How much should you invest?
I wrote down a few pointers for that.
Let me say first, no matter what, it is always smart to have $1,000 to $2,000 in crypto. Will it all crash and go to zero? Even if it does, you only lose $1,000/$2,000, that’s your maximum risk.
If it doesn’t crash, $1,000 will already get you quite far. More specifically, it is most likely to yield you $17,000, not bad. Why?
Because the last bull runs all had an average return rate of 1,700%.
Have a look at the last bull runs.
- 9x over 5 days in 2010 from $0.008-$0.08
- 10x over 5 months in 2010 from $0.08-$1
- 40x over 2 months in 2011 from $0.07-$30
- 14x over 3 months in 2013 from $15-$213
- 12x over 2 months in 2013 from $139-$1132
- 20x over 7 months in 2018 from $1,000-$19,800
Every time there was a 17x bull run with a 70% correction on average and it will happen again. You can check for yourself here.
You want to invest more than $1,000? In general, it is reasonable to invest 10% of your yearly salary and 10% of your total savings.
Let’s get more specific and follow my pointers.
- If you make less than $50,000 and you have no savings, you can invest $1,000-$2,000. It would be annoying if it all goes down to zero, but for many people a 17x return on that is the only way out of poverty. So, $1,000-$2,000 would be reasonable.
- If you make $50,000 per year and you have no other savings, it is reasonable for you to invest $3,000-$5,000, since you can make it back in a year if it all goes to zero.
- If you make $50,000 per year and have $50,000 in savings, you can safely invest 10% of your salary and 10% of your savings, making it a total of $10,000 with a potential return of $170,000. Not bad.
- If you make $100,000 per year, have no savings, you can also invest $10,000. This is reasonable, because you can easily make back a possible $10,000 loss in a year.
- If you make $100,000 per year and have $50,000 in savings, you can get bolder. You can invest 10% of your salary and 20% of your savings, since you have a really good job and there is very little risk for you to slip into poverty. In total, you can invest $20,000 into crypto.
- If you make $100,000 per year and have $100,000 in savings, you can get even bolder. You can invest 10% of your salary and 30% of your savings, since you have a really good job, very good savings and there is very little risk for you to slip into poverty. In total, you can invest $40,000 into crypto.
- This ratio stays the same for more savings. If you make $100,000 per year and have $300,000 in savings, you can get even bolder. You can invest 10% of your salary and 30% of your savings, totalling at $110,000. Of course, you could also invest 50% of your savings totalling $160,000, but at this point the risk-reward ratio doesn’t get much more positive with more money invested. You get diminishing returns. Taking the average profit of 1,700% per bull run. $110,000 would already yield you $1.81M. Yes, you can invest $160,000 and get a possible return of $2.7M, but what changes for your when you between $1.81M and $2.7M. You can buy an even bigger apartment or a third car. But at this point this is just gluttony and not healthy anymore.There are so many risks of losing your crypto investment, through theft, forgetting passwords, hacks, making 1 bad margin trade, getting too greedy just once, stupid news that crash the market, it’s not worth taking the additional risk.
All in all, you can invest 10% of your annual salary into crypto and 10% of your total savings. If you have more than $50,000 in savings, you can invest 20% or even 30% of your total savings, but beyond that you simply get diminishing returns.
Also, once the Bitcoin bull run has gone close to 17x, you can make possibly make another 20x by pickingand there are a few more bull runs to come until crypto has conquered the world. There is enough crypto for everybody. Don’t put all your savings into it, stay reasonable. With the bitcoin and the altcoin bull run, you can get sufficient returns also for a small investment.
Hope this gives you a good guideline as to how to invest your money.
Don’t invest more money than you can afford to lose!