In the ever-evolving world of finance, the crypto asset class has emerged as a promising investment vehicle. However, navigating the volatile crypto market requires careful consideration and strategic planning. It can be made simple if investors define a strategy and execute it without worrying about day-to-day market volatility.
In this article, we aim to provide you with valuable tips to maximise returns on your crypto investments in a safe way. We have structured it in three main heads — investing, holding, and safeguarding.
Investing In Crypto
Set clear investment goals
Establishing clear investment goals is vital for success. Determine your risk tolerance, investment horizon, and desired returns. Crypto investments can be fruitful long-term, so align your investment strategy accordingly. Setting realistic goals and regularly reviewing them will help you stay focused and realize value over time.
Embrace diversification
One of the key principles of successful investing is diversification across various asset classes to minimise risk. Crypto is volatile and a higher beta asset – hence it should hold a minimal share of your overall wealth portfolio (we suggest 2-5 per cent). Within crypto, park a majority with the blue chips – Bitcoin and Ethereum – as they offer good returns with lower risk in longer timeframes.
Conduct thorough research
Prior to investing in any crypto asset, spend time analysing the project’s fundamentals, scalability, technological innovations, development team, market demand, and competitive landscape. Investigate whitepapers, explore online communities, and stay informed about the latest news and updates.
Cost average your buys
Timing the market is challenging, even for experienced investors. Cost averaging by timing your buys at regular intervals help you invest with peace of mind. This approach helps mitigate the impact of short-term price fluctuations and is especially valid in 2023.
Hold Patiently
Play the waiting game, emotionally
Once you have built a portfolio, allow time for it to grow. This is a multi-year effort and sometimes can be taxing emotionally. Refrain from acting in haste — stay away from looking at your portfolio regularly.
Take some profits at targets
Ensure each of your investments has a target price. Don’t shy away from taking some profits once these targets are achieved. This helps in ensuring gains even in a volatile market.
Switch to long-term investing and wealth creation mindset
Avoid frequent trades — it doesn’t help from a tax perspective too, given the 1 per cent TDS on sales in India. Stay committed to your portfolio.
Safeguarding Investments
Trade in recognised Indian exchanges
Given that global exchanges do not adhere to the Indian government’s requirements of KYC or TDS deduction, it is prudent to place all your trades in Indian exchanges that are compliant. It will also make it easier to track all your investments and arrive at your tax liability when you take profits. This is pertinent especially as many scams have flourished in P2P trades done on some global exchanges – customers have had their bank accounts frozen as a result.
Get custody of your funds or park with a recognised Indian exchange
Crypto allows you to hold your funds in a personal (hardware) wallet that is not dependent on any third party. However, if you find it convenient, hold the assets in Indian exchanges with enough insurance coverage for user funds.
Be vigilant about scams
Always, be vigilant about deals that are ‘too good to be true’. Protect your OTP mechanisms and safeguard your profiles. Be careful about every permission you give for your wallets (software-based) when you interact with DeFi protocols. Many scams are ongoing and can take the sheen away from your hard-earned gains.
In conclusion, maximising crypto investments requires a comprehensive approach to personal finance and investment planning. By following key principles, individuals can optimise their investment strategy and mitigate risks.
(The author is the CEO of crypto platform Giottus)
Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP Network Pvt. Ltd. Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.