Baby's First Crypto: 5 Important Questions to Ask About Custodial Investments

Cryptocurrency can be an excellent investment for your child's future. You can open an account for your child at a custodial investment firm and let them grow their money.

Before you invest, it's important to do your research and ask these five critical questions to do it right.

What Fees Are Associated With the Investment?

You should always know what fees you are being charged for an investment. There may be account setup fees, management fees, and transaction fees with custodial assets. 

Understanding all the fees before you invest is essential, so there are no surprises down the road. Fees can eat into your investment returns, so it's important to understand what you're paying. 

Know if there are fees charged for setting up the account and if there are any ongoing management fees.

What Are the Risks and Rewards Associated With Custodial Investments?

Before investing, it's important to understand the risks and rewards associated with custodial investments. The biggest threat is that your investment could lose money. 

However, if the market goes up, your investment will also grow. It's important to have realistic expectations for the risks and rewards of any investment before you put your money in.

How Will You Protect Your Child’s Investment?

Once you've decided to invest in a custodial investment for your child, it's crucial to consider how you will protect that investment. One way to do this is by choosing a firm with good customer service and security features. 

You should also ensure that the account is adequately diversified so that your child's money is not all invested in one thing.

What Are the Tax Implications of Investing in Cryptos for Minors?

Crypto for minors has a few tax implications you should be aware of. First, any gains your child makes on their investment will be taxed at the child's tax rate. 

Second, if you withdraw money from the account to pay for college expenses, those withdrawals may be subject to taxes and penalties. Talking to a tax advisor about the implications of investing in cryptos for minors is vital before you do it.

How Will You Know When It’s Time To Sell?

One of the hardest things about investing is knowing when to sell. With a custodial investment, you may have the ability to set up automatic sell orders so that your child's money is automatically sold when it reaches a certain price. 

This can take the emotion out of deciding when to sell and help you get the most out of your investment.

Custodial investments are long-term investments. They can be a great way to grow your child's money, but it's important to do your research and understand the risks before you invest. 

By asking these five key questions, you can ensure that you make the best decision for your child's future.

Do's and Don'ts of NFT Investing

Making money with NFTs has become a lucrative business for many opportunistic investors across the world. NFT investments can make you rich overnight, but your odds of success decrease substantially if you don't understand the do's and don'ts of NFT investing.

Below is a list of dos and don'ts you need to know before investing in non-fungible tokens (NFTs).

Do's for NFT Investments

1. Research extensively.

It is extremely important that you do proper research on every NFT project before buying. Researching on the NFT increases your odds of making a good ROI. Some of the things you should look into before investing in NFTs include:

• NFT creator's social profiles and status
• Community
• Intellectual property/brand name
• Contract terms (term dates, perks, and restrictions)
• Past projects, accomplishments, and failures

2. Get involved in Crypto communities.

If you want NFTs to be a profitable investment, you need to engage with the NFT community. The community is your support group; you can ask questions to understand the market and if you have something knowledgeable, share it with them. Interacting with the community helps ignite new ideas and friendships.

3. Be a skeptic.

A healthy dose of skepticism can prevent you from being a victim of an NFT scam. If the offer is too good to be true, it may not be true at all. So, ask people, research online, and investigate to seek out the authenticity of the offer and the company making the offer.

4. Understand your risk appetite.

NFTs are relatively new, and their market is extremely volatile. Before investing in NFTs, understand the risks and go ahead with them only if you have the financial bandwidth and the appetite to withstand the risks.

Don'ts for NFT Investments

1. Don't invest in something you do not understand.

It's important that you fully understand the asset you are purchasing. To guide you with the purchase, ask these questions: is the value of NFT based on demand? Scarcity? Utility? What can you do with the tokens? Research before investing in NFTs.

2. Don't share your wallet password or secret phrase.

You need to be extremely cautious about your crypto wallet. Never ever reveal your password or secret phrase to anybody regardless of the situation. 

Anybody asking you to reveal this information is possibly a scammer. Your confidential details in the wrong hands put you and your digital assets at extreme risk.

3. Don't sell too early.

It might be tempting to sell your NFT when you get a reasonable offer for it. But, it might not be the right time to sell; if you sell it too early, you might lose an opportunity for it to grow to its potential worth. If you think the value of your NFT is much higher than what's being offered, listen to your gut and don't sell it.

4. Don't let greed cloud your judgment.

If you are greedy to make a quick buck with NFTs, you could be attracting deals that are too good to be true. Spammers love to target greedy people because they are quick to take a bite. 

Greed can also instigate you to make wrong decisions, making you lose all your hard-earned money. Avoid being greedy; do your research and always invest your money with good intentions, and don't forget to do your bit to give back to the community.

NFT Investing is a lucrative opportunity to make money, but it's extremely important that you understand what you are getting into before making NFT investments. Let the above do's, and don'ts be a guide to you in making informed investment plans and decisions.

Author Bio: Akanksha Malik is a content creator & digital strategist at Mesha - India's largest investing club & online community where the world's best investors gather to share ideas, discover fellow investors, invest in NFTs & crypto, and compete in challenges for real money. She develops content to share her knowledge and insights helping her readers stay updated with the latest in fintech & investments, as well as cryptocurrency trends and upcoming NFT opportunities. Apart from being passionate about her work, Akanksha loves exploring architectural sites and different local dishes during her travels.

Can You Still Make Money Farming Cryptocurrency?

You may have heard or read about people making tons of money farming cryptocurrency and be considering it as an investment for a quick way to make lots of cash. 

The truth is that you still can make money farming cryptocurrency, but it's not an investment strategy for the timid or the beginner.

What is Farming Cryptocurrency?

Farming cryptocurrency, also known as cryptocurrency yield farming, is an investment strategy that offers higher returns than conventional investments. However, like most investment strategies, higher returns mean increased risks.

When you put many in the bank, you're lending money, which is why the bank pays you interest on the money you deposit. With yield farming, investors are lending cryptocurrency. 

Yield farming can earn double-digit interest rates, but the real payoff comes if the digital currency appreciates rapidly. The bottom line is that when you lend cryptocurrency, you're hoping the value of the digital currency appreciates quickly. 

If the market gets flooded with a new currency, the digital currency devaluates, and you lose money.

How Cryptocurrency Farming Works

Farming cryptocurrency works by lending digital coins or currency through DAI or Tether through a decentralized app such as Compound. 

Compound is an algorithmic, autonomous interest rate protocol made for developers to unlock various open financial applications.

Compound lends the digital currency to borrowers who then use the currency for speculation. The interest rate you receive will vary with demand, but each day you use the Compound service, you receive Comp coins, interest, and other fees. If the Comp coins you receive appreciate, your returns skyrocket as well.

What are the Risks?

One of the most significant risks involved in yield farming is increasing regulations by the SEC. In addition, theft is a growing trend in digital currency. 

When you lend digital currency, the money is held by software, which is vulnerable to hackers who find ways to steal funds from the software. Another risk is that some digital currency is only a few years old and could potentially lose value, leading to an entire system crash.

The Bottom Line

It is possible to make money farming cryptocurrency. However, as time progresses, it will become more and more difficult to make money framing cryptocurrency, and risks will most likely become higher. 

Farming digital currency is not for the novice. You should familiarize yourself with all risks involved before you begin a yield farming investment strategy.