NFTs are the latest trend in the finance world, but it’s important to do your research before investing. Find out everything you need to know before investing in NFTs here.
NFTs are taking over the internet and it’s making a lot of people curious about investing. Since its surge in popularity in 2021, it’s become a buzzword that everyone’s talking about – it’s reaching news headlines, the finance and crypto community, and even celebrities.
Although hopping onto the latest trend seems to be the first thing the media is telling you to do, investing in NFTs should actually be the last step of your investment journey. Before you decide to dive into the world of NFTs, it’s important to do your own research beforehand so you can feel confident about where you're putting your money.
Taking the time to research the trending token will not only help lead to well-informed decisions, but it will also make future transactions a whole lot easier.
What are NFTs? The answer usually leaves most people feeling confused. NFTs are literally non-fungible tokens, meaning they have unique value and are unable to be replaced or replicated with another.
Popularised by blockchain technology, NFTs can take the form of most digital content, including art, video games (and in-game characters), music, memes, songs and videos. It’s the medium that allows you to buy, collect or sell digital art.
Making the final commitment to invest in NFTs should mean that you’ve done your research and are well-versed in the innovative market. This careful approach to NFT investments helps keep you protected by making smart, educated decisions.
If you are still in the process of researching (good on you!) and are on your way of becoming a NFT expert, here are some things you should know before investing in NFTs:
Make future transactions simple and easy with the right tools
Buying and selling NFTs is less complicated with intuitive crypto tools that are designed to make transactions effortless and easy. Our crypto accounting software AEM Journaler helps users with their NFT investments, supporting both NFT purchases and sales.
Most NFTs are based on the Ethereum blockchain, meaning you will probably need to buy a NFT using the cryptocurrency. Journaler organises all your cryptocurrencies and transactions in one place, which affords greater control over your digital assets, including NFTs. The software also comprises automated invoicing and billing features, allowing you to create invoices and bills for your crypto transactions in a matter of seconds.
Looking to buy or sell NFTs? Or maybe both? Journaler creates automated invoices and bills for you so you can instantly have them on file, whenever you need them. With Journaler's Xero integration, you're able to export your invoices straight to Xero for your accounting needs. If you’re only going to be selling NFTs, you can use our multi-crypto wallet app AEM+ that features automated invoicing for free. It also assists in consolidating all your crypto wallets in one place, simplifying your crypto transaction processes in the palm of your hand.
Having the right tools to help you with your NFT investments and transactions helps alleviate the stress when it comes to the accounts payable and accounts receivable process.
Knowing you have access to secure systems like Journaler or AEM+ will ensure your NFT investments remain manageable and well-organised. Get ahead of your prospective investments by having the reliable tools on hand, such as our automated invoicing and billing features.
Ensure you keep track of your transactions 24/7
If you intend to build a NFT portfolio, it’s crucial to retain a system that allows you to continuously monitor their value in the market as they are volatile assets. Keeping updated records of your NFT transactions will help you make informed decisions later down the road. .
Tracing your NFT investments with accurate crypto management systems in place also helps keep you compliant with government tax regulations. Since NFTs are treated as CGT assets (similar to cryptocurrency), it’s imperative to avoid reporting mistakes and inaccurate data when it comes to tax time.
Journaler has pioneered automated crypto technology to prevent the issue of human error found within traditional financial reporting methods. Unlike accounting spreadsheets and ledger papers, Journaler uses automated technology to expend minimal amounts of time, energy and resources to resolve tedious tasks.
By integrating a sophisticated system to support your investments, you can easily track and report your NFT transactions with confidence. With live blockchain wallet technology, reviewing your wallet balances and transactions for NFTs are easier than ever.
Doing research on how you’ll effectively manage your NFT portfolio in the future will not only improve your productivity, but it’ll help prevent unnecessary stress if things get messy and difficult to trace. Overall, having an automated system to assist you will make you a smarter and more efficient investor.
Understand why you want to invest in NFTs and the risks involved
Establishing a sound reason for starting your NFT investment journey is a good way to overcome the bandwagon effect and avoid making rash decisions. Ask yourself: Why do you want to invest in NFTs? How can it benefit your business or financial future? Do you simply want to support the artists that you’re buying from? Are you interested in collecting digital art?
Having a motivation other than following a mainstream trend will likely help you stay on top of your investments, as well as lead to wise decisions.
It also allows you to determine whether the potential gains of investing in the novelty is worth the risks and consequences it may produce. This includes its impact on the environment, its volatility issue, and the threat of fraudulent NFTs - all of which are issues you need to be knowledgeable about before beginning into your NFT journey.
Explore the NFT marketplace
NFTs are proliferating in the digital market, meaning there’s a lot of art pieces to choose from and potentially invest in. While investing in the most trending item may be an appealing choice, it imposes the risk of significantly decreasing in value after the peak dies down.
Like all investments, there are plenty of risks involved, so choose wisely. If you’re investing in NFTs to make a profit, it’s usually best to pick ones that you personally like and have done plenty of research on. Some things to keep in mind when selecting a NFT is its level of rarity, the history of past ownership, the profile of the creator, and how valued it is within the community.
NFTs are here to stay, so do your research now