1 Way to Invest Strategically in Meme Coins

Meme coins don't have the best reputation, and the typical advice is to avoid them entirely. But they can be fun and exciting because of the possibility that you'll buy the next one to take off.

Since they live and die based on hype, meme coins aren't investments. But if you're really interested in buying them, there's a safe way you can do it -- and maybe even make some money.

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Set strict limits for yourself

It's perfectly fine to use a portion of your portfolio as "fun money" that you can spend however you want. The key is to make this a small amount, meaning no more than 1% or 2% of your portfolio. If you're starting to invest with $3,000, you could set aside $30 to $60 for buying meme coins and invest the rest in stocks, index funds, and other proven assets.

The nice thing about meme coins is that most of them trade for well under $1, and many cost less than $0.01. Even if you're starting off with $20 or $30, you can still buy plenty of Dogecoin, Shiba Inu, Pepe, or whatever else catches your eye.

Meme coins can go through wild price changes, so you should also figure out limits on when you'll sell. For example, you could decide that you'll sell at least part of your position if you gain or lose 25%. This way, if you come out ahead, you take some money off the board. If your meme coins start dropping in value, you sell before getting wiped out.

If you stick to your limits, you can treat meme coins as short-term, speculative plays. Just make sure you only use money you can afford to lose and that most of your portfolio is in solid investments.

Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.