography is unnecessary over the last 13 years. Cryptocurrencies and blockchain technologies, like the internet, will become so ingrained in our daily lives that we will be unable to imagine a world without them.

But how do I know which cryptocurrency to choose, and how do I know it will win?

5 Diversification.

Investing is one of the most effective ways to accumulate wealth and achieve long-term financial objectives. However, picking the right investment or asset class to help you achieve your objectives can be difficult.

Diversification helps to solve this problem by distributing your investments across a group of assets or asset classes, rather than risking everything on a single asset that promises high returns.

The idea is that by diversifying your cryptocurrency portfolio, you’ll be able to benefit from uncorrelated returns.

Sure, you won’t get the same returns as if you invested exclusively in the best-performing cryptocurrencies.

On the other hand, you won’t put all of your eggs in one basket. Diversification, on the other hand, spreads the risk and allows you to enjoy a less volatile ride along the way.

Furthermore, we can see that diversified bundles outperform some of the most popular cryptocurrencies.

Diversification, while simple to understand, can be difficult to implement in some people’s portfolios. It can be difficult to navigate the vast amounts of assets in the investment world, particularly in the Crypto space.

By Lena

Invest Club Hub

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