Have you heard of Dogecoin or Shiba Inu millionaires? These regular people like you and I took a calculated risk and invested early in the projects that exploited one day and made them millionaires. According to Benzinga, one investor invested $17.53 in Shiba Inu in October 2020 (worth around 200 billion Shiba tokens), and his $17.53 investment was worth $5.8 million just 197 days later. This person made life-changing money in less than 200 days, which is insane and rare.
These stories are one of the reasons young investors tend to jump into the market without knowing what to expect because they want a piece of the next big thing in the cryptocurrency or stock market. At Bako Invest, we came up with 12 things new investors should consider before investing their hard-earned money in the stock and cryptocurrency market.
I. Exchanges and Brokerage platforms have different features and fees. First, what’s the difference between broker and exchange
Cryptocurrency exchanges are platforms where buyers meet sellers to convert one crypto to another or convert to cash. The exchange acts as a mediator between the buyer and seller. For instance, let’s say you want to buy Bitcoin, but you only have Dogecoin. So, if your cryptocurrency exchange has both coins, you can swap your Dogecoin for Bitcoin. Also, if you want cash, you can sell your bitcoin for fiat and transfer it to your bank account as cash. Some examples of exchanges are Coinbase, Crypto.com, Binance, and more.
On the other hand, stockbrokers are individuals or companies that act as a middleman between the buyer and the seller of a security. However, unlike a crypto exchange, the broker buys the stake in the company and sells it to the buyer. The most popular brokerage companies are Robinhood, Webull, Ameritrade, Public, and other platforms that are considered brokers. So, if you buy a stock or cryptocurrency through brokers, you are buying from them because they have purchased the assets and then sell them to you.
Features and fees
Before opening a brokerage or cryptocurrency account, you must consider the platform’s features. Every cryptocurrency exchange, wallet, or stockbroker has different features from each other. That’s why you have to consider exploring different platforms before opening an account. For some people, opening more than one platform account makes more sense because they get to have all the features since platforms are unique in their way.
At Bako Invest, we use platforms such as Crypto.com, Binance, Coinbase, Robinhood, Webull, and Acorns. We employ more than one platform because some exchanges and brokers don’t have the features, coins, and tokens we might be looking for.
It is hard to find an exchange that provides every coin or token on their platform, which is one of the biggest reasons investors should use more than one exchange.
Having at least two different platforms is highly recommended if you are a cryptocurrency investor. There are a lot of scammers in the cryptocurrency industry. Having more than one exchange account helps in case one account is hacked or looking for a specific cryptocurrency that one platform doesn’t have. If your cryptocurrencies are stored in a crypto wallet, you should never give away your passphrase or you'll lose them. If somebody gets access to your crypto wallet seed phrase, your cryptocurrencies are gone for good. So please be very cautious with your crypto wallets’ passphrase.
Fees are another significant thing to consider before opening an account because every platform has unique fee structures. For instance, Crypto.com fees are 2.99% flat when you buy or sell, Coinbase fees varies from state to state, and Robinhood and Webull are fee-free for both cryptocurrencies and stocks hosted on their platforms. I mentioned just a few companies or platforms, but there are more. That’s why you should always pay attention to the platform fee before opening an account.
II. You don’t know the kind of investor you are in the beginning.
Many people, especially young and first-time investors, don’t know what kind of investors they want to be at the beginning of their investing journey. For many people flipping stocks and cryptocurrencies is the first thing that comes to mind. However, there are different kinds of investment strategies you should know before investing your money. So, let’s dive into the types of investors that are there.
Day trader: A Day trade is an investing strategy where a trader buys a stock or cryptocurrency and sells it on the same day. These investors are called Day traders. It is hard to day trade, especially if you are new in the stock and investing world. You must develop the skills and day trading strategy that works for you, and it requires a lot of discipline.
Before becoming a Day Trader in the stock market, you must know the following rules.
Your account needs to be above $25,000.
You can’t trade the same security or stock more than 4 times a week. For example, if you buy Apple stock, you can day trade it only four times every week. Let’s say your day traded Apple stock 4 times on Monday. That means you will have to wait until the following Monday to Day trade it again. But you can Day Trade as many stocks you want as long as you don’t trade the same stock more than 4 times in the same week and your account stays above $25,000.
