If you invest in the market, you might have some of your assets in mutual funds, some in stocks, or perhaps real estate, but there’s another market you should explore to round out your portfolio: digital assets. This investment type includes cryptocurrencies and non-fungible tokens (NFTs) that you can buy, hold, and sell just like any other asset in your portfolio. What’s different about these holdings is that it only exists in the digital world.
That fact and the high volatility keep a lot of investors away from adding cryptocurrencies or NFTs to their portfolios. Before you discount this investment as a means to grow your wealth, learn about how they work to see if digital assets are worth your time — and money.
Learning About Cryptocurrency
Cryptocurrencies like Bitcoin and Ethereum are units of money that only exist virtually. Although you may see pictures of a physical Bitcoin, that’s nothing but a mere token without value. Digital currencies exist on what’s called a blockchain, which is a ledger that exists on a network of computers.
That record follows each coin’s activity and doesn’t live in a singular place. In other words, cryptocurrencies are decentralized and not regulated by any institution. While currently there are only a few things you can buy directly with virtual money, the ability to exchange crypto for traditional dollars or using digital assets to pay for goods and services is gaining traction.
As it stands, the quickest way to earn money in cryptocurrency is to buy low and sell high, similar to any other asset in the marketplace. But you can also hold your cryptocurrency (HODL) and earn interest without trading your assets.
The thing to remember about digital items is their risk factors, and realize that there’s also a widespread misunderstanding of how cryptocurrencies work. Even if you know how to write technical documentation for a complex subject, the idea of holding something solely in the virtual arena can be a difficult concept to grasp.
What Is an NFT?
Cryptocurrencies are not the only assets you can hold virtually. You can also add NFTs to your portfolio. Think of an NFT like a virtual baseball card that you used to trade when you were a kid or a skin you own for your avatar in your favorite video game: That’s an NFT. It’s a virtual one-of-a-kind asset that you can either hold until it gains value or sell to another interested buyer.
NFTs are relatively new, and there’s no guarantee that the asset you buy will increase in value, but that’s true with any investment.
Another way to take advantage of this new investment type is to create an NFT yourself. If you’re a photographer, an artist, or a creator of any kind, you can make a unique digital asset and offer it on the blockchain as a non-fungible token. It could be a great way to reach a different audience while growing your business and generating extra income.
Diversification Is the Key
If you want success in your portfolio and your bottom line to grow over time, diversification is the answer. You don’t want all your investment eggs in one basket because when one part of the market goes down, another might go up. Keeping your money spread over various assets can shield you against significant losses.
Before investing, consult a professional and tell them your goals. They will help you align your investments, so you have a better chance at achieving your desired outcome. But the more you learn about new investment types, the more prepared you’ll be to listen to recommendations and apply them to your finances and grow your overall wealth.
Founder Dinis Guarda
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