Dhanteras 2021: Why this may be the perfect opportunity to begin your investing journey in cryptocurrencies

November 01, 2021 4:20 PM

Cryptocurrencies are not a get-rich-quick scheme. Investors should understand that all investments come with an inherent risk.

cryptocurrencyRepresentative image

By Edul Patel

Most Indians consider festivals to be an auspicious occasion to invest in gold and other assets. While gold is usually considered the safest asset class, investing in gold does come with its set of challenges. First of all, storing the physical gold can be a cumbersome task. Secondly, the capital required to invest in gold is quite high. Moreover, the return on investment in gold is pretty low, as there is not much capital appreciation in gold.

However, gold investors would argue that the key elements associated with gold are its ability to be a hedge against inflation. Although traditionally that was true, it might not be the case now! The reckless printing of money by the central banks worldwide has made inflation go much higher, almost outweighing the capital appreciation in gold.

The younger demographic in India is slowly starting to explore investment avenues beyond gold for diversification. And thus enters the asset class of cryptocurrencies that have managed to outperform every other asset class by miles. This asset class has given a massive return on investment and is completely digital, eliminating the hassle of storing a high-valued physical asset. Unlike gold, investing in cryptocurrencies does not need a high capital to start.

With the increase in awareness among investors, several Indians have already taken the first step towards investing in cryptocurrencies. Several cryptocurrency platforms, including many global ones, are ramping up efforts to lure Indians to invest during this Dhanteras. Referral campaigns and other promotional activities have seen a massive surge lately. Many platforms are also ramping efforts to educate the investors on how to evaluate the investments. This long-term approach to building a community of investors is actually a pretty progressive step. It ensures that people see this as an asset class that would help in building wealth in the long run. This Dhanteras might be the perfect time to take that step towards starting a systematic investment plan in crypto. Picking a few top cryptocurrencies and diversifying them would be the best way forward.

ALSO READ | SGB, SIP, FD to Insurance: Quick investment options you can gift your loved ones this Diwali and Dhanteras

Cryptocurrencies should be seen as any other asset class. Several people jump into this segment looking to make 100x returns in a few days. With this objective, they invest in random coins, and ultimately a vast majority of them lose money. That is not investing and is akin to gambling. The starting step to get into this asset class would be to look at the top 10 cryptocurrencies by market capitalization. These coins have stood the test of time and have reached thus far. Diversifying across these tokens would be the best way to begin the crypto investing journey. With time, investors could look at tokens with lower market cap and good use-cases that would ultimately provide excellent returns.

Cryptocurrencies are not a get-rich-quick scheme. Investors should understand that all investments come with an inherent risk. Since it is still an unregulated asset class, the risk associated is higher. Investors should not look at investing more than 5% of their net worth into cryptos. Expecting unrealistic returns makes one fall prey to Ponzi schemes, and that needs to be avoided at all costs. Proper investing in cryptocurrencies could fetch a decent 5% return per month. It essentially means investors could double their capital in just over a year! Any seasoned investor would happily accept such returns.

This Dhanteras could be the perfect opportunity to take that step and begin that investing journey in cryptocurrencies. This asset class definitely needs to be in every investors’ portfolio. The ability to generate alpha or returns is massive. That being stated, diversification is the most essential element. It means one should invest across different asset classes such as stocks, real estate, gold, and fixed income products such as fixed deposits in addition to investing in cryptos.

Edul Patel is CEO and Co-founder of Mudrex, a global algorithm-based crypto investment platform. Views expressed are personal.

The suggestions/recommendations around cryptocurrencies in this article are by the respective commentator. Financial Express Online does not bear any responsibility for their advice. Please consult your financial advisor before dealing/investing in cryptocurrencies.

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