Most Day traders don’t make money: It is hard to predict whether the stock market will open green or red. Only a small percentage of Day Traders make a profit.
Most day traders wake up very early before the market opens to study the stock market charts to see which companies they should buy when the market opens. For those who want to Day Trade, prepare to wake up early to see how the market is doing.
Day Traders do not trade when the market is closed. Since the government regulates the US stock market, Nasdaq and New Your stock exchanges have to close, forcing brokers like TD Ameritrade, Robinhood, Webull, and other exchanges to stop stock trading until the market opens.
III. What to know if you want to become a cryptocurrency Day Trader
The cryptocurrency market is flexible. It opens 24/7 and it is decentralized. Bitcoin, Ethereum, Cardano and other crypto projects are not control buy any government. This is why it have few rules compared to regulated markets like the Stock market.
There’s no minimum amount of money to day trade cryptocurrencies. You can day trade with as little as $1. However, you must remember that the more money you use to Day trade, the bigger the profits.
Cryptocurrency industry is volatile, and You can make a lot of money and a living Day Trading Bitcoin, Sui, Pepe, and others. However, you can also lose a lot of money day trading crypto if you don't have a good plan in place. If you develop a working strategy, you can make an insane amount of money day trading bitcoin and other cryptos since the market can go up and down fast. The cryptocurrency market has no data history to look back to because it's a new asset class, which makes it riskier than the stock market. So always research any coin or token before putting your money in them.
IV. There are different ways to make money in the crypto and stock markets.
When people hear about the stock market, the think about the Bullrun scenario and it never cross them mind that the market goes down to. However, there is more than one way to make money in cryptocurrency and the stock market. The following are ways people make money from just one investment.
In the stock market you can make money through capital gain, dividends, Call options, and Put options.
Capital gain: It is when stock appreciates. The profit you make is what is called capital gain.
Dividend: The money companies pay to their investors in a particular period. Some companies pay dividends monthly, quarterly, semiyearly, and yearly.
Call option: It is when an investor bet that the stock will go up. If it goes up, the investor makes money, and when it goes down, they lose money since the bet was that the stock will go up.
Put Option: This is the opposite of the call option. The put option is when the investor bets that the market will go down. So, when the market goes down, the investor make money. But, if the market goes bullish instead, the investor loses money since he betted that the stock would go down.
Many institutions use options trading to hedge against the market. However, trading options is risky because the investor can lose the whole initial investment if the options expire out of the money. So, make sure to research before placing a call or put option trade because you might lose the entire initial investment if the stock goes against you.
On the other hand, there is a big difference between how the stock market and cryptocurrency make money. In cryptocurrency, you can make money from capital gain, Staking, and shorting.
Capital Gain: it is when you make money on your cryptocurrency. The profit you make on the cryptocurrency is called "capital gain.”
Staking: When you stake a cryptocurrency, they pay you dividends in the cryptocurrency that you staked. Most importantly, Staking yields are more significant than dividend yields. However, the downside is that when you stake your cryptocurrency, you cannot sell it until the staking period expires. For example, if you stake Cardano on Crypto.com for 3 months, you can’t sell it until the 3 months period expires.
Short Position: Shorting a cryptocurrency is when you bet against a cryptocurrency that it will go down. So, when it goes down, you make money, and if it goes up, you lose money. Some investors make millions of dollars during a cryptocurrency meltdown through shorting. However, you have to be a skilled investor because you can lose a lot of money when trying to short a cryptocurrency.
V. You don’t need a lot of money to start investing.
Before I started trading in the stock market, I thought you had to have a lot of money to start trading. However, the truth is that you need as little as $1 to trade. But you must remember that you will make more money based on the initial investment. For instance, the profit will not be the same if one person invests $100 and another $1,000. The person with $1,000 will likely have more profits since he trades with a more significant account.
VI. The stock and cryptocurrency markets are risky.
It is not a secret that you can make a lot of money in both the stock and cryptocurrency market in a short period. However, the stock and cryptocurrency have a high risk, and you have zero control of which direction the market will move. The truth is that when you buy a stock or cryptocurrency, you sit and pray that the market will move in your favor. So that is why you should always research before buying a stock or cryptocurrency. Also, it would be best to diversify your investment portfolio because it evens out when the market is in a bear market. It is very unlikely that your assets can lose money at the same time. But it is possible, so always research or seek professional help before investing your hard-earned money.
