Cryptocurrencies have certainly had one wild ride in recent times with vast booms and plunges, huge swings, and some unforgettable scams that have startled even the most seasoned investors.
Investors have experienced unexplainable and unprecedented gains and losses through this almost 'magical' asset type over the last decade, so I can understand why you and your friends would be interested.
The volatility of returns relating to crypto-assets means that it is especially hard for investors to build strong confidence and secure consistent gains which is why a lot of our clients feel that it is just too risky to hold in their portfolios.
It is unregulated and is extremely susceptible to sentiment and publicity which is what makes it so volatile.
We do not formally provide clients with advice on cryptocurrency as we are not regulated to do so but I firmly believe that if you wish to follow a sound focused plan to build up a sound investment pot whether it is for your retirement or whatever reason then cryptocurrency does not have a place in this type of a portfolio.
In my opinion, the uncontrollable fluctuations associated with crypto are too ulcer-producing. My average investor wants to preserve their assets so the risks involved here are just simply too high.
When building a diverse portfolio, we find that clients are more focused on stocks than riskier assets such as cryptocurrencies. Stocks represent ownership stakes in real companies with inherent value.
By comparison, cryptocurrencies do not actually own anything, generate revenue, or have visions for creating shareholder value. Some do have practical utility, which is great. But lack of intrinsic value makes cryptocurrencies risky investments and that is the key difference between them and stocks.
As short-sighted and old-fashioned as this might make me seem, I myself am staying far away from cryptocurrencies. And it turns out that I am not the only one - Bill Gates who is also not a fan, recently told Bloomberg, “I do think people get bought into these manias, who may not have as much money to spare, so I'm not bullish on Bitcoin, and my general thought would be that, if you have less money than Elon (Musk), you should probably watch out."
If you still wish to take a tiny punt at some stage, Bitcoin is the only one I'd buy. The supply side of Bitcoin is extremely simple and the demand for Bitcoin sets it apart. This is the one people want to own. Many other cryptocurrencies have launched, addressing Bitcoin's various shortcomings. Nevertheless, Bitcoin remains the cryptocurrency with the most brand recognition. So it is the one people consider buying first, and I don't see that changing anytime soon.
If you wish to invest in digital assets such as cryptocurrency, I would strongly advise that you need to assess your own personal and financial situation, risk tolerance and always consult a financial professional for appropriate advice.
- Carol Brick, Managing Director of HerMoney has over 20 years of experience in the provision of professional Financial Advice see hermoney.ie