We can’t seem to have a conversation about investing without talking about cryptocurrencies. While digital currencies are not exactly a new concept, the last few years have seen crypto take off in a big way as more celebrities, experts and everyday investors get involved.

What do experienced investors think about the trend and what words do they have for those who are new on the crypto scene? We invited three experts to share their thoughts on crypto investing and what insights they would share with the crypto-curious.

Read more: Understanding Cryptocurrency — What It Is and How It Works

Caitlin Cook, Head of Community, Onramp Invest & VP of Operations, Onramp Academy

My take: Intention over impulse

Ask yourself: Do you want to trade or do you want to invest?

This is an important distinction for investors to make when setting expectations, making investment decisions and planning for the future.

Experienced investors with the knowledge and time required to capitalize on the inherent volatility of crypto assets may find various opportunities for short term trading gains. However, this is likely not suitable for most, and I encourage investors to think twice before succumbing to the FOMO they might feel over the short term in highly publicized asset classes such as crypto. It’s important for investors to remain true to the processes they’ve established, be clear about their intentions and take the time to carefully consider if, and where, crypto investments make sense within their broader financial plan.

We often contrast crypto and traditional investments, but rarely do we discuss the many ways in which these assets should be approached in a similar manner by long term investors. Below, I’ve outlined some priceless principles to consider:

  1. Financial plan comes first. In my opinion, retail investors should not allocate any substantial amount of capital towards crypto unless they already have a comprehensive financial plan and adequate savings in place.
  2. Risk tolerance. What has been your historic tolerance for risk, and does crypto align with that risk profile? Perhaps even more essential: Do you have the stomach for it? Volatility is to be expected with crypto assets, even more so than most traditional investments. If you tend to get scared and sell when things go south, crypto might not be for you.
  3. Write down your investment thesis. If you’ve determined that crypto can help you toward achieving your financial goals, document your “why” explicitly. By keeping your intention front and center, you have a north star to reference through the inevitable ups and downs.
  4. Have a “cowboy account.” Contrary to the advice of certain investment gurus, it is absolutely acceptable to set “fun” money aside for things like buying a stock because you think the company is cool, or buying tokens and interacting with projects, platforms or protocols you find interesting. To me, the best way to learn is by doing. Set boundaries for yourself (for example, a max dollar amount per month) that will allow you to play around without going overboard. A general rule of thumb: Don’t invest more than you’re willing to lose.
  5. Diversify. As we are so often taught when reviewing the baseline principles of portfolio allocation, do not be irresponsibly long crypto (or any asset, for that matter). Too many eggs should never be put in a single basket.
  6. Stick to a process. Trying to time the market is a fool’s game and counterproductive for most retail investors. Create a process and automate where you can; dollar cost averaging and frequent rebalancing, especially in volatile asset classes, is considered a sound approach in the long run. Don’t overthink it — be regimented and rely on your predetermined investment strategy. Process helps to remove a lot of thinking, time and emotion from the investing equation.
  7. Work with an advisor. Tax planning, estate planning and other aspects of the financial planning process have many unique and nuanced considerations when it comes to this asset class. Seek out professional guidance if you own crypto assets, but vet carefully and be mindful that many advisors are just getting started.

Jaspreet Singh, Founder, Minority Mindset & CEO, Market Briefs

My take: Crypto is a movement.

Cryptocurrency is the people’s movement for money. People are tired of governments and central banks diluting the value of their money, so they’re moving to crypto.

However, that doesn’t come without risk.

Crypto is speculative, which makes it very volatile. That’s why you can see the price of Bitcoin fall by 50% in three months. And because some people are looking at crypto as a way to get rich quick, you’ve seen the rise of scams and ‘crapcoins.’

These are things you need to be aware of before you put a dollar into cryptocurrency.

But let me also cover three big benefits of cryptocurrency:

Crypto makes transferring money cheap and easy. 

You don’t have to worry about paying bank fees or wire fees or lugging around huge sums of cash. You store your crypto in a digital wallet, and you can send crypto in seconds for pennies.

Blockchain will change the internet. 

Blockchain is the technology behind cryptocurrency, and it has the power to decentralize everything. Imagine being able to get a driver without going through Uber. And imagine being able to rent a home without going through Airbnb. This decentralization can make life cheaper, and it opens up a new world of financial opportunity called DeFi — decentralized finance.

Deflation

Bitcoin is a deflationary asset because there’s a limited supply of Bitcoin. Compare that to our dollars, which are inflationary since the Fed can print an unlimited amount.

This creates the opportunity for people to save their money in Bitcoin and see a real return because a limited supply of Bitcoin coupled with growing demand would lead to higher Bitcoin prices. Of course, this requires more people to believe in Bitcoin and own it.

In any case, for cryptocurrency to have any value, it must demonstrate two things: usability and network.

Usability is what the cryptocurrency, or blockchain, can do. For example, the Ethereum blockchain lets developers create DeFi applications and many NFTs are built onto the Ethereum blockchain.

Network is how many people own the cryptocurrency. Dogecoin originally didn’t have any use — it started off as a “meme coin.” But it grew such a big social following (thanks to the help of Elon Musk and Mark Cuban) that its network created a use.

