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Investing Early

The Importance of Investing Early

The importance of investing at a young age cannot be overstated. This doesn’t mean you need to give $100K to a hedge fund manager or become a trader on the NYSE. Investing young can simply mean utilizing online investment services with no minimum limit or buying assets like cryptocurrency to hold over the long term. And while it may seem sufficient to start investing in your 30s/40s when you have some savings and a steady income, there are massive benefits to starting in your late teens/early 20s.

The Time Value of Money

Investing young allows you to enjoy compounding returns and collect many additional years of interest on an investment. By re-investing earnings, you can grow your investment much faster compounding your returns. Assuming a 5% return rate, a $10,000 investment at age 20 would grow to $70,000 by age 60. The same initial investment at age 40 would only grow to about $26,500. Investing $25,000 at age 40 would yield roughly $66,000 by age 60. As you can see, investing $10,000 at age 20 is more beneficial for retirement planning than investing $25,000 at age 40. Allowing a little money to grow over time, rather than waiting until you have a lot to invest, is a prudent move when you consider the time value of money.

heaven and earth seem to dwell in my soul and absorb its power, like the form of a beloved mistress, then I often think with longing, Oh, would I could describe these conceptions, could impress upon paper all that is living so full and warm within me.

Experience

Investing early will allow you to gain some much-needed experience to become a skilled investor over time. As with any profession or hobby, investing cannot be mastered overnight. You’ll need some trial and error learning and to gain experience analyzing markets and financial data. Over the course of many years, you will continually refine your investing strategy to reflect experience, advice and new knowledge. Those who wait until the end of their careers to start will be behind in what is already considered a relatively large learning curve.

Crypto investment strategy

Taking on Risk

Younger investors typically have the ability to take on more risk than older investors. They have more time to recover and learn from their mistakes, as well as more time to play with short-term, high-volatility investments. While most investors well into adulthood prefer stable long-term investments, young investors can try out riskier investments and improve on their strategy over many years. If you’re a first-time investor close to retirement, you won’t have time to lose money and learn from your mistakes. Young investors do have that luxury. While it’s never a goal to lose money or take on unnecessary risk, investing young allows you to do both without jeopardizing your future.

Future Quality of Life

Investing young allows you to grow your wealth surprisingly quickly. As discussed above, a $10,000 investment at 5% interest held for 40 years will yield roughly $70,000. And that doesn’t even account for the potential for above-average returns. Investing a certain percentage of your paycheck each week, or salary each year will allow you to build a large nest egg for the future. Putting away a little money now will allow you to take out a lot many years down the line. Like starting a savings account young, investing young can give you financial flexibility in retirement, financial security to start a family, or just a higher quality of life than you would have otherwise been able to afford. While it may sound like you need a lot to start investing early, there are online investment advisors, like Capital investment that don’t require a minimum investment. At Capital Investment Ltd, we have helped many young investors start cryptocurrency portfolios and put themselves on the track for a better financial future. Without prior experience or knowledge, we can help you become a confident, skilled investor at any stage in life.

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The Importance of Diversification

Investors at any level of experience, with any amount of assets on the line, should utilize diversification. At Capital Investment Ltd, we don’t often make broad statements when it comes to how we treat our clients — we carefully tailor an investment strategy to each individual. Diversification, however, is core to each of those strategies. The next section explains diversification as it pertains to investing, but the simplest way to understand this core concept might be the adage, don’t put all your eggs in one basket. As simple as it may be, this sums up the need to have multiple sources of financial security, rather than relying on any single one. Those with all their eggs in one basket risk losing everything should that basket default or disappear. Diversification serves to reduce this risk and offers investors peace of mind as a result.

What Exactly is Diversification in Investment?

