money·3 min read

Investing in NFTs Isn’t as Complicated as You Think

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Design: theSkimm | Photo: iStock
Jun 16, 2022

If you’ve heard of NFTs, you’ve probably already considered investing.But what would that look like? And where can you buy an NFT? Good news (maybe): It’s a pretty simple process. 

Back up. What exactly is an NFT?

NFT stands for non-fungible token, which means it’s irreplaceable. And it’s a unique digital asset that often takes the form of virtual art.Some you might have heard of: these Bored Apes,Jack Dorsey’s first tweet, and a few from celebs like Dolly Parton, Snoop Dogg, and Madonna.  

Internet creators use them as a source of revenue from fans.And a lot of people buy them to sell them later at a profit. (Hi, investing mania.)But even though they’re secured through blockchain technology, they’re still a pretty risky investment.

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Got it. Now tell me how to invest in an NFT.

It’s a lot easier than you might think. Just follow these three steps:

1. Open a digital wallet.

It’s like a bank account for your online currency. And you’ll need one to access your NFTs. And crypto. PS: Skimm more about digital wallets and how (and where) to buy, store, and spend crypto.

And don’t be surprised if you need to load that wallet with Ether currency before you can make your first buy. Because most NFT sales happen on the Ethereum platform.

2. Join a marketplace. 

Open an account with an online marketplace where NFTs are sold. Think: OpenSea or Axie. The exact process is different depending on the marketplace. For instance, OpenSea only accepts certain digital wallets. So be sure to read up on the details before you sign up.

3. Make your purchase.

Once your wallet is ready, start browsing the marketplace for your first purchase. There are a lot to choose from, so take your time.

Some items are available to buy immediately. But you’ll have to bid on others through an auction. Once you purchase an NFT, you receive a digital token to confirm it’s yours. 

And how do I sell an NFT?

Once you’ve found a few NFTs you like, you have the option to list them for sale on the marketplace — and hopefully make a profit. Hint: Make sure the marketplace supports the same blockchain your NFT was created on. 

Any risks I should know about before I invest in NFTs?

Like any other investment, NFTs can be risky business.Unlike other investment options, they don’t offer much liquidity. Because buyers usually prefer holding on to their NFTs rather than trading them. And it’s hard to determine what makes a good trade. Example: Is a Michael Jackson NFT worth trading for a Lebron James NFT? Plus, NFT values can fluctuate at any time based on hype. So the market can get a bit tricky. Which is why NFTs should only make up a small portion of your investment portfolio.

Oh, and they can be risky for the planet, too. One NFT transaction uses as much electricity as the average home uses in a day and a half. Not the most environmentally-friendly investment.

theSkimm

NFTs are a beginner friendly investment option (if you have some extra money you can afford to lose). And the investment process is pretty easy to understand. But that doesn’t mean they’re risk-free.

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