I'm finding that many of my clients have similar questions about their finances, so I'm starting a new section of my newsletter called, Ask Me Anything Money (AMAM for short). I'll answer 1-2 questions in every newsletter, sometimes in a form of a new blog post.
This months hot burning question is…………
Heather, what are your thoughts on Crypto?
Yes, I am tracking it. Of course I’m always paying attention and reading, which is my job and promise to my clients. What I’ve learned thus far, is there is no evidence based research to support it. Thus, I do not feel comfortable putting Crypto in TF's portfolios. The risk-to-reward-ratio is not there for me. For example, as of right now (end of January 2022 as I write this) the market is down 7%. Bitcoin is down 20% for the year. Eight Nobel Economics Laureates (Nobel prize winners for economics) have said Crypto is the, "Mother of All Investment Bubbles" and that virtual currency is like the “Dutch Tulip Bubble”. Everyone is jumping in, but no one understands it. Kind of reminds me of the .com bubble. What happened to Pets.com? theGlobe.com? Exactly. They no longer exist.
Many people buy into Bitcoin because they think they are buying block chain technology. Companies are already implementing blockchain technology (Microsoft, Amazon, J.P. Morgan, etc. ) so by investing in the S&P 500 (the stock market), you are invested in blockchain technology! Bitcoin doesn't own blockchain technology.
Do I think Crypto is here to stay? Yes, but I think governments will develop their own coin and will not buy bitcoin, ethereum or dogecoin (lol).
Still not convinced? That's okay! Many of you aren't and I respect that. Don't want to feel left out? Have a play fund. Count it as your spending money and invest it. Just don’t let it take you from your other savings goals and don’t invest more than 5% of your net worth. If it ends up going to the moon…you win. If it doesn't, then it won't financially devastate you.
p.s. Spending and selling crypto is a taxable event and must be reported. The IRS is cracking down on this to the point that they put a question on the 1st page of the tax return related to using crypto.
p.p.s. When you start having gains that you would hate to lose, take some of them off the table - a few of my clients took this advice when bitcoin was in the $60s and are pretty happy right about now as it's in the $30s.
If you would love to have someone on your team to walk you through topics like these and how they impact your unique situation, schedule a free intro call here.
