For people who wish to retire early, investing is one of the best available options. Unlike before, when we only had options like stock investing and mutual funds, now you can use cryptocurrencies as well to plan your retirement.
Note: Cryptocurrencies are high volatility assets. When investing in crypto, make sure that you have other, low-risk and debt assets as well in your portfolio. Ideally, crypto should make 5% or less of your folio.
Why should you invest in crypto for retirement?
Though when planning for retirement, people normally want to invest in safe assets such as debts that can give guaranteed returns with minimum risk. However, for people who want to retire early, getting big returns in a short period should be the goal. And the crypto market has proven itself to be one of the best ways to get high returns on investment.
Because cryptocurrencies are volatile, their value changes frequently and abruptly. This allows them to give huge returns in a very short period. For example, the Libra coin’s value has nearly doubled in just about a year.
And not just in the short term, many high-potential coins have also produced outstanding returns in the long term. Bitcoin, for example, yielded 254,445% returns during a period of 8 years between 2012 and 2020.
So, yes, it is very much possible to retire early with cryptocurrencies. Now, let’s talk about HOW.
How to retire early with cryptocurrency
In order to retire early, you must plan your investments well. Ideally, your portfolio should include both debt and equity assets. As equity helps your folio gain value with time, debt will help set off risk and losses. For higher ROI, include cryptocurrencies in your folio.
Here’s our step-by-step guide to creating a retirement plan with cryptocurrencies.
Step 1: Evaluate your expenses and retirement amount
Retirement amount is the amount of money you’d need to comfortably retire and maintain your lifestyle after retirement. To determine your ideal retirement amount, first you need to determine your expenses, i.e. how much money you need per month or year.
The standard method of determining retirement amount is – number of years post-retirement x annual expenses. Suppose that your annual expenditure is INR 10,00,000 and you want to retire at the age of 45 (considering an average lifespan of 90 years, you’d have 45 years left after retirement), then, you’d need to save INR 10,00,000 x 45 = INR 4.5 crore.
Also, you need to take inflation into consideration when determining the retirement amount, as the value of the money you have now will be less in the coming years.
Step 2: Building your retirement corpus using Crypto
Now, there are two ways to achieve your early retirement target – spend less and earn more. And whatever you earn, a major part of it should be saved and invested in high-growth assets.
Where to invest?
Your ideal portfolio allocation will depend on a number of things, including your risk tolerance, your age, target retirement age, sources of income, etc.
If you are looking to make more money in less time and retire early, you should be ready to take risks and invest in high-return assets, such as stocks and cryptocurrencies. This is called aggressive investment and involves putting at least 50% of your money into equities, crypto and other high-growth assets.
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If you are just starting out, do not put more than 5% of your money into cryptocurrencies. Invest only in well-researched and institution-backed coins. Re-evaluate and adjust your portfolio on a regular basis.
By investing in good, high-potential coins and holding for some years, you can make good returns even with a small amount of initial investment.