Spice Up Your Asset Portfolio
Investors everywhere sat up and started paying attention when talk of multi-million dollar profits hit the gossip channels. That is a lot of money for a strange little image or video. Even people who have never heard of cryptocurrency in their life started looking for more information about what these NFTs are all about.
Others, like the team at NFTsPedia.com, who had followed crypto since the very beginning and knew about NFTs long before the 2021 boom, saw the potential for these tokens to start getting some serious mainstream attention, profits, or no profits.
NFTs are exciting, if a little unpredictable, but that is all part of the fun. If you are interested in investing but are not sure how to approach it, let us help you find a path. We feel like it is necessary, at this point, to remember that NFT collecting is predominantly about the art, and most people do not turn eye-watering profits overnight. That said, they are certainly a bold and exciting asset to add to a portfolio!
- 1 Ways to Invest in NFTs
- 2 Top Tips for Investing in NFTS
- 3 Final Thoughts
Ways to Invest in NFTs
There are four main ways to invest in NFTs, each very different in its approach.
1. Become a Collector
Collecting NFTs has been likened to fine art collecting in that you purchase multiple assets, growing a collection that you hope increases in value over time. If this is the road you want to go down, you need to make sure you have a secure place to store them.
Investors looking to begin collecting NFTs should also invest in a high-quality hardware digital wallet. If you are going to put money into something to buy and keep, you better keep it safe and secure. When you decide what marketplace you want to buy from, you should set up an online digital wallet that works compatibly so that the assets and payments can transfer across easily, but you should also have a secondary hardware backup.
If you need more information about how to start collecting, check out our step-by-step guide to buying NFTs.
2. Invest in Fractionalized NFTs
New investors that want to get involved in exciting opportunities with high profit potential should look at blue chip projects. These include well-known collections such as CryptoPunk and ArtBlocks, both of which have sold tokens for millions of dollars.
The average investor probably doesn’t have that cash lying around, making these blue chips inaccessible for most. That is where fractionalized NFTs come in. Basically, people can buy a share of an NFT rather than the whole thing. Instead of one person paying $1 million, 500 people pay $2000 each, or even more!
Shares do not have to be split equally. Someone could invest $10,000 in a fractionalized NFT, and somebody else could put in $10. Of course, the returns would reflect the initial payment.
3. Join a Decentralized Autonomous Organization
Another creative and collaborative method of investing is through a DAO. Decentralized Autonomous Organizations are essentially NFT investment clubs where people come together to combine funds and buy valuable tokens.
It works similarly to fractionalizing, except the token is bought by the group as a sole owner. Technically, the DAO owns the NFT, and the individuals split the profits through their organizations. You can find out more information about joining a Decentralized Autonomous Organization by visiting one of their sites. Two of the best choices are FlamingoDAO and ARK Gallery.
This is a good choice for people with a good bit of money to invest, but not quite enough to buy a blue chip token alone. Investors with a low budget may struggle to buy through a DAO as some have a minimum amount and certain commitments you need to make. It is definitely worth looking into if you have the chance.
4. Mint Your Own NFTs
Lastly, you can make and mint your own NFTs from scratch. Instead of investing in somebody else’s token, invest in creating your own. You can find out all you need to know about minting an NFT on our “How to Create an NFT Art” page! It walks you through the entire process, from coming up with an idea to putting it up for sale.
Top Tips for Investing in NFTS
Look Out for Scammers
As with any online industry, there are people out there trying to take advantage of the situation and scam others out of hard-earned cash. In a world as new and unknown for many as NFTs, there is a lot of opportunity for hackers and other cybercriminals to find a way in.
Even the biggest and most popular marketplaces struggle with scams in various shapes and sizes. Here are a few common tricks that people try to pull that investors should be aware of.
- Fake collections: A scammer may list a collection to look and sound like something else with the hope that someone browsing quickly looking for deals doesn’t pay close attention before bidding. If you see a collection you recognize and want to invest in, look a little closer at the properties and the number of NFTs in the collection. Most fake collections do not exceed 100 NFTs, so they are easy to find if the type you are looking for usually has thousands.
- Airdrop scams: If an NFT shows up in your wallet that you did not purchase, do not touch it. Hence, if you don’t know where it came from, it is best to leave it well alone. Attempting to do anything with it, such as move it or sell it, could grant a hacker access to your digital wallet and everything inside it. The only thing you should do is hide them if your wallet provides that option. If you are unsure, it is best to just leave it well alone.
- Price-change scams: This sneaky trick is so simple, but it catches many investors out. A person can list an NFT at a super low price, encouraging someone to buy it immediately. They then confirm the purchase without thinking much of it. Where this becomes a scam is the seller very quickly changes the price to a significantly higher amount during the window between clicking “buy” and “confirm.” Never confirm an investment without looking over the transaction details first.
- Dodgy bundles: Many investors choose to buy NFT bundles. What they sometimes fail to do is to actually check the bundle to see if everything is legit. Sometimes people put one real NFT to distract the buyer, and the rest are fake copies.
Generally speaking, always check twice before making an investment. If it seems too good to be true, then it probably is. Don’t get caught out and lose money simply because you didn’t take a minute or two to look.
Plan Security and Storage in Advance
The best NFT investors plan ahead. Therefore, the better prepared you are before going into an investment, the better chances you have of smooth, successful transactions. You also increase the safety and security of your assets, which is absolutely essential in crypto trading of any kind.
NFTs are, essentially, a form of cryptocurrency, although every coin is completely unique and non-interchangeable. The security and storage an investor prepares for holding their NFT assets should be on par with how they protect their money.
Most investors looking into NFTs are already involved with crypto, so they should know the drill. If you are new to the industry or want to brush up on the most up-to-date ways to protect crypto funds of any kind- NFTs included- take a look at Cryptonews.com and its guide to safely storing your digital assets in 2021.
Consider All the Costs
One of the biggest faux pas for new investors is failing to truly understand the costs involved with minting, buying, selling, and storing NFTs. What makes it complicated is how it varies from site to site and blockchain to blockchain.
Investors should understand the ins and out of gas fees for both the buyer and seller, especially if they intend to flip and NFT for profit. Cyber Scrilla has an excellent in-depth explanation of gas fees that interested investors should read. We also touch on the topic in our how to buy and how to sell NFT art pages.
Manage Your Expectations
When you see headlines about people making millions of dollars in profit from NFTs, it is easy to get swept up in the hype and try your luck: luck being the optimal word. There is very little rhyme or reason to what does well and what doesn’t in the NFT collecting world, which is not really ideal for an investor viewing them as profit-generating assets.
A lot of NFT buyers are in it for the art, to collect and be part of something. If this is the focus and profit is a bonus, you are sure to have a good time. Investors looking to make easy money may end up disappointed. That is not to say you can make profits- there is every chance that you could- and many people do. However, don’t run in expecting huge success overnight: it happens to a lucky few, but it is not the norm.
NFTs are a great way to diversify your asset portfolio, especially for an investor with an existing interest in crypto. Whatever path you choose to take to start investing, remember this: NFTs are first and foremost about the art and the creative uniqueness of it all. Sure, there is money to be made if you play your non-fungible cards right, but it is not a guarantee.
Just like a painting, an NFT could grow in value over time, bringing huge returns on the initial investment, or it could just gather dust sitting in your private collection. If you like the painting, what does it matter? Try to balance the investing side of things with the art collecting then you can have the best of both worlds.