In investing, diversification entails allocating capital in various ways to reduce exposure to any single asset’s risk. Essentially, this means that you save and invest your money in a variety of ways, reducing the overall impact of any losses. A financially savvy individual will have savings accounts (401K, Retirement, Roth IRA, etc), bonds, and a portfolio of various investments, such as Exchange Traded Funds (ETFs), cryptocurrencies, real estate, and stocks. That might sound like a lot to juggle, but you can build and diversify your assets slowly over time.

Less risky options, like savings accounts and bonds, offer long-term financial security and a more modest return on investment. These options are important for ensuring financial security and planning for the future, but they don’t offer massive potential returns. Trading in stocks, commodities, or cryptocurrency, on the other hand, has a much larger risk/reward ratio. These options, while more volatile in nature, offer investors the ability to grow their assets faster, providing much higher potential returns than savings accounts or bonds. To truly take advantage of the market, you’ll want assets with different levels of risk.

The most difficult part of diversifying your assets is getting started. The tools to create a diversified portfolio aren’t always accessible to the typical consumer, and sometimes it seems like they’re made inaccessible intentionally. Moreover, most employers don’t go to the trouble to offer retirement accounts or investment opportunities that help employees get started. Before the advent of online investment tools like Robo-advisors, Acorns, Investopedia, and, Capital Investment, there were few ways for people without experience to break into the field. Now that these tools and advisors exist, there is little excuse to keep all your money in one place. These tools will help you quickly and easily become a diversified investor, and you can allocate assets among them based on your own appetite for risk. In almost no time, you could be on the road to high returns.

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How to rebalance your crypto portfolio: strategies, tools and benefits

Rebalancing consists of intermittently re-aligning assets with your strategy. That means periodically making tweaks to your asset allocation to ensure that you maintain your desired risk profile and take advantage of any new opportunities in the market.

What is portfolio rebalancing?

Rebalancing is the process of buying and selling portions of your portfolio in order to set the weight of each asset class back to its original state.

Rebalancing is only possible for investors with a diversified cryptocurrency portfolio. This means that you cannot tweak your asset allocation if you only own a single cryptocurrency (e.g., Bitcoin). Consequently, rebalancing and diversification go hand-in-hand. In our previous article, we already discussed how to diversify your crypto portfolio based on your desired level of risk and your preferred asset allocation.

For example, say your original target asset allocation was 50% Bitcoin and 50% Altcoins. If Bitcoin performed well during the period, it could have increased the Bitcoin weighting of the portfolio to 70% or even 85%. You may then decide to sell some Bitcoin and buy Altcoins to get the portfolio back to the original target allocation of 50/50.

Why is rebalancing important?

Rebalancing offers a lot of benefits, without losing many of the benefits of HODLING. HODLING, a common slang term in cryptocurrency, refers to holding an investment over time, regardless of short-term changes in the market. Essentially, this means buying cryptocurrency and waiting for years as the market continues to grow.

Rebalancing still allows you to buy now and hold onto an investment as long as you’d like. It also reserves you the opportunity to adjust planned long-term investments that fall off their trajectory.

  1. Manage your risks: Asset allocation is about balancing risk and reward. Invariably some asset classes will perform better than others. As a result, the percentage that you’ve allocated to different asset classes will change. This can cause your portfolio to be skewed towards an allocation that takes too much risk or too little risk based on your financial objectives.
  2. Maxime chances of profitability: by selling the assets that are outperforming, and buying the underperforming ones, you will benefit from the buy-low and sell-high strategies
  3. Keep control of your portfolio and emotions: Warren Buffet’s most famous quote states “if you cannot control your emotions, you can’t control your money”. By having and keeping a consistent strategy, you can avoid FOMO (Fear of Missing Out) or FUD (fear, uncertainty, and doubt.)

However, one of the disadvantages of rebalancing is that sometimes you cut the legs out from under the asset class before it has finished its bull run.

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The Importance of Altcoins

What is an Altcoin?

If you happened to read our cryptocurrency dictionary blog from a couple of weeks back, or are already a crypto enthusiast, then you’re probably familiar with altcoins. If not — this will be a good introduction. While a lot of the terminology surrounding cryptocurrency and blockchain can be complicated and confusing, this blog should be very straightforward for new investors.

