How to be careful with NFTs?

NFTs are always hot and people easily get excited about NFTs. I wanted to share some information on NFTs and how to choose the right NFTs if someone is planning to purchase some. We have to understand first if we know enough about NFTs. Otherwise, it is best to get started there and try to understand what is an NFT and how is it different from an FT.

I have had a few friends who are new to the Crypto world ask me what this NFT is all about and if they can invest in any NFTs. The first thing that they get to know is about some NFTs on the ETH blockchain. My knowledge of those NFTs is very limited but being here for almost 6 years in the crypto world, I know a little about the blockchain concepts and I can guide a few people if they ask me questions. Let's get started on some of the common things we have to keep in mind if we would like to explore NFTs in the crypto world.

Identify the purpose of NFT

There are so many projects out there. Many projects sell you NFTs and in fact, some of the projects sell you NFTs as a presale thing with which they usually gather funds to start developing the project. Some projects continue developing and become successful and some projects get stuck in the development stage itself and they don't end up releasing anything good. So it is always good to control the excitement and invest only in something that we know for sure.

There are so many projects that sell out NFTs that have no real-world purpose or use case. People just buy them for the sake of collecting them. Some NFTs are even valued very high and they are sold as something very limited in number and people who are crazy to invest, usually buy them.

Invest only the money you can afford

Some people might have a lot of money to invest and play around and some people might be investing their hard-earned money. Either way, it is always good to invest only the money that you are ready to burn. In the crypto world, nothing is for sure. Sometimes a project can be very successful and sometimes the success may not be good. We may not even know if we are making the right investment. So, it is always good to invest only the money we can afford and in the worst case, if we lose that money, it shouldn't affect our real life.

Plan an exit strategy

Profit and loss are all good things in a healthy market. We should know when to book our loss and exit. We can purchase some NFTs and hold them for a longer period of time. But if the project is not doing good, there is no point in holding them even longer. We have to be very clear on the exit strategy. We can either exit with a good profit or with a minimum loss. But we should know when it should happen.

Know when to book profits

Sometimes after we purchase something, the value might go up due to several parameters. We should know when to book our profits. It is usually an individual's decision to book the profits. Imagine a state where there is a 5% increase in the value and if we decide not to book profits suddenly it goes 10% down. Then in that case we shouldn't worry that we missed the opportunity. It is always good to book our profits whenever we get a chance. There will always be an opportunity to purchase something very low