With the bitcoin craze in full effect, smart investors investing in bitcoin are likely to pause. Experts are comparing the bitcoin surge to Tulip mania, cynics are predicting the burst of a bubble, and swindlers are creating ingenious ways to scam curious bitcoin investors.
It’s during times like these that investors should meditate on Warren Buffett’s wise counsel to be “fearful when others are greedy and greedy when others are fearful.” While Bitcoin may turn out to be a great investment, the best investment strategy maintains discipline and poise.
If you are wondering whether to invest in bitcoin, you’ve come to the right place. There is a lot of buzz now because cryptocurrencies such as bitcoin are moving up in market value. Thus, we’ll tell you why you should, or should not invest today.
As an aside: ‘Investing’ in bitcoin is a really bad term. ‘Speculation might be more accurate!
The journey to personal financial freedom is not easy. Yet, it is achievable. You have to follow these tips to succeed:
- Increase your assets and reduce liabilities
- Study and correct past investment mistakes
- Improve your views about money
- Set financial goals
- Save money consistently
One investment mistake is failing to diversify your portfolio. Here’s where bitcoins might come in as an extra layer. They offer a new and profitable route to diversification, until the bubble bursts, that is.
The hell with it – Let me start with how the ‘Dumb Investor’ should look at bitcoin!
Read the following guide to learn why you should absolutely invest in bitcoin. And, as a bonus, if you are dumb enough to follow this rant you are granted the dumb investor award of the year.
Now is the Time to Invest in Bitcoin!
About 25 percent of Americans believe digital currencies are the future of online spending. Yet, few people are familiar with bitcoin. The traditional ways of spending still have a lot of power in the financial markets.
Here are five reasons to invest in bitcoin in 2017:
1. It Has First-Mover Advantage
Bitcoin has a stronger brand and competitive advantage over any other digital currencies. Of the more than a hundred cryptocurrencies in the market, bitcoin has the highest market cap.
Being a first-mover means it is innovating and improving its structure and services. Moreover, its price has gone up for several years. This status means you will have a reliable investment option. (says who?)
2. It Provides Many Investment Options
As an investment, you can buy and hold bitcoin and wait for its value to rise. You can also use it in trades where you can buy low and sell at a higher price. Third, you can invest in its mining process. You don’t get these many options with other investments. (The big money always creates more ‘options’ or derivatives, so don’t worry about that!)
3. It Can be Used for Hedging
Bitcoin is not tied to traditional money. Thus, it provides a great option for hedging against losses. For example, in June 2016, bitcoin soared while the pound dropped after the Brexit vote.
Moreover, the lack of currency interventions makes bitcoin easy to trade and transfer. (Ever tried to transfer large amounts of cryptocurrency to your bank account? What a pain in the ass!)
4. New-Found Legitimacy
One reason people don’t trust cryptocurrencies is that they doubt its legitimacy. This isn’t a problem for bitcoin. The largest options exchange in America, the Chicago Board of Options Exchanges (CBOE), plans to have bitcoin futures trading. (Already there, running behind.)
While it is not a legal tender, bitcoin is recognized in many countries. They include the U.S., Japan, Canada, Philippines, and the European Union. This legitimacy gives you a level of confidence when investing. (euh…)
5. Has Stability and Continual Growth
The last reason and best reason (ha!) to invest in bitcoin is its stability and growth. Despite the instability in worldwide financial markets, bitcoin continues growing every year. It continues to set new milestones in price rises. This growth shows you won’t go wrong investing in bitcoin.
So far, bitcoin has climbed 1,100 percent to over $12,000 in 2017. (check current price here.)As such, financial experts are predicting the digital currency will rise next year. This presents the clearest sign of a great investment option. It seems bitcoin is going to be the future! (or not, who knows!)
FULL STOP! Did you read the above rant? That’s what I call a ‘to good to be true story’. And it might be – but the truth is that nobody knows!
Here’s how the Smart Investor should Invest in Bitcoin.
As an unregulated new investment vehicle, speculation on the future of bitcoin runs rampant. Unlike traditional stock exchanges whose history allows for market analysis and prediction, cryptocurrencies are the Wild West of investing. And if you’re not careful in this rugged, risky terrain, you can lose it all.
Before investing in bitcoin, create a solid foundation for taking on this risk.
Invest in Your Long-Term Future
First, make sure that your current investment into a traditional investment vehicle such as a 401(k), IRA or any other retirement fund is enough to produce a comfortable retirement.
Aim to at least contribute 10 to 15 percent of your paycheck to your retirement account. You can expect to live for decades on your retirement savings, so make this investment vehicle a priority. The earlier you start and the more you invest, the better your future outlook.
Preparing for your long-term future is a non-negotiable prerequisite before investing in bitcoin. Don’t take a gamble on your future by skipping this step.
Secure Your Short-Term Future
Next, secure your short-term future by funding a savings account that can be used if you lose your job or face a hardship. This emergency fund provides a safety net by ensuring that you can cover your expenses in a crunch.
While the goal is to accumulate at least three to six months of living expenses in your emergency fund, save at least one month of expenses before investing in bitcoin (4). This money should sit untouched in an online savings account (5). Online banks pay more interest than typical brick-and-mortar banks. Also, your money remains liquid and available for a rainy day.
It’s only after investing in your long-term future and securing your short-term future that you should invest in bitcoin.
Invest Discretionary Income
All investments come with risk. Investors may benefit from the investment, or they may lose everything. Bitcoin is unique because it isn’t backed by any government entity and it lacks a history to determine risk.
No one knows if Bitcoin will be around next year, next month, or tomorrow. Therefore, a smart investor will add bitcoin to their portfolio in a way that avoids impulse buys and prevents financial damage. Accomplish this through the use of discretionary income.
After you’ve invested in your 401(k), funded your emergency savings account, paid rent and utilities, purchased food, and paid for an oil change, you are left with discretionary income.
This is the humble amount left in your bank account after you’ve taken care of all your expenses. It’s with this money that investors should buy bitcoin.
There are several reasons this method makes for a prudent investment.
1. You’re avoiding the bitcoin craze and impulse purchases. You won’t buy $500 worth of bitcoin because a pundit estimates that bitcoin will reach a million dollars in two years. Instead, your investments are balanced and strategic.
2. You make sure that your future is secure no matter what happens with bitcoin. If bitcoin disappeared tomorrow and took your hard earned money with it, the loss won’t affect your present and future security.
3. Knowing that whatever you don’t spend during the month will go towards a fun investment, such as bitcoin, acts as motivation to spend less. The more money you save on other expenses, the more money you can risk with bitcoin.
If you would have invested in bitcoin seven years ago, you’d be a very wealthy person today. Bitcoin advocates won’t let you forget this as they paint a rosy picture of the asset/currency/collectible’s future.
Sure, Bitcoin may continue to skyrocket into the heavens, or it may crash and burn; either way, smart investors will stick to their planned investment course and only risk what they can comfortably afford to lose.
— Steven (@blogpfo) 21 december 2017