One thing about investments in modern times is that your options are diverse. From intraday trading to scalping, there are a bunch of tactics that professional investors leverage to profit from their investments.
We generally form the argument that because crypto is a new technology, investment methods are limited. While that may be true to some extent, one thing’s certain – it is also a form of investing wealth and capital. And because of that, there are a few methods crypto investors can also rely upon to make tangible profits from their investments, one of which is a recurring investment.
Now recurring investments are a well-worn-out strategy by this point. For the crypto markets, however, this strategy is something that could come in handy more than you could imagine.
Because of their volatility, crypto investments may seem intimidating to new investors. However, a recurring investment in the crypto markets is a really easy method to begin your journey.
What is a recurring investment?
Exchanges like Binance and Coinbase have a feature that allows their customers to purchase fixed amounts of their preferred digital assets over time at specific time intervals.
You can customize your preferred exchange to buy, let’s say, $100 worth of Bitcoin three times a month for the sake of building an ‘average’ position in the market.
The idea of a recurring investment is to be on the safer side when there are dramatic increases and decreases in your portfolio – generally to benefit from the market moving in any direction.
By buying a crypto asset at different times, you are entering the market at different prices, keeping you in the middle ground where the rule of ‘averaging’ comes to your aid.
This helps neutralize the fluctuations of the market.
Benefits of recurring investments in crypto
A recurring deposit is an effective investing strategy with tangible benefits in the long run. There are a variety of reasons why a lot of investors resort to recurring deposits in their investing journey.
Some benefits include:
1. Recurring investments fit all budgets
Depending on how much your exchange considers as a minimum or maximum investment, you can easily start your recurring investments in the crypto markets.
If you are a first-timer, you can also dip your toes into the crypto markets with your investments being as low as $1. Whether you are investing $1 or $10,000 every month, every budget is inclusive of recurring investments.
Having a regular amount of money invested into your portfolio every month could build your financial discipline a long way, taking us to the next point – discipline.
2. More financial discipline
Investing based on emotions and impulses is common, especially when you hear enough stories around you about people benefitting from assets you haven’t even heard about.
Emotionally charged investments, in most cases, end up negatively influencing your portfolio. However, a recurring investment can take away the need to chase the ‘right time’ to invest, since both the amount and the time of investment are predetermined months before your purchase.
This allows you to make timely investments regardless of the market conditions or waiting to smoothen out the peaks and troughs of the market.
3. A steady portfolio growth over time
With regular investments comes diversification – your ability to invest in different assets. This allows you to spread out your investments, have a diversified portfolio and hold on to different assets at the same time.
As digital assets are growing in popularity, it only makes sense that they are going to find their way to growth in due time. Holding on to multiple assets increases your chances to benefit from the developments of this space.
Since investing is a long-term strategy over a quick win, your investments could become so frequent and streamlined that you practically forget about them till you meet your financial goals.
4. ‘Usually’ less risky than a lump sum investment
Spreading your investments over a regular period of time gradually rather than going all in is always better. This is because your entry into the crypto markets at different times could mean different results with your investments.
On the other hand, a lump sum investment may (OR MAY NOT) pay off. Those kinds of odds are risky, especially if you are investing a considerable amount of money.
Breaking your investments into smaller chunks provides flexibility to increase or decrease your investment budget, while also reducing the risk for you.
The problem(s) with recurring investments
Recurring investments are such an investment strategy that isn’t meant for everyone. Sure it may sound appealing, but there are also some drawbacks associated with it that you can’t overlook.
For instance,
Missing out on opportunities
Investing a significant amount of money into an asset ‘could’ pay off well enough. Sometimes, a timely investment could pay off really well. The more the investment, the more the ROI. At the same time, the bigger the investment, the larger the risk associated with it. Tread carefully about how much amount you want to invest in the first place.
Involves more fees
Certain exchanges charge certain fees to make an entry into the market. With recurring investments, you need to make frequent payments, meaning the fee you pay altogether might also be higher than what you’d pay in a single investment transaction.
Are recurring investments meant for you?
Investing is a great way to build your wealth over time. The more disciplined you are with your money, the faster you reach your financial goals.
A great feature of recurring investments is that it allows you to make frequent contributions to your portfolios. Because of that, you streamline your wealth and understand
- how much to spend
- how much to save
Remember that we’re still in the early stages of digital assets, which means that if you decide to go for recurring investments, your plan should be for the long-term.
Most importantly, because of the fluctuations and uncertainties associated with digital assets right now, it’s always wise to invest a part of your money rather than a major part of it.