VII. The reward is high.
Would you be happy if you woke up one day and your stocks or cryptocurrency account grew to $ 1 million? Well, who wouldn’t!
The reward in the stock market can be gratifying if you buy the stock or cryptocurrency at the right time. For example, I bought $1,832 worth of Dogecoin at $.003. Then 3 months later, I sold it for $151,000.
I didn’t make that much money in a short time because I was a genius. It is because I bought Dogecoin at the right time. So, the moral of this example is to tell you that it is possible to make money fast in the market if you buy at the perfect time. But it is hard to do because no one can time the market. However, if you stick with the market through the ups and downs, you can get rewarded big. So, make sure that you choose the strategy that works for you.
VIII. Your emotions are involved.
You have to be emotionally mature to stay long in the market. It is well known that investors are always happy during a bull market and panic in a bear market. The bull market is when the stock or cryptocurrency is in an uptrend (going up), and the bear market is when the market is going down. The fastest way to know if we are in a bear market is when the S&P 500 goes down more than 20% year to date.
Most people don’t stay in the market for more than one year because they are not mature enough to weather the market downturn. Always know that you don’t lose money until you sell. Also, for intelligent investors, a bear market is an opportunity to buy stocks and cryptocurrencies that were out of their price range at a discount.
IX. Invest what you are willing to lose.
The stock and cryptocurrency markets are very volatile. So, it is highly encouraged that people have to invest the money they don’t need, at least for a long time. Investing the money, you need soon can cause mental distress. Which can force an investor to sell at a loss to cover the bill or another emergency. It is highly recommended by many financial advisors’ that you should invest the money you don’t need anytime soon. It will help you mentally and emotionally.
X. You can become a multimillionaire overnight.
Becoming a crypto or stock market millionaire is every investor’s dream, and it is possible. AMC, GameStop, Dogecoin, Shiba Inu, and other meme stocks and cryptocurrencies made many people wealthy in the shorter amount of time. If you catch a stock or cryptocurrency at the right time, you can make life-changing money fast. It is advisable to research before investing in the speculated meme stocks or cryptocurrencies to make a life-changing money. It is possible to become a stock or cryptocurrency millionaire fast, but it is rare.
XI. Investing can help you retire early or quit that job you hate so much.
As discussed above, you don’t need a lot of money to start investing in the stock market or cryptocurrency. If you are a person who is looking to retire early or want to quick your job, you can invest in the stock and cryptocurrency market based on your age and goal. You might ask yourself, why should I invest in the stock or cryptocurrency market when I can save my money in the bank and never have to worry about the market’s volatility.
The truth is that the market grows faster than your local bank's interest rate. For instance, historically speaking, the S&P 500 has risen 8% yearly since 1957. I guarantee you that the banks will not give you the kind of return that the stock or cryptocurrency market will give you. So, once you know your goal, figure out how much you need to have in your retirement by the time you choose to retire and invest daily, weekly or monthly to reach your goal.
On the other hand, some people might want to invest but don’t know how or where to start. If you are one of them, feel free to use Acorns. It’s a robot advisor that invests for you in stocks and bitcoin-based on your age and risk tolerance. Also, you can use Webull, Robinhood, Coinbase, Crypto.com and other reputable platforms to invest in individual stocks and cryptocurrency by yourself.
XII. You learn how money works.
Finally, you will learn the ins and outs of how money once you start investing in the stock and cryptocurrency market. Every person, at some point in life, believes that the only way people can earn money is by getting a job. Sadly, many still believe that working for others is the only way to make it in life.
However, investing in the stock and cryptocurrency market opens people’s eyes and minds. After learning about the stock market in 20018, I started to see that the $26 per hour I was making at my job wasn’t worth my time. Eventually, I quit my job and Started Bako Invest LLC, which was the best decision I have ever made.
Related article: 13 important lessons I learned after quitting my full-time job.
In Conclusion
Investing can be overwhelming for many people. However, it is not as complicated as Wall Street advertises it. Most investors jump into the cryptocurrency and stock market without the basic knowledge of how both markets work and what to expect. I hope these articles tell you what to expect before investing in the cryptocurrency and stock market.
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