4 Steps to Safely Buying Litecoin – Motley Fool

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First time buying Litecoin? This step-by-step guide will take you through the process.

Created to be a faster, more efficient version of Bitcoin, Litecoin has consistently ranked among the top cryptocurrencies. It also trades at a much lower price than Bitcoin, making it a popular alternative.

If you’ve researched Litecoin, think it’s a smart investment, and want to get some of your own, then it’s time to learn how to buy it. There are many ways to purchase crypto, but there are also plenty of scams out there. Follow the steps below to safely buy Litecoin.

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1. Choose a cryptocurrency exchange

The most common way to buy crypto is through an exchange, such as Coinbase or Gemini. Several investing and payment apps also sell crypto, including Cash App, PayPal, and Venmo. As you shop around for where you’ll buy Litecoin, here’s what to look for.

  • Security: Review the security measures the platform takes and if there have been any incidents in the past, such as hacks or stolen funds. The most important part of a crypto platform is that it keeps your assets and your personal information safe.
  • Fees: There are fees for both buying and selling crypto. Check that the platform you choose has fees that are competitive with other top exchanges.
  • Ease of use: Buying crypto shouldn’t be a chore, so make sure to pick a platform that you’re comfortable using.

To see options that check all these boxes, review the best cryptocurrency apps and exchanges.

One more feature you might want to consider is cryptocurrency selection. It’s not a big deal if you’re only interested in Litecoin, because that’s available at most exchanges. But if you think you’ll want to invest in smaller coins in the future, then cryptocurrency selection is important when choosing an exchange.

2. Set up your account

Once you’ve picked a place to buy Litecoin, it’s time to create an account. The process varies by exchange, but there’s usually a button that says “Get started” or “Register” on the home page.

Enter the required information to sign up for an account. Most apps and exchanges will ask for the following:

  • Full name
  • Email address
  • Phone number

That’s easy enough, but you’re not done yet. Crypto exchanges also need to verify your identity. This process is called “Know Your Customer” (KYC). Until you’ve done this, you either won’t be able to buy crypto, or you’ll only be able to buy a small amount before hitting your account’s limit.

For the KYC process, expect to provide the following:

  • Date of birth
  • Social Security number
  • Address
  • A scan of a valid passport, driver’s license, or ID card

3. Decide how much Litecoin you want to buy

The golden rule with Litecoin, and with any cryptocurrency, is to only invest what you can afford to lose.

Cryptocurrency is volatile, and even though prices can skyrocket, they can come down just as quickly. Don’t make crypto your retirement fund, and definitely don’t use crypto as your emergency fund. A good guideline is to dedicate no more than 5% to 10% of your investment portfolio to cryptocurrencies.

Think about how often you’ll buy Litecoin as well. Some investors make one large purchase or make occasional purchases with no strategy behind it. For cryptocurrency investments, dollar-cost averaging is often a better method.

With dollar-cost averaging, you make periodic investments. For example, you could buy $250 of Litecoin every two weeks or every month. This works well for volatile investments, because even if the price drops, you haven’t put in all your money at once.

4. Make your purchase

The purchase process and accepted payment methods depend on the exchange you chose. Payment methods may include an ACH transfer from a bank account, debit card, or credit card. Bank transfers tend to be the best option, because paying by debit or credit card can result in additional fees.

Bank account transfers do have one disadvantage, and that’s speed. You typically need to wait several days for the transfer to process and the funds to arrive in your account.

Once the money is available, choose the “Buy” option and select Litecoin. Enter the amount you want to buy and review the transaction preview to see the fees and how much Litecoin you’ll get. If you’re satisfied with everything, confirm the transaction.

Don’t forget to record the amount you spent and the amount of Litecoin you received for tax purposes. When you either sell Litecoin or trade it for another cryptocurrency, that’s considered a taxable event.

After completing those steps, you’ll have your own Litecoin. One final thing you may want to do is look into crypto wallets where you can store it. Many investors keep their crypto on the exchange where they bought it, but transferring it to a crypto wallet is a good way to have extra security.

Buy and sell crypto on an expert picked exchange

There are hundreds of platforms around the world that are waiting to give you access to thousands of cryptocurrencies. And to find the one that’s right for you, you’ll need to decide what features that matter most to you.

To help you get started, our independent experts have sifted through the options to bring you some of our best cryptocurrency exchanges for 2021. Check out the list here and get started on your crypto journey, today.

About the Author

Lyle is a writer specializing in credit cards, travel rewards programs, and banking. His work has also appeared on MSN Money, USA Today, and Yahoo! Finance.