“I don’t trust investing,” a friend said once. I asked her why. “Isn’t it kind of like playing the lottery?” she asked. Investing is intimidating enough for people as it is. Toss in something as unpredictable as cryptocurrency, and people give up on it altogether. It reinforces the notion that investing is like buying a bunch of scratch-offs.
“I certainly would never ever recommend Bitcoin,” said Norm Mindel, a Certified Financial Planner, co-managing partner of Forum Financial Management, and author of Wealth Management in the New Economy. “When something bizarre like this comes out, if a client came in and said, ‘I want to buy this,’ I would say okay, if you want to do it, take a small amount of your portfolio and go buy it. But leave me out of it.”
The Difference Between Bitcoin and Long-Term Investing
There’s a big difference between the kind of passive, long-term investing that’s required to build a nest egg so you can retire someday and investing in something like cryptocurrency, which is well, cryptic. The thing about cryptocurrency, Mindel says, is that we don’t understand it. While there’s risk involved with any kind of investment, that risk is much greater when there’s not much data to draw from.
The other issue is that unlike investing in a company that turns a profit, or a rental property that turns a profit, or anything else that turns a profit, commodities like cryptocurrency have no inherent value.
“The way I describe investment is when you invest in the stock market, what are you really buying? You’re buying the present value of the dividends of the earning of capital gains,” Mindel explained. “So when people say, ‘I don’t understand the stock market, the stock market is a gamble.’ Well, it’s got risk associated with it but there’s something to quantify.”
Cryptocurrency, on the other hand, is more of a gamble because there is…