Let’s start with the basics — what is an altcoin? An altcoin is any cryptocurrency other than Bitcoin (BTC), which is widely considered to be the original cryptocurrency. Broken down, altcoin means alternative coin. This indicates that any cryptocurrency on the market that’s not BTC is referred to as an altcoin. This includes popular coins like Ethereum, Litecoin and Ripple. It may seem unorthodox to refer to every other available digital coin as a mere alternative to Bitcoin, but Bitcoin has earned this title through continued success and early domination of the market. While there were various attempts at digital currency before Bitcoin, such as DigiCash and B-Money, Bitcoin was the first decentralized digital currency to attract the critical mass of users required to succeed. As a result, most of the altcoins available perform in accordance with Bitcoin, with some coins’ success entirely dictated by Bitcoin’s movement. It may seem like these coins are lesser versions of Bitcoin, and thus don’t have much value to crypto investors. However, there are a couple paramount reasons to consider altcoins.

Why Do We Need Altcoins?

Any savvy investor knows that diversification is a key to success. That old saying about not wanting all of your eggs in one basket is, in fact, a great piece of investment advice. Diversifying your investments across a portfolio that includes assets like stocks, bonds, cash, and cryptocurrency is important for mitigating risk and taking advantage of multiple opportunities for success. Being diversified in one’s investments reduces the impact of any one asset failing and allows investors to have some control over risk. What does this mean for crypto investors? First, it means that you shouldn’t be invested in crypto and anything else. At Capital Investment Ltd, while we handle cryptocurrency investments, we still understand the importance of a diverse investment portfolio. As a cryptocurrency investor, you may want to reduce your risk profile with investments in government bonds or other low-risk options. Overall, your ideal portfolio would include investments of every kind with assets allocated at a risk level with which you’re comfortable. It’s not a good idea to have all of your assets in cash, but it’s also not a good idea to have all of your assets in crypto.

Another important aspect of a diversified portfolio is diversification within your investments. As discussed above, it’s important for investors to own a multifarious investment portfolio, including stocks, bonds, cash, crypto, and other assets. Likewise, it’s important to have diverse investments within a diverse portfolio. For example, when one invests in stocks, they typically don’t buy a bunch of shares of one available option and call it a day. Instead, the savvy investor builds a portfolio of various stocks that help to mitigate the risk of anyone failing. This concept holds true in cryptocurrency as well. And while we don’t see Bitcoin failing anytime in the near future, it is still prudent to diversify your crypto. In cryptocurrency investing, the industry volatility can be one of the most exciting aspects as it leads to big wins and unpredictable results. Unfortunately, this is a double-edged sword. Crypto’s unpredictability can also lead to quick downturns and large losses, especially for those who invested without a strategy. For the diversified crypto investor, however, these losses don’t hurt as much. If an altcoin takes a dive tomorrow, it’s far less significant if it’s one of the five you own, rather than the only one. Essentially, this is where altcoins come into play for many investors — they’re a way to hedge your bets. Owning multiple coins will ensure that your portfolio doesn’t tank if one currency drops.

What Next?

So now you know why it’s important to have more than just Bitcoin in your crypto portfolio. But you probably don’t know how to build a portfolio that’s right for you, tailored to your desired level of risk. Choosing the right coins, allocating the proper funds to each coin, and knowing when to enter each market are difficult tasks even for experts. That’s why, at Capital investment Ltd , we don’t make you do the legwork when it comes to building your portfolio. All you need to know is what you want to invest and the level of risk with which you’re comfortable. Once we know that, the rest of the hard work is on us. We will set up and tailor a diversified cryptocurrency portfolio to your needs. While it may seem daunting to enter such a volatile and complicated industry, Capital investment Ltd helps take the pressure off you. We take care of diversifying your portfolio and you just watch your assets grow. To learn more, visit our website.