People who owned Dogecoin were willing to make transactions with it, and now you can buy a Tesla Cyberwhistle or Mavericks merchandise with Dogecoin. The use was created by the network.

Just remember, investing has risks. The key to investing in cryptocurrency is having the right education, investing no more than you’re willing to lose and not getting emotional with your investments.

Lindsey Bell, Chief Markets & Money Strategist, Ally

My take: There’s more to crypto than coins.

Cryptocurrencies are becoming more mainstream every day with more celebrities touting it, networks advertising it, retailers accepting it and fintechs offering it.

It’s no surprise many people have made investments in the craze already. For those on the sidelines, the curiosity is palpable. 70% of Americans admitted they’ve invested in crypto or plan to in the future, in a survey conducted by Ally.

At the same time, the risk associated with investing in crypto isn’t lost on many. More than the majority of those invested and those not invested believe it’s a risky investment. Outside of the risk of losing all their money, many cited the significant amount of volatility and even the security of the asset class as reasons investing could be risky. I completely sympathize with those concerns.

Crypto remains both new and speculative at this point in time, which means it carries high levels of risk. But just like with any investing you do, understanding and mitigating risks are a key part of the process. There are less direct ways to invest in crypto, which could help to moderate some, but not all, of the risks.

Below are examples of ways to get exposure to crypto without buying coins directly:

Crypto ecosystem: You could invest in companies that are building the infrastructure and technology that supports crypto. There are semiconductor companies and software companies that are playing big roles in the development of this innovative technology. Additionally, companies that are responsible for the brass tacks of crypto — or crypto mining — are another way to gain exposure to crypto without buying coins.

Crypto payments or trading systems: There are several public payment companies that allow individuals to trade or hold crypto in their wallet. These companies are vying to enable consumers to use digital currency in the real world. Crypto brokerages allow you to buy and sell or trade coins as investments. Transaction fees for both types of companies allow them to benefit from the growing popularity, as well as the volatility, of crypto.

Crypto trusts: Not to be confused with ETFs (covered below), these investment vehicles invest directly in specific crypto currencies. Because they are private trusts that sell shares of the trust to the public, it can help limit the security concern related to investing directly in coins. However, there is often a significant fee charged to invest in these funds.

Crypto ETFs: ETFs that are tied to cryptocurrencies are often investing in futures contracts, not the actual coins. As such they have additional risks associated with them. They may also carry high fees. The SEC has yet to approve an ETF that directly invests in digital assets. Excitingly, new ETFs that invest in the crypto ecosystem, or the companies that are building it, are being introduced more and more frequently. Fees for these ETFs are being reduced but are still worth checking.

Stablecoins: These types of coins are different from the traditional cryptocurrencies because they are typically tied to another asset class or currency, which helps create better stability.

While crypto has become mainstream and seemingly has exciting prospects, it is still a new innovation, and there’s a lot for all of us to learn.

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Expert Take with speech bubble icon

Headshot of Caitlin CookCaitlin Cook
Head of Community, Onramp Invest & VP of Operations, Onramp Academy

Caitlin Cook is responsible for building Onramp Invest’s community and brand with advisors and consumers, leveraging her innate ability to understand what resonates with a target audience. After coming from the asset management space, she now leads Onramp’s education efforts, running point on the creation and evolution of Onramp Academy, the cryptoasset education platform for financial advisors. In her previous sales role at a global asset management firm, she worked closely with advisors across the country to deliver suitable investment solutions to end clients. She is now leveraging her traditional background working within the advisor ecosystem to deliver educational content that will provide a smooth transition for advisors from TradFi to the emerging world of DeFi, covering topics ranging from compliance, practice management and estate planning to staking, stablecoins, DeFi, and more.

Headshot of Jaspreet SinghJaspreet Singh
The Minority Mindset & CEO, Market Briefs

Jaspreet Singh is an entrepreneur, a licensed attorney and creator of The Minority Mindset, a YouTube channel with over one million subscribers. Singh’s passion for bringing financial education to the masses drove him to found The Minority Mindset, which teaches people how to think differently from the majority when it comes to finances. The brand has helped countless people get out of debt, start investing and create a plan for wealth building. Since launching The Minority Mindset, Singh has grown the company to include Market Briefs, a free financial newsletter and Market Insiders, an investing education app.

Headshot of Lindsey BellLindsey Bell
Chief Markets & Money Strategist, Ally

Lindsey Bell, Ally’s chief markets & money strategist, is an award-winning investment professional with a passion for personal finance and more than 17 years of Wall Street experience. Bell’s unique ability to connect the dots between data and real life and craft bite-sized money ideas that people can use and apply stems from her deep background as an analyst, researcher and portfolio manager at organizations including J.P. Morgan and Deutsche Bank. She is known for demonstrating why and how an understanding of all things money improves a person’s finances and overall well-being. An ongoing CNBC contributor, Bell empowers consumers and investors across all walks of life and frequently shares her insights with the Wall Street Journal, Barron’s, Kiplinger’s, Forbes and Business Insider. She also serves on the board of Better Investing, a non-profit focused on investment education.

More content from Lindsey Bell.

The views and opinions expressed are solely the authors’ and do not necessarily represent the views and opinions of Ally